There was great excitement last week in the financial world as the FTSE 100 moved above 5,000 for the first time since the collapse of Lehman Brothers a year ago. The FTSE 100 has now increased by more than 40% since March, and many economists and analysts are pointing to rising stock markets across the world as evidence that we are moving out of recession earlier than many people had hoped.
While indeed it is good news for shareholders, employees and anyone with a private pension that the FTSE 100 is rising again, we are danger of ignoring the Labour Government’s terrible record over the FTSE 100, the cradle of much of the nation’s wealth.
The FTSE 100 was formed in January 1984, with a starting level of 1,000. Thirteen years later, when the Major government was defeated, the FTSE 100 had more than quadrupled, to well over 4,000.
The day Labour was elected in May 1997, the FTSE closed at 4,456. Last Friday, September 11th 2009, it closed at 5,011. So after more than 12 years in power, the UK’s main stock market index has risen just 12% under Labour – less than 1% a year.
Compare this to other countries. In the same period from May 1997 to September 2009, the Dow Jones has grown 35%. France’s CAC has grown 40%. The German DAX has grown 60%. Australia’s main index has grown a whopping 80%, a testament to the Howard government’s handling of the Aussie economy.
So why has the UK stock market performed so poorly when compared to our European neighbours and our Anglosphere cousins?
The answer should be fairly obvious to all Conservatives – 12 years of rising taxes and regulation, huge increases in public spending as a share of the economy and the lowest growth rate in the English speaking world have all taken their toll – not to mention of course a banking crisis caused in part by a financial regulation regime Gordon Brown introduced.
Had the FTSE 100 grown since May 1997 at the same rate as the Dow Jones has – 35% – the FTSE 100 would have closed last Friday 1,000 points higher than it actually did – at just over 6,000 rather than just over 5,000.
If the FTSE 100 was at 6,000, then we would all be feeling a lot wealthier. Anyone with savings in shares or managed funds, people on employee share ownership schemes, and especially anyone with a private sector pension would now be feeling a lot better off. Indeed, the crisis in Britain’s private pension sector (itself started by Gordon Brown’s infamous abolition of the dividend tax credit in 1997), with the vast majority of company schemes in deficit, would be much less acute if the FTSE was at 6,000.
There are a lot of economic and financial indicators we can lay at Gordon Brown’s door as a sign of the Labour Government’s failure – public debt that will cripple us for a generation, falling public sector productivity after massive spending increases, an uncompetitive tax regime causing companies to re-locate abroad, and of course a banking crisis that has affected our banking system and our public finances more than in any comparable country.
But don’t forget the FTSE 100 only being at 5,000, 12 years into a Labour Government, is another sign of the damage Labour has done to our economy.