UPDATE 2-UK's Conservatives and Labour vow to spend big in battle for votes

* Labour vows to spend 400 bln stg if it wins election

* Says seeking “irreversible shift” in power, wealth

* UK’s Javid describes plans as “fantasy economics”

* Javid changes fiscal rules to invest more (Adds Labour details)

By William James and Kylie MacLellan

LIVERPOOL/MANCHESTER, England, Nov 7 (Reuters) – Britain’s governing Conservatives vowed on Thursday to spend billions of pounds more on infrastructure, stepping up an election battle with the main opposition Labour Party over who is best placed to drive growth and help struggling regions.

With Britons due to vote on Dec. 12, the main parties are drawing up battle lines: Prime Minister Boris Johnson says only he can deliver Brexit, while Labour leader Jeremy Corbyn says he alone can offer real change.

Finance minister Sajid Javid said his willingness to spend an additional 20 billion pounds a year was the “responsible” way to drive growth following years of tight spending that has angered swathes of the electorate.

Javid was speaking shortly before Labour’s would-be finance minister John McDonnell set out his plan to spend 400 billion pounds over 10 years on schools, homes and hospitals.

Early spending pledges from the two parties prompted a non-partisan think-tank, the Resolution Foundation, to declare on Monday that Britain appeared to be heading back to 1970s levels of state spending whoever wins the election.

Javid said voters faced a choice over which party could be trusted to spend more to grow the economy without racking up debt.

“The difference between Labour and the Conservatives just couldn’t be bigger in this. We have a responsible plan that will allow us to have that decade of renewal,” he said in the northern English city of Manchester.

“Anything John McDonnell promises today, it doesn’t matter if it’s an extra pound, an extra 150 billion or an extra trillion, it just cannot be relied on. Before he spends any of that money, the economy will be ruined.”

The poll called by Johnson to try to break parliamentary deadlock over Brexit is shaping up to be a contest between two parties more than willing to break with years of economic austerity imposed since the Conservatives took power in 2010.

Both Javid and McDonnell travelled to the north of England to make their pitches, eyeing seats outside the main cities where many voters feel they have been squeezed by cuts and decades of deindustrialisation.

McDonnell, a left-winger who opposes the current model of capitalism and promises to shake up the financial sector if he takes control at the Treasury, pledged an additional 150 billion pounds of spending.

He said this would “begin the urgent task of repairing our social fabric that the Tories (Conservatives) have torn apart.”

The 150 billion is in addition to 250 billion pounds Labour had already pledged to invest in capital projects over the next 10 years, financed by selling long-term bonds, to stimulate growth and make the economy more environmentally friendly.

“Our aim as a Labour government is to achieve what past Labour governments have aspired to,” he said.

“An irreversible shift in the balance of power and wealth in favour of working people. That means investment on a scale never seen before in this country.”

MARRED BY EVENTS

Both parties were trying to focus on the economy on the second day of the official campaign after their early efforts were marred by unexpected or unplanned events.

On Thursday, a former Labour lawmaker took aim at leader Jeremy Corbyn, going so far as to say he did not think he was fit to be British prime minister and instead would encourage the party’s supporters to consider backing Johnson.

On Wednesday, the official launch of Johnson’s Conservative campaign was overshadowed by a resignation, much-criticised comments by one of his top team about a deadly tower block blaze and a doctored video advert.

Nine years of spending cuts to reduce a budget deficit that ballooned during the financial crisis have taken their toll on voters, with many public services financially stretched and polls suggesting little appetite for more austerity.

With that in mind, both parties are promising to end the era of cuts and undertake huge infrastructure investment programmes — taking advantage of record-low government borrowing costs in financial markets to fund them — if they win.

Monday’s Resolution Foundation report said such pledges could push government spending to above 40% of national output — levels not seen in the UK for decades, although still below those in Germany or France — and that taxes would have to rise.

At the start of the election campaign, the Conservatives enjoy a lead over Labour of between 7 and 17 percentage points, though pollsters warn that voters are volatile and their models are wilting beside the Brexit furnace.

($1 = 0.7785 pounds) (Writing by Kate Holton and Elizabeth Piper; Editing by Gareth Jones and Catherine Evans)

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