Goldman enters election campaign with Labour warning

Goldman Sachs has warned that a Labour-led government is likely to spark a sell-off by investors, adding its voice to a growing chorus of concern in the City as it considers the prospect of Ed Miliband in Downing Street.

The US investment bank listed the Labour party's plans to freeze energy bills, raise taxes and curb zero-hour contracts as policies likely to alarm investors, while noting that the Scottish National Party could drag Mr Miliband further to the left.

With a little over two weeks in the election and the polls deadlocked Boris Johnson, London mayor, sought to rally Tory supporters behind the party's strategy amid concern that it has failed to capitalise on the economic recovery.

Deploying his customary bombastic language, he claimed in an interview with the Financial Times that Mr Miliband was "the most leftwing Labour leader since Michael Foot" with policies that should "curdle the blood of all FT readers".

The US investment bank tempered its warnings to investors by pointing out that Tory plans for an EU referendum and to curb migration further "have met with their own concerns from business leaders".

But it cautioned that Labour's plans might mean that Britain's flexible labour market could be compromised "by promises to abolish so-called 'zero hour contracts' and interventions in markets".

In recent weeks a number of banks have issued investor notes warning that a Labour victory could unsettle markets, while there has been a surge in demand for insurance against sharp swings in the value of the pound.

In its note to clients, Goldman Sachs said: "Concerns are likely to emerge that reliance on the SNP would pull the Labour government away from the centre to the left of the political spectrum, as well as raising the spectre of distributional policies favouring Scotland at the expense of the UK as a whole."

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Mr Johnson claimed that Labour policies such as abolishing non-domicile status and raising the top rate of income tax to 50p were "acts of spite" because there was no proof that either policy would raise money. Labour says they are fair and will raise money for the exchequer.

"He [Mr Miliband] has a crazed desire to punish bankers and express his hostility to what he sees as casino capitalism," Mr Johnson added.

The increasingly vitriolic language being used by leading Conservatives against the SNP and Mr Miliband - including by Sir John Major on Tuesday - are seen in the Labour camp as evidence of panic in the Tory campaign.

However Lynton Crosby, the Tory campaign chief, believes voters in England are responding to the party's warnings about the risks posed by a Labour government with SNP support.

Mr Johnson backed Mr Crosby's robust tactics: "Have we become all namby pamby?" he asked. He said voters were right to fear the prospect of "Nicola Sturgeon wearing the tartan trousers, to use another metaphor which she will no doubt find offensive."

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