Best Financial Markets Analysis Article Thursdays European Elections are expected to deliver an horrendous result for the Labour government that will likely see a major restructuring of the cabinet on Friday that could even claim the Chancellor of the Exchequer as Gordon Brown seeks to put in place a team untainted by the the expenses scandal to muster at the next general election. Whilst many now openly question whether Gordon Brown himself can survive as panic spreads amongst Labour MP's that will clutch at anyone that could help prevent them from losing their seats at an general election.

However, my ongoing analysis over the past 6 weeks in advance of the update to the UK recession forecast of Feb 2009, has clearly illustrated that the UK economy is showing signs of having put the worst behind it and that Britain is on track for a strong economic bounce going into the Summer 2010 election deadline. My most recent analysis (Labour Governments Bankrupt Scorched Earth UK Economy for the Conservative Government ) showed that the government is borrowing to spend a net deficit of more than £500 billion to generate growth of just £67 billion and concluded that:

The Labour government's primary objective now is to deliver David Cameron's Conservative government a scorched earth economy whilst at the same time engineering a debt fueled economic bounce to maximise the number of seats the party will be able to muster in opposition, therefore current opinion polls and projections of seats at the next election grossly under-estimate the actual number of seats Labour will win.

General Election Forecast

In 2005 the three mainstream parties polled:

Labour 35%
Conservatives 32%
Lib Dems 22%

The most recent poll in the Daily Mail puts Labour on a 20+ year low of just 18%, Conservatives on 40% and Lib Dems also on 18%. The mainstream press are running with headlines of a Tory landslide victory at the next general election, such as the Sun newspaper forecasting a landslide Conservative majority of 192 or 414 seats in total.

Therefore considering the projected debt fueled economic recovery, the current opinion polls and this weeks European Election results can be disregarded as not reflective of the prospects for the major parties at the next general election, which I suspect will prove to deliver the Conservatives a far smaller majority as the below forecast graph illustrates.

The general election forecast is for 225 seats for Labour and 343 seats for the Conservatives which implies a Tory government with a much smaller majority of 36 than the 192 being bandied about in the mainstream press this week, which would mean that the next Conservative government will not be able to implement many of the more radical reforms necessary to restructure the economy in terms of deep cuts in public spending and therefore suggests a weaker government that could by mid-term at the the mercy of rebel euro-skeptic MP's much as John Majors government of 1992 to 1997 experienced. This is potentially bad news for the economy as it confirms my expectations of continued stagnation for most of the term of the next government i.e. low average growth coupled with above average inflation as a consequence of not being able to mend countries finances which is likely to continue to see large year on year budget deficits and therefore achieves the Labour parties strategy of delivering a scorched earth economy to a Conservatives one term crippled government, that sows the seeds for a landslide Labour victory come the 2014-2015 election.

Meanwhile the Lib Dems are expected to see their strong gains of 2005 all but disappear due to the fact that many of the Lib Dem marginal seats are against the Conservatives rather than Labour, and given the strong swing to the Tories the Lib Dem's blood bath could even be worse than that for Labour with potentially as many as half of Lib Dem seats being lost.

When Will the Next General Election be Held?

Way back in October 2007 when Gordon Brown bottled out of calling a general election, I warned that he had blown his chances of winning the next election and given that the economy was on the crest of the wave of a housing market crash which implied that the next election could not take place until May 2010.

The statement clearly indicates that there will be no election during 2007 or 2008, and given the economic circumstances of expectations for sharply lower growth during 2008 and 2009, it is highly likely that Gordon Brown will now postpone an election until the full five year term is over. Which now suggests the next UK general election will be in April or May 2010.

As things look today, Gordon Brown appears to have well and truly blown his chances of getting re-elected at the next Election in 2010. - Nadeem Walayat - October 2007.

The forecast housing market crash of 2007 to 2009 has come to pass with all of the economic consequences and much worse. However now given the anticipated trend for economic recovery well into 2010 the best strategy for the Labour government still remains to delay calling the general election for as long as possible, this therefore continues to suggest that the next general election will probably take place in May 2010 i.e. just a few weeks before the June 3rd 2010 Deadline, as further confirmation the odds for a May 2010 election has fallen from 30-1 in October 2007 to just 1/2 today (Ladbrokes).

The updated in depth analysis and forecast for the UK economy is near completion, to receive this by email subscribe to my always free newsletter.

By Nadeem Walayat
http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

Comments

Charlie 02 Jun 09, 10:37	Labour Out I have had enough of this government - it's time for change!
P. 02 Jun 09, 10:41	Reforms What we need by way of reform is: 1. Get MP numbers down to 400 2. Have 100 elected members in the Lords 3. Proportional Representation 4. A fixed 4 year term 5. A binding EU referendum There's absolutely no chance of any of the above with the current crew in Westminster though.
MICK UKIP 04 Jun 09, 03:59	UKIP UKIP VOTE THE UKIP
DS 04 Jun 09, 19:27	Election We want an early Autumn General Election to rid ourselves of this disasterous Government led by Mr. Brown. We can then have an independent, legally constituted new set of expenses and allowances. We also need a new set of standards for the selection of MPs.
Sky 06 Jun 09, 01:05	Sky elelection forecast A professor on the sky news site - Professor Michael Thrasher is forecasting the following on the basis of the local election results - Conservatives would enjoy a majority of 28 seats in the Commons if the results of the local elections were repeated in a General Election. After analysing the results of more than 700 council wards, Labour would have 215 seats in the Commons, while the Tories would be on 339 seats. And the Liberal Democrats would have 63 seats. Other parties, including the SNP, Plaid Cymru and the Northern Irish parties, would have 33 seats. Sky News' election expert Professor Michael Thrasher said the Tories picked up lots of council seats in what will be key battleground areas in the next General Election. He said: "In the South West, it was crucial for the Tories to take control in Somerset, which they did, and Devon was a bonus. ...................... Well done for beating the prof to the punch before the local election results.
Liam 06 Jun 09, 01:09	Gordon Brown What would be the impact of Gordon Brown going on the election date ?
Alex French 11 Jun 09, 16:50	Leave the country if labour win Personally if labour win the 2010 general election most people would leave the country, thus leaving labour with no people to govern. VOTE CONSERVATIVE, ALAN B'STARD (THE NEW STATESMAN)
Ed Addis 08 Nov 09, 10:25	Learned article but .. "...could by mid-term at the the mercy of rebel euro-skeptic MP's much as John Majors government of 1992 to 1997 experienced." 1 MPs is a plural not a possessive. Plurals do not use apostrophes in English. 2 Major's is a possessive and requires an apostrophe in English.
d j s 05 Jan 10, 18:45	labour party to win I think the labour party need to win Tories only in it for them self's think Cameron and the other 1 Osborn net 6m if they win that's off us the taxpayer wtf is wrong not going to get my vote in for the rich not for average normal people like me think of all the people that need HELP!! not for what labour did and it was all major parts that played a part in the expenses but every one takes it out on the party in power

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