There are crucial lessons for Ed Miliband in Hollande’s defeat
A DISASTER for Francois Hollande, France’s socialist president: that is the only way to describe the outcome of yesterday’s elections, which saw the centre-right sweep to power in towns and cities across the country. The one exception to the socialist meltdown was in Paris, where the leftist Anne Hidalgo grabbed 55 per cent of the vote, making history as the first woman to become mayor of the French capital. In the rest of the country, however, socialist mayors were booted out in droves.
But this wasn’t just a victory for the opposition centre-right: the extremist National Front managed to seize power in a number of towns, grabbing well over a thousand municipal councillors even though it only stood in a small number of places. Turnout was weak by French standards, with many angry voters preferring to stay at home to express their disgust at the entirety of the French political class.
Hollande is expected to announce a new government; Jean-Marc Ayrault, the prime minister, could find himself becoming Hollande’s fall guy. The president is bound to continue his shift to the centre, desperately rowing back from his original radical agenda. He is not the first socialist ideologue to perform a U-turn: after his 1981 presidential election victory, Francois Mitterrand appointed a socialist-communist government that nationalised much of French industry and finance, and took the country to the brink. Economic reality and a political backlash led to a wave of reprivatisations and tax cuts a few years later.
So far, Hollande’s more moderate rhetoric hasn’t changed one key fact: the French state has grown even larger. Public spending on the OECD’s measure increased to 57 per cent of GDP last year, up from 56.7 per cent in 2012, the highest level in recent French political history; and spending is expected to dip only trivially to 56.8 per cent of GDP this year.
Unless the next prime minister takes a real axe to this, nothing will change.
There are lessons aplenty for Ed Miliband in all of this. Many of his policies are straight out of the Hollande hard-left playbook. Sadly, these kinds of ideas often appeal to the public – but it doesn’t take long for their disastrous side-effects to become obvious, and for their proponents to go from being loved to being hated. Hollande backed a 75 per cent top rate of tax; this has been turned into a slightly different but equally punitive super-levy, nominally imposed on employers. It is a strikingly similar idea to Miliband’s proposed 75 per cent tax rate on bank bonuses (the proceeds of which he has already promised to spend many times over). Miliband’s mansions tax is a narrower variant of France’s wealth tax; and his proposed price controls are of the kind that the French left has always advocated. Such ideas may attract the support of many UK voters – but they would deliver a disastrous supply-side shock to the economy, incentivising companies to hire and spend less.
French entrepreneurs are still tearing their hair out; even though the economy is finally picking up, they remain extremely gloomy about France’s future, and the exodus of talent and capital is continuing. Miliband is unlikely to ever accept that his policies would cripple growth – but perhaps Hollande’s wholesale rejection by the electorate will make him think again. The politics of envy is often popular at first – but it inevitably ends in tears.
TRADE WITH EUROPE
Some 4.2m jobs, 13.3 per cent of the workforce, are associated with exports to the EU, up from 3.7m in 1997, with 3.1m directly supported and 1.1m indirectly via income from exports – so estimates the Centre for Economics and Business Research. But as it notes, “this does not imply that the jobs would be lost if the UK were to leave the EU”. As I wrote on Friday, this would depend on whatever alternative trade deals were negotiated and on the flexibility of the UK workplace. A crucial caveat.
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