Sanguine markets must look again at Labour
Tuesday 18 March 1997
Nevertheless, Mr Major has clearly determined that the long haul - 45 days at the hustings, the longest election campaign this century - is the best route to staying in power. That's time enough to expose Labour's financial illiteracy and fiscal irresponsibility while allowing a steady flow of good economic news to filter through.
The initial reaction from the markets might suggest that his strategy has got off to a good start - the pound down against the Deutschmark and dollar, gilts off half a point and the Footsie tumbling by more than 50 points as the prospect of Tony Blair's first cabinet looms large. Like most knee jerk reactions, however, this one may well prove wrong.
Adjusting for the number of stocks going ex-dividend, the response from the equity markets to the naming of election day was less marked than that from the foreign exchanges. In the event that Labour does form the next government, it ought to be the other way around.
Gordon Brown has banged on for so long about fiscal rectitude, balanced budgets, low inflation and the need to cost every spending pledge, that it is difficult to get a cigarette paper in between the two main parties on macro-economic policy. If an incoming Labour government does find itself confronted with a sterling crisis, it is more likely to be about how to control sterling's rise than prevent it from falling through the floor.
The outlook for the corporate sector is much less promising. Labour's pledge not to raise either the basic or high rates of tax looks ominous. The obvious target now that these this avenue has been closed off must be companies, since neither companies nor the pension funds that provide their capital possess votes.
So far the only tax-raising pledge is the windfall levy on the privatised utilities. But will a Labour government be able to resist fiddling with corporation tax? And will a Labour government be able to resist further restricting, perhaps even abolishing the tax credits that exempt funds enjoy on dividends?
If the latter were to happen then it would take a 10 per cent correction on the equity markets to maintain current yields. The markets are perhaps being more sanguine about the prospect of a Labour win than they ought to be.
Exclusive: World’s most pristine waters are polluted by US Navy human waste
Chicago river turns green to mark Saint Patrick's Day
Saint Patrick's Day: Google Doodle celebrates patron saint of Ireland - here are 10 things you didn't know about the man himself
Missing Malaysia Airlines Flight MH370: Did jetliner fly into area controlled by Taliban? Net widens after claims final satellite signal could have been sent from the ground
Nasa-funded study warns of ‘collapse of civilisation’ in coming decades
Ukip and Nigel Farage on course for remarkable victory in European elections
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
Tony Benn was entirely ineffectual - and usually wrong
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
The rise of Ukip: Study warns Labour that Eurosceptic party's electoral base now 'more working class than any of the main parties'
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
- 1 Is your name now 'banned' in Saudi Arabia?
- 2 Gender-specific books demean all our children. So the Independent on Sunday will no longer review anything marketed to exclude either sex
- 3 Missing Malaysia Airlines Flight MH370: Did jetliner fly into area controlled by Taliban? Net widens after claims final satellite signal could have been sent from the ground
- 4 Nasa-funded study warns of ‘collapse of civilisation’ in coming decades
- 5 'Missing Malaysia Airlines Flight MH370 plane found in Bermuda Triangle!' Viral Facebook links are profiting hackers
iJobs Money & Business
£35000 - £43000 per annum + Bonus and Benefits: Harrington Starr: A global lea...
£50000 - £60000 per annum: Harrington Starr: Linux Systems Administrator - UNI...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...