Wednesday 1 October 2014

France and UK future united?

France is today battling against the Eurozone. Being part of the Euro means that the Government has to justify its debts to a third party in a way that does not happen in the UK. Depending on your view this could be a good thing, like mega-OBR or a bad thing in that is undermines the sovereignty of a nation.

Either way, France is making excuses about its budget deficit and its inability to hit the 3% or lower target demanded by Euro membership. France is due to miss by 1% every year until 2017. Oh for the UK to be in this position, our budget deficit is 6.5% and none of the UK politicians are making any real noises about how to reduce this beyond saying cuts are coming after the election!

That France has higher public net debt to start with makes things more difficult. But the truth is that France has tax rates that overall are not too dis-similar to the UK, only about 2% points higher on balance. However, with its vast public sector, powerful unions and left-wing Government, no one is in a position to force real change; or even to want it.

This same situation will likely appear in the UK after the next election. A Labour government led by Ed Milliband will have no appetite for real austerity. Taxes can only be raised a little given their historically high point has already been reached - there are severe diminishing returns for pumping up taxes from here.

Reforming or cutting services will not be on the ideological agenda so instead they will hope that economic growth outstrips the debt growth. However, this is unlikely to happen as the high point for growth in the current cycle is around now in all likelihood, not in 2015/16 when instead you would expect a slight slowdown or, if unlucky, recession.

Also in France, President Hollande is very unpopular, with the right wing Marie Le Pen seen as the main challenger - this surely gives hope to UKIP too in the UK that given the above set of circumstances it can replace the Tories as the party of opposition in time for 2020 when a sad Labour Government will be beaten out of sight in the election - having delivered a dog's dinner of hollow promises for its 5 year term.


Anonymous said...

"this surely gives hope to UKIP too in the UK that given the above set of circumstances it can **replace the Tories as the party of opposition** in time for 2020"

What were you drinking last night?

CityUnslicker said...

le Pen will do this in France; why not the UK when our economic paths and political paths are so similar?

I admit, I could have couched it a little more, but hey - its a blog post!

Ed Miliband said...

Its a ten year plan actually.Not a five year one. I said so in my speech, in one of the bits I remembered to talk about.

Already I am making excuses for why Labour utterly failed to achieve anything in their 2015-2020 election.

I met a bloke called Derek, at a chip shop. He said that UKIP were racists.
I like it when ordinary working class types agree with my own views.
And he wasn't a made up person. he was a real pensioner having the 6pm early-bird pensioner cod and chips.

So there!

Jer said...

False hope to UKIP surely.
If the Tories lose, Cameron will fall on his sword (being a decent, honourable pillock) and there will be a new leader.

Not sure who the Tory John Smith is though. Theresa May wouldn't be a UKIP killer but is the most convincing.

A lot of people would vote for Boris - even if only to see what happens...

CityUnslicker said...

Jer - that sounds good.

Boris is fun, Milliband will be amazing fun in his own special way. Farage is fun.
Whilst the finances of the nation will be lacklustre, the gaiety of the nation will be most improved.

dearieme said...

Five years is a long time in politics.

Budgie said...

CU said: "... sad Labour Government .... having delivered a dog's dinner of hollow promises for its 5 year term."

Hmmm, a bit like Cameron's Conservatives, then?

The biggest saving to make in government is to make it efficient at spending the money it has, certainly not to increase taxes (which takes money out of the rest of the economy).

This is very very hard to do. But possible. It requires application, perseverance, knowledge and competence. It also requires the political will to resist fiddling with outcomes and instead focusing on the processes. The relevant existing legislation must be considered in tandem, to see whether imposed obligations can be adjusted or re-directed whilst still achieving the original intent.

Cameron could have done this. He should have done it. Instead he has implemented essentially the 2010 Labour strategy, but without Brown.

That is why we can vote UKIP (which is least worst, not wonderful), without being tricked into being fearful of the Miliband Tendency - because the LibLabCon are all essentially similar in practice. Cameron knows all this of course, which is why he is now promising all sorts of real Tory ideas at the conference. Too late - he shouldn't have ignored the Tory faithful over the last 6 years.

CityUnslicker said...

The pretend tax breaks in the speech today were great. TAX CUTS, but only if we cut the deficit, which we can't....

Anonymous said...

UKIP's problem is the FPTP system. They are trying to out Tory the Tories. But when it comes down to it, they won't get to the finishing post.

Think of them like Aldi/Lidl. They are game changers but not game winners. The UK shopper still goes to Tescos - even though like GO they have messed up the accounts.

Anonymous said...

"TAX CUTS, but only if we cut the deficit, which we can't...."

Yup. And the media of right and left have swallowed it whole. Telegraph show their readers how much better off they'll be, Guardian criticise tax cuts for the rich. Fantasy budgets rule.