The next British finance minister in Gordon Brown's future administration is unlikely to abolish stamp duty on share trading, despite great hopes for change, and investors can expect little new in terms of policy, analysts say.
Brown, finance minister since 1997, is due to become prime minister on June 27, with a cabinet reshuffle expected the same day. Brown's first act as chancellor 10 years ago was to hand independence to the Bank of England, putting it in charge of interest rates - a move lauded by financial markets - and this has raised hopes of a similar grand gesture when he takes the top job later this month.
Abolishing stamp duty on share trading, currently at 0.5 percent, is often mooted by market participants as a way to increase the UK markets' competitiveness with other European bourses, though most think such hopes will be dashed while Brown's Labour Party remains in power.
"It's only the Tories who have taken this one up, saying that if they got into power, they would look to abolish stamp duty - but that is a big 'if' at the moment," said Richard Hunter, head of UK Equities at Hargreaves Lansdown.
"Only the other day, the government said they have no intention of scrapping it ... It's 4 billion pounds they will have to find elsewhere in the public purse."
"The current government are not going to step down on that." One area that the new chancellor may look at, however, is the way the Treasury taxes spreadbetting companies, such as IG Index, Cantor Index and CMC Markets, analysts say.
"Because of the development of spreadbetting and things like that, which are obviously immune from stamp duty, there is an argument to suggest bringing that in line with some of the other financial products that can be traded these days," Barclays' Potts said.
But Hunter believes such a move is unworkable. "Contracts for differences trading and spreadbetting - you're not actually (the) owners of the underlying shares and that's why stamp duty isn't payable." "That would become very complicated if you started to stamp duty on any sort of synthetic products or derivatives. I think its too much of a moving target for the government to clamp down on."
Market participants hope the new finance minister will strive to ensure that the UK continues to be a competitive environment in terms of its taxation and ability to foster entrepreneurship. Brown's own elevation to Prime Minister is likely to ensure continuity from his days at the finance ministry.
"Brown's replacement as chancellor will be of more interest," said Hunter, head of UK equities at Hargreaves Lansdown. Trade and Industry Secretary Alistair Darling is seen as the hot favourite to succeed Brown, the longest-serving chancellor of the exchequer in 200 years.
"It is important," said Henk Potts, an equity strategist at Barclays Stock Brokers. "The reality is that Brown will choose someone who is likely to fall in line with his policies and his practices as well." "Of course it's a very difficult act to follow, particularly as the chancellor now becomes your boss, effectively."
Brown has presided over a long period of stability for the UK economy after the regular "boom and bust" cycles of the past. Traditionally, political moves did tend to shake the markets, but over the last 15 years they have had very little impact. It only tends to come around budget time," said Hunter.
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