Why Gordon Brown won’t call an early election

However, although inflationary pressures might make it harder for the Bank of England to cut rates, there is growing evidence that UK consumers are tightening their belts.

Retail tycoon Sir Philip Green, reported that profits at flagship chain BHS were almost flat, while underlying sales fell 1.5% for the year to March 2007.

“The summer for everybody in our industry was hard work and anybody who tells you different is a liar,” he told the FT. “It was ugly… it cost me a lot of money.”

Sir Philip may be talking his book a little here – after all, BHS is hardly the toast of the high street, while his former target M&S (MKS) is still the darling of the fashion world. But amid higher interest rates, higher mortgage payments, and raised levels of uncertainty, there’s no denying that the outlook for the consumer is much wobblier than it has been for years.

All in all, there are plenty of good reasons for Gordon Brown to call an early election. As Clinton said, when it comes to elections, “It’s the economy, stupid.” The longer he leaves it, the more chance there is that things will go horribly wrong.

But for what it’s worth, I don’t think he’ll call an early poll, for several reasons. For a start, Mr Brown has got lucky so far. The exceptionally benign economic environment of the past decade means that there is still no real popular understanding of just how significantly he has raised taxes, or how wastefully that money’s been spent (see our May cover story on his record for more details: What Gordon Brown's premiership will mean for investors). None of the recent mud from the banking crisis has stuck to him.

He may expect that luck to continue - particularly now that Northern Rock is receding from the headlines. More to the point, I suspect Mr Brown believes that his economic policies are the right ones. He‘s certainly not someone to admit he‘s wrong, as his stubborn insistence on sticking with the ludicrous tax credits system shows, and as his generally hostile reactions when questioned on his policies shows.

Yet if he calls an election now, he’s pretty much admitting that he’s worried he won’t be able to win one later - otherwise, why go to the country mid-term? It’s a bit like being up 1-0 at half-time in a football match, and then trying to get the referee to call the rest of the game off. He’s already argued that there’s no need for him to get a mandate from voters, so really, there’s no justification for going to all the hassle and expense of an election, as Philip Johnston pointed out in The Telegraph a few days ago.

He’ll probably keep us guessing right to the last moment - mainly to keep the Tories running around in circles panicking about the election rather than focusing on building some concrete policies or vision of the future. But in the end he won’t go early. After all, as we saw from his years of glowering in Tony Blair’s shadow, he’s not one for taking risks. In fact, he may well keep putting it off and waiting for a better opportunity to go until he's forced to in 2010.

I could be wrong of course. But bear in mind that if he does call an early election, it’s because he is so sure that life is going to be harder in a year’s time than it is now, that’s he’s more willing to risk losing power early, than risk waiting to face the voters later. So an early election is a bad sign for the economy – if he does call a November poll, I’d suggest raising up your gold holdings.

Moving on – here’s a conference that may well be of interest to readers of Money Morning. It’s never easy to figure out where the best place is to put your money, and it’s going to get harder amid the recent turmoil in the markets. But it’s always good to get an expert opinion – and you can hear more than 50 of them lining up to give you their share tips and profitable strategies at the World Money Show. The London leg of the conference is being held on 30 November - 1 December at The Queen Elizabeth II Conference Centre and will feature 14 panel presentations and leading investment product and service providers. Call today to register for The World Money Show London at 00 800 1414 8888 (international free phone) between 10.30 am -10.30 pm (EXCEPT from 28 October to 4 November when hours will be 9.30 am to 9.30 pm because of the daylight saving time difference). Don’t forget to mention priority code #009184. Or just click here.

And just before we go, I just need to warn subscribers that unfortunately, due to the rather lengthy UK postal strike this week and next, there’s a strong chance you won’t get your copy of this week’s issue of MoneyWeek delivered until well into next week. We’re very sorry and none-too-happy ourselves about this - it’s something that’s completely beyond our control. However, you can download the latest issue as a PDF from our website, which may at least tide you over in the meantime. Feel free to give it a try with the current issue, and if you have any problems with downloading it, send me an email (johns@moneyweek.com) and I’ll get our customer services team to help you out.

Turning to the wider markets…