Brown's Footsie performance

THE London stock market's performance since Labour's reign began back in May 1997 is probably not a subject Chancellor Gordon Brown would wish to dwell on. In fact, it has been lamentable.

After seven-and-a-half years of Labour, the FTSE 100 index is showing a derisory gain of less than 300 points, or just 6%. Between 1997 and 2003, the economy grew 18% with inflation around the same order. Now compare that with our main European neighbours.

During the same period, the German economy grew just 9% while its leading stock market indicator, the Dax, rose 17%. France posted economic growth of 16% while its CAC rose a healthy 42%. In Italy, the economy expanded 11% while the BCI was up an impressive 72%.

In fairness to Brown, the Footsie reached an all-time 6950.6 in December 1999, fuelled by demand for hi-tech stocks. But that went pear-shaped a year later when it became clear the high ratings boasted by many internet boomers could not be sustained.

Richard Jeffrey, chief economist at Bridgewell Securities, says no blame can be attached to the Government for the subsequent collapse that left private investors smarting with heavy losses.

When Brown took the economic reins, he made the Bank of England independent and charged it with keeping inflation under control. More importantly, he did away with the dividend tax credits enjoyed by the big City institutions which look after our pension funds. In one fell swoop, he drained the market of an estimated £7bn a year.

Jeffrey says: 'This was the first of the stealth taxes and was not fully comprehended by everyone at the time. But there is no doubt now about the severity of its impact.'

Fund managers switched out of equities and into expensive bond markets, a decision many came to regret bitterly.

The growing tax burden on individuals is also blamed on the stock market's sluggish performance by Justin Urquhart Stewart, boss of Seven Investment Management. He says that in 1997 the number of income tax-payers in Britain was 25.7m. That had grown to 29.9m four years later, reducing the amount of disposable income available for equities.

Brown's possible elevation to Prime Minister after the next election leaves a question mark over who might move into his job, at a time when doubts are rising about the strength of the UK economy. And investors are wondering about the impact of a third Labour term.