Two new polls on Sunday pointed to an indecisive result in Britain's upcoming election, with one suggesting the Labour Party would emerge as the biggest party and the other giving the edge to the Conservatives.

A YouGov poll for the Sunday Times showed the centre-right Conservatives with a four-point lead over Labour, down one point from a week earlier.

The poll of just over 1,500 people put the Conservatives on 37 percent ahead of Labour on 33 percent and the Liberal Democrats on 17 percent.

If repeated at the election widely expected on May 6, it would give Labour 302 seats in parliament against 277 for the Conservatives, the newspaper said. Neither party would have an outright majority.

Financial markets fear a minority or coalition government would be reluctant to take the strong action investors want to cut Britain's budget deficit, forecast to reach 178 billion pounds this year, more than 12 percent of GDP.

Markets punished the pound earlier this month after a poll showed Labour could stay in power but without a clear majority.

The Conservatives are bidding to end 13 years of Labour rule. But polls increasingly point to a hung parliament, in which no party has a majority, for the first time since 1974.

Labour needs a smaller percentage of the national vote than the Conservatives do to win a majority because its vote is concentrated in urban constituencies, which tend to have smaller electorates than rural areas.

CUTTING SERVICES

The poll provided ammunition for some analysts' view that the Conservatives are turning off voters with their

call for strong and early action to rein in the deficit.

Thirty-seven percent said the Conservatives were likely to raise taxes most, compared with 26 percent who thought Labour would. Half thought the Conservatives would make the biggest cuts in public services, against 14 percent who chose Labour.

A second poll, by ICM for The Sunday Telegraph, showed the Conservative lead dropping to seven points from nine last month.

The survey of just over 1,000 people put the Conservatives on 38 percent, ahead of Labour on 31 percent and the Liberal Democrats on 21. The Conservative lead equalled its lowest in any ICM poll for the last two years.

If repeated at the election, the result would leave the Conservatives as the largest party in parliament but still 30 seats short of an overall majority.

A hung parliament could leave the Liberal Democrats as kingmakers with either the Conservatives or Labour needing their support to govern.

The Conservatives want immediate action to start reining in the deficit while both Labour and the Liberal Democrats think the economy is too fragile to withstand public spending cuts now and that they should wait until the 2011-12 financial year.

Liberal Democrat leader Nick Clegg indicated on Saturday that, if the Conservatives needed Liberal Democrat support to form a government after the election, the Liberal Democrats would resist early spending cuts.

"We think that merrily slashing now is an act of economic masochism. If anyone had to rely on our support and we were involved in government of course we would say: 'No, do it sensibly ... Do it at a time when it is economically sustainable,'" he told the BBC.

Clegg's comment could reinforce investors' fears that a hung parliament would lead to inaction on government spending.