Taxing time under Brown

IT IS a statistic Gordon Brown will be keen to avoid. The Chancellor often talks about the need to encourage savings. But new research shows how badly Britain's stock market has fared since Labour came to power, seven years ago tomorrow.

It is up just 1.8%. After counting inflation, investors have lost 10.4%.

Nor can this purely be explained by the 'boom' and the subsequent 'bust' in global markets. Comparable overseas markets have done much better over the same period. If London had matched its rivals the Footsie, currently at 4519.5, would be back over 6000.

So says the independent - albeit Conservative-leaning - Centre for Policy Studies think-tank. It contrasts the market's dire performance with its strong record under the previous Tory Governments, and with the 'golden economic inheritance' Labour received in 1997.

These are political points to be debated. But the data themselves are publicly available and are incontrovertible.

We included reinvested dividends and found the gap remains: London is up 29% (before tax), the US and the rest of the EU 70%.

Why the divergence? Red tape and dividend tax changes cost investors some £23bn a year, while the corporation tax cut saves just £3bn.

Meanwhile, Britain's economic competitiveness has slumped in international league tables. Estimated net profits have fallen 11% and returns on invested capital have more than halved to 5.8%. Government inspired 'rip-off Britain' attacks on anyone who dares make a profit are keeping investors wary.

But the news is not all bad. Industry profits, which began falling in 1997, started to recover last year. The pound, whose strength has hurt industry through much of the period, has come off its peak. And London, on 15 times recent earnings, yielding 3.5%, looks better value than many overseas markets.