Party time for punters

A bet on a Labour win could prove as safe as any other investment, writes Rachel Fixsen

What's the difference between investment and gambling? One is for the prudent, the other for moments of downright recklessness - right?

Perhaps, though the line between the two sometimes seems thin - especially when you find yourself stung by the plummeting price of a sure share bet.

With the ultimate "sure bet" looming in less than three weeks, why not forget serious investments for a spell and have a real flutter? Betting on a Labour victory at the general election on 1 May seems safer than some "investments" on offer.

The odds on a Labour win are short, but if you feel sure Tony Blair will be the new incumbent at 10 Downing Street, a bookie could give you a decent return on your stake.

William Hill and Ladbrokes are offering odds of 1-7 on Labour winning the most seats. This means for a stake of pounds 7 (and 63p with betting tax at 9 per cent) a win would give you pounds 1 plus your stake back. Taking the tax into account your return over the next three weeks would be 4.85 per cent - if Labour won. This adds up to an annual rate of return of about 84 per cent.

If you believe John Major will beat the opinion polls, as he did in 1992 and win the vote, you can get odds of 4-1 from either bookmaker. Odds of a Liberal Democrat win are 800-1.

Simon Clare, election betting manager at Ladbrokes, says all the money is going on the size the Labour majority will be, rather than whether the party will win. "Nobody is backing any Tory majority at all," Mr Clare says.

Shortest odds - 9-2 - are being offered for a Labour majority of 81-100 seats. Some punters are betting on 221-240 , where the odds are 25-1, Mr Clare says.

Serious money has already been placed though most election betting is expected nearer polling day.

"We've had pounds 95,000 from a punter who's had a double, combining a bet that Labour will win the most seats with a bet that (Glasgow) Rangers will win the Scottish Premier Division," says William Hill spokesman Graham Sharpe. This individual stands to make a clear profit of pounds 13,000 if her predictions come true. Bookmakers expect election betting to total pounds 20m this year.

Spread betting is a form that sprang up 14 years ago. It packages betting into the format City traders use to deal in stocks and was aimed at traders to begin with. City Index, Labrokes and William Hill Index offer spread betting.

"It started as a hobby for people who worked in the City ... but it has reached a much wider audience now," says City Index spokesman Paul Austin.

In some ways it straddles the line between betting and investing and is regulated by the Securities and Futures Association, unlike standard betting which has no official regulator.

This is how it works. In election spread betting, you bet on the size of majority you expect a certain party to win. The betting shop offers a range, or spread, representing the majority it expects the party to gain.

You then have two choices - bet the party will get above or below the range. If you bet above the range and the party wins more seats than the range suggested, you win your stake multiplied by every seat the party wins above the top of the range.

So if you bet pounds 10 above City Index's spread for Labour's majority, which is 368-374 seats and Labour subsequently wins 400 seats in parliament you win pounds 260. But if Labour manage only 300 seats you have to pay pounds 680. You never hand over your stake, as clients set up credit facilities with the companies.

While you're weighing up the odds of Labour winning, don't forget to take a look at any shares you own. Some stocks might not take kindly to a change of government, analysts say.

Utilities, including water, telecommunications and gas, are bound to sustain injuries if Labour's proposed windfall tax becomes law. "If Labour were to win there might be 2-3 per cent downside," says Philip Wolstencroft, equity strategist at securities house Merrill Lynch.

Over time, general tax rates and corporate tax rates would be likely to go up under Labour, says Mr Wolstencroft. This would be bad for share prices generally.

Worries that Labour might step up dividend taxation have started to niggle the markets. Analysts say these fears are groundless, but extra dividend tax would hit high-yield stocks.

A Labour win may not be bad news all round for equities. Some market players believe bus companies like National Express or Stagecoach could be winners if a Blair administration opts to back public transport. Manufacturers could benefit if corporate tax was reformed in their favour.

"A lot of these equities market issues will not be decided on election day. The Budget will and this will come some weeks later," says George Hodgson, equity strategist at SBC Warburg.

So will voters decide it is Time For A Change, or will they make sure The Others Don't Ruin It? Roll up and place your bets in the betting shop or the stock market. But remember - three weeks is a very long time in politics.