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The markets need a stable government not a lurch to the right or left

April 24, 2015 12:01 AM
Originally published by UK Liberal Democrats

The Liberal Democrats have released a dossier that shows businesses, the City and markets all fear an economic lurch to the right or left.

The document contains evidence from Britain's investment banks, rating agencies and economists expressing fears of a Conservative or Labour Government.


It shows Britain's markets crave the stability and balanced economic approach fought for by the Liberal Democrats over the last five years.

As a recent report released by AXA wealth management said: "The markets would react most positively to policies that were closer to the political centre ground."

The cache of evidence reveals UK Plc is deeply concerned with a Conservative plan to abandon this approach - one that cuts public spending to the bone and flirts with an EU exit.

It also clear market analysts, fund managers and currency traders are worried about a Labour Government in deficit denial, borrowing too much and in hoc to the SNP.

The evidence shows the threat of a departure from a stable Coalition government has already caused volatility in the sterling and gilt market.

Markets also fear a Labour Government would:

  • Cost the economy more than £10bn-a-year as growth decrease by 0.6 of a percentage point (pp).
  • Cost the average household at least an extra £800-a-year in mortgage payments as interest rates jump 0.7pp.
  • A 1pp in gilt rates would increase the cost of government debt interest by over £4bn.

While a Conservative Government risking 'Brexit' would:

  • Reduce economic growth and threaten the UK credit rating.
  • Threaten UK, trade jobs and business investment.
  • Negatively affect markets and increase the cost of Government borrowing.

Liberal Democrat Chief Secretary to the Treasury Danny Alexander said:

"It is clear that neither Labour nor the Conservatives will achieve a majority. So the key question is who holds the balance of power, and what sort of government emerges afterwards.

"An unstable government, unable to take serious decisions, pulled sharply to left or right, with Alex Salmond or Nigel Farage, would cost us all dear. It would jam the breaks on the economic recovery.

"As the market commentary makes clear, such an outcome would lead to higher costs of government borrowing, mortgage costs rising by at least an estimated £800 a year, and a weaker pound.

"That would be an economic disaster for Britain, and an insult to the massive effort and the many sacrifices made by millions of people and businesses who are powering our recovery.

"The Liberal Democrats have shown we can deliver strong and stable government. We are the only party that can keep Britain in the centre ground, the markets happy and the recovery going."