The United Kingdom is a democratic, constitutional monarchy. Queen Elizabeth II is the nation's monarch, and she serves as the head of state. Along with New Zealand and Israel, the United Kingdom is unique among the nations of the world in that it does not have a single formal written constitution. Instead, its constitution is based on a series of historical documents and traditional legal and political practices that are collectively known as English Common Law. The principal constitutional documents include the Magna Carta (1215), the Petition of Right (1628), the Bill of Rights (1689), and the Act of Settlement (1701). This gives the constitution great flexibility since, unlike the United States, there is no formal amendment process needed to change it. The Parliament can simply enact legislation that changes the nature of a particular area of the constitution. An example of an unwritten component of the constitution is the practice that the prime minister must be a member of the Parliament (which is not recorded as a law).
There are 2 main principles behind the unwritten constitution. These are the rule of law and parliamentary sovereignty. The rule of law is based on the principle that the government is not above the law and can only do what it has the legal power to do. Parliamentary sovereignty means that the Parliament can legally pass any law it wishes, and no person or institution can override it. Any law can be repealed or changed by Parliament. This makes the government more powerful than its counterparts in Western Europe or the United States.
While the monarch has a lot of power in principle, custom has dictated that such power is only used sparingly. The role of the monarch is now mainly ceremonial. The Queen also serves as the head of state for many former British colonies such as Antigua and Barbuda, Australia, the Bahamas, Belize, Canada, Jamaica, Mauritius, New Zealand, Papua New Guinea, St. Lucia, the Solomon Islands, and Tuvalu.
The government is led by the prime minister, who is appointed by the Queen. The prime minister is usually the leader of the largest political party in Parliament. Parliament itself is bicameral (it consists of 2 chambers). The upper chamber is known as the House of Lords and the lower chamber is known as the House of Commons. Parliament can pass laws for the United Kingdom as a whole or for any of its constituent parts, including the dependencies such as the Channel Islands.
The House of Lords is comprised of nobles, senior bishops, and senior judges known as law lords. The 1999 House of Lords Act reduced the number of hereditary peers to 92. (A peer is a lord. Hereditary peers pass their status to their heirs, and in turn, their heirs become lords. "Life peers" do not have hereditary titles, thus their heirs cannot inherit their status.) This reduced the size of the House of Lords from 1,200 seats in 1997 to 670 in 2000. There are no elections for the House of Lords, and with the exception of bishops who retire, members serve for life. The most substantial legislative power of the chamber is its delaying capability. The Lords may reject a motion from the Commons. The lower house must then wait a year to resubmit it. The House of Commons consists of 659 members who are elected by universal adult suffrage. Of the members, 529 are from England, 40 from Wales, 72 from Scotland and 18 from Northern Ireland. Each is elected from single-member districts for a 5-year period, although new elections can be called early at the discretion of the prime minister. (In single-member districts, 1 person is elected to serve the entire district. This is the system in the United Kingdom and the United States. Some countries use proportional districts, in which several representatives are elected. This guarantees some minority-party representation in all districts.)
One of the major goals of the government has been to give the regions of the United Kingdom more political power. By 1999, Scotland, Wales, and Northern Ireland had all been granted some degree of self-government and each area had a national legislative body. The king-dom's Parliament retains control over defense, foreign policy, and social security systems. The regional assemblies have a high degree of control over education, the environment, and culture.
There are 2 main political parties in the United Kingdom, the Conservative Party and the Labour Party. The Conservatives, known popularly as the Tories, are a center-right party that supports lower taxes and a smaller role for government in the economy. The Labour Party is center-left. It has traditionally supported unions and government control of major industries, but has recently moved closer to the Tory position on a number of economic issues, including trade and state-ownership of industries. The United Kingdom also has a number of minor or regional parties, including the Liberal Democrats, Ulster Unionists, Sinn Fein, Scottish National Party, and Plaid Cymru (Welsh National Party).
Among the nations of Europe, the government of the United Kingdom has traditionally been the most supportive of free trade and free enterprise in the domestic market. Nonetheless, the influence of the government runs deeper than that of nations such as the United States. Since the late 1970s, the government has been engaged in a program to sell off state-owned companies. Examples of companies that have already been privatized include British Airways, British Aerospace, British Gas, British Steel, and British Telecom. One continuing problem for the British government is the ongoing effort to reform the National Health System (NHS) which provides health care for Britons. The popularity of NHS has made it difficult for the government to carry out reforms that are needed to keep the program solvent . The aging of the British population has placed new pressures on the NHS, and the Conservative Party has called for the privatization of the system in order to prevent a potential economic crisis in the future.
In 1999, the British government had revenues of US$541 billion and expenditures of US$507.5 billion. Government spending accounted for 36.3 percent of GDP in 1998, down from more than 40 percent just 2 years prior. From 1995 to 1998, the government had budget deficits , but in 1998, the government had a surplus of 1.6 percent, and it has had surpluses since then. About 11.3 percent of the workforce is employed by government at some level, whether it be the national, regional or local governments. Government revenues are augmented by the kingdom's considerable energy resources in the North Sea. Although most companies in the energy sector are privately owned, they pay licensing fees to the government in exchange for the right to produce oil and natural gas. Corporate tax rates in the United Kingdom are designed to encourage the growth of small businesses. The tax rate for large corporations is 31 percent. Smaller companies, those with revenues of less than £300,000, have a corporate rate of 21 percent. The United Kingdom and Luxembourg have the lowest corporate tax levels in the EU. Personal tax brackets range from 20 percent to 40 percent, depending on income levels. When personal and corporate taxes are combined, the kingdom has the lowest tax levels in the EU.
The United Kingdom is a net contributor of foreign aid. In 1997, it donated US$3.4 billion in aid. Military expenditures hover around 2.7 percent of the GDP. In 1998, this amounted to US$36.9 billion. In 1999, the British military numbered 209,000 personnel, with 110,000 in the army, 44,000 in the Royal Navy and 55,000 in the Royal Air Force (RAF). The United Kingdom is a member of the North Atlantic Treaty Organization (NATO, a military alliance of many western European countries plus the United States and Canada). Britain is one of the few nations in the world to possess nuclear weapons, although it has cut back on its total number of nuclear warheads since the end of the Cold War in 1991.
The United Kingdom is the closest military and economic ally of the United States. The 2 nations have a long history of security cooperation that includes being allies in both World Wars as well as the Cold War. The United Kingdom has also cooperated closely with the United States in the United Nations and in various international economic organizations. The kingdom is a member of the World Trade Organization (WTO), the Organization of Economically Developed Countries (OECD) and the Group of Eight Industrialized Nations. One area in which the United States and the United Kingdom are currently collaborating on is the development of a transatlantic free-trade area that would eliminate tariffs and duties on goods and services between the United States and Europe.
A deep debate within the government and British public is over adoption of the euro as a common currency. The United Kingdom is a member of the European Union, but when other members of the EU decided to replace their national currencies with the euro in 1999, the British opted out of the agreement. Those who support replacing the pound sterling with the euro argue that this would make trade with other EU nations easier and less expensive. Those who oppose the euro maintain that loss of the pound sterling would also mean loss of control over monetary policy and make the United Kingdom vulnerable to economic problems from the European continent.
Government policy continues to emphasize low inflation. In 1999, the kingdom's inflation rate was 2.3 percent, down a full percentage point from 1996. However, many economists contend that the official inflation rate is actually about one point lower than it should be. The government has also worked to lower unemployment, which stood at 6 percent in 1999. There are few restrictions on foreign companies in the United Kingdom, and the government has adopted a variety of programs to attract foreign investment and foreign businesses. One result of these efforts is that the United Kingdom and the United States are the largest foreign investors in each other's markets. The only significant restrictions on foreign ownership of businesses are those firms in the broadcasting, air and maritime transport, fishing, and defense sectors. For instance, foreign ownership of a British airline is limited to 49 percent.