Mr Hollande’s alternative to austerity is – austerity

Mr Hollande spoke with upbeat rhetoric to get elected.Now he is governing, he pores forth pessimistic language. He campaigned with optimism, he governs with pessimism.

His supporters will say he has to trim to the realities of office. They might argue that he did say in the small print of his manifesto that he too, like Sarkozy before him, needed to get the budget deficit down. Yet what most of us remember was the song “All you need is growth”. It is difficult to see where the extra growth is going to come from on his current policies.

Mr Hollande is right to take action to curb the deficit, even though it is already lower than the UK’s as a proportion of national income. I hope UK socialists will take note that a socialist French President wants the deficit below 3% of GDP, en route for 0%.

Where his policy is likely to prove damaging is opting to do so much of the adjustment by higher taxes. Mr Hollande may find, as Mr Osborne is finding here, that higher tax rates lead to a fall in tax income, or slow its natural growth. Mr Hollande’s income tax increases are so eye catching that they are a help even to London, which looks good value in comparison. Why wouldn’t well off and enterprising French people now go to Singapore, Hong Kong, or New York, to make their money?

There are only so many rich people to tax in the world, and they do tend to move around to lower tax jurisdictions. Mr Hollande will have to tax the not so rich as well, if wants to keep his public spending at current levels. His decision to reduce the retirement age has made it more difficult for him to control spending. He may find, as southern Euro states are finding, that deficits go up, not down as economies decline and as rich people find ways to earn less or move abroad with their money.

Growth requires realistic tax rates, stronger banks and private sector led activity. How is Mr Hollande going to provide that, with a diet of pessimism and higher taxes?

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107 Comments

  1. paydirt
    Posted September 29, 2012 at 5:47 am | Permalink

    don’T want to pour eau froid on this, but why worry about the
    French lot? It’s good for us if their socialists show the way to perdition.

    • Bob
      Posted September 29, 2012 at 12:16 pm | Permalink

      With his wealth of experience in financial matters I’m sure he’ll do a great job.

      Pass the popcorn.

  2. Kevin R. Lohse
    Posted September 29, 2012 at 5:58 am | Permalink

    “He campaigned with optimism, he governs with pessimism.” Sounds like an Orange-Booker to me.

  3. zorro
    Posted September 29, 2012 at 6:10 am | Permalink

    A pretty sound analysis of the likely result of his actions…..maybe the French will accept it…..but on the other hand they are far more likely to strike at the drop of a hat. Prepare for mass demonstrations in Paris, blockading of ports, shutting down of their transport system and mischief with asylum seekers at the Channel Ports…..Well, that’s the usual routine and within their deflationary mechanism, it’s likely to be worse than usual….

    zorro

    • alan jutson
      Posted September 29, 2012 at 6:51 am | Permalink

      Zorro

      And I was thinking of going to France for a holiday next year. !

  4. lifelogic
    Posted September 29, 2012 at 6:16 am | Permalink

    Indeed M. Hollande came to power by promising to rob the rich. He must surely have known it will not work. He was, despite this, very happy to milk it for political purposes and now the county will have to pay the price (albeit modified for reality slightly).

    Perhaps the most depressing thing on Question time was the huge cheers when rent controls were suggested. Doubtless we will get them with Labour in 2015. If not with the current socialist rabble. Miliband will be very Hollande like at the next election I suspect not that he will have much opposition it seems.

    It was good to see that the Tory party still has one or two sensible people like Jacob Reece Mogg, all be they rather thin on the ground.

    The lessons from all this seem to be that, with the BBC setting the socialist, quack green, pro EU agenda, there will always votes in purveying quack remedies for the economy rather than the sensible clear ones. One just has to listen to the dreadful Harriet Harman. Also what is it about tv comedians (and pop stars too) like Steve Coogan that always seems to give them such mad, unworkable and socialist views? Is it the desire to respond to the “BBC think” audience?

    I see Cameron “hints at EU referendum after 2015” after he has left power. He thinks it is not in our interest to leave and become a greater Switzerland but will not say why. He said “I don’t think it is in Britain’s interests to leave the EU but I do think what it is increasingly becoming the time for is a new settlement between Britain and Europe and I think that new settlement will require fresh consent,”. Who on earth will consent?

    After his broken, cast iron promise, a “hint” from him of this type is a clear outrage and pure betrayal of his voters. Perhaps he should just keep doing the US TV circuit and let someone sensible take over.

    • Iain Gill
      Posted September 29, 2012 at 7:52 am | Permalink

      Re “Rent controls” I do feel the private sector rental market is out of control at the moment. We are the only developed country I know where its impossible for decent people who pay on time cannot get long term tenancies to be able to guarantee their location through say their childrens run up to their exams, or through a family members cancer treatment. Even terminally ill people who know they only have two years to live cannot find somewhere to rent to live their final days in peace even if they have the cash up front to pay for that couple of years rent. The dominance of short term 6 and 12 month tenancys and the power that gives landlords to destroy peoples lives on a whim is bad for society. It also imposes far worse situation for any private tenants who do loose their jobs than happens to their mortgaged or state subsidised housing equivalents, really folk need a breathing space to go out and get a job not be looking for a house again at the very point in their life where they will not pass a credit check.

      The continued state subsidised housing stock is also bad for the country. Its unfair competition prevents innovation and competitive pressure on rented housing provision. It would be far better to give needy people money to be able to spend on free market rents wherever they want. Many housing associations are providing poor service levels, and the whole allocation process is corrupt with houses allocated to friends of friends on the nod being routine. To say nothing of the whole aspect inherent in the so called affordable housing of the state choosing where people should live rather than folk being able to gently move over time to where the emerging jobs are and so on.

      I would also like to see some other sensible ideas looked at. For instance I don’t see why recent graduates shouldn’t be able to live in halls of residence for a year or two after they graduate. Sometimes there is capacity there to allow this (especially short term), its basically prevented by the rules that mean as soon as one non student lives there everyone becomes liable to council tax. If ex students could live in such accommodation it would help them transition to the world of work a lot more easily, especially relevant for those with limited family support or who have come out of the care system.

      So fixes do need looking at.

      Reply It is not true to say that all Council house allocation is corrupt. If you have evidence of corruption with a particular Council should you should take it up with Councillors or the authorities

      • ChrisXP
        Posted September 29, 2012 at 8:22 am | Permalink

        “The dominance of short term 6 and 12 month tenancys and the power that gives landlords to destroy peoples lives on a whim is bad for society”.

        Oh dear this just isn’t true. The majority of landlords are not out to make people’s lives a misery. It’s more likely the other way round; when tenants wreck properties, leave bills unpaid and leave the landlord with costs of thousands of pounds to mend a property before he can re-let it. Tenants know the law is weighted favourably in their direction which is why many try it on.

        • Iain Gill
          Posted September 29, 2012 at 12:56 pm | Permalink

          I have seen plenty of good, decent, honest, reliable paying tenants kicked out on a whim at the end of their 6 months. Indeed it has happened to myself a few times, landlord decides he wants to move back into the house or whatever.

          At the risk of repeating myself we need companies like Virgin entering the mass property rental market to shake it up and provide some proper reliable landlording for decent folk.

          • lifelogic
            Posted September 29, 2012 at 4:36 pm | Permalink

            Fine but the landlords would not let it if they did not think they could recover it when for example they returned from a job abroad or it he wanted to sell the property. Also tenants may want to rent for five year but they also want the right to change their minds if they lose a job or see a better deal. The tenant took a 6 month or twelve month contract they knew the deal. They cannot have it all there own way. Landlord need flexibility too or why let at all.

        • Leslie Singleton
          Posted September 29, 2012 at 3:13 pm | Permalink

          Cannot imagine where the idea comes from of the dominance of short term. In my experience (as a tenant following divorce) l and with friends who are landlords (not that this is so hard to predict) landlords want nothing more than they want continuity. Once or twice when I have perhaps diffidently mooted the possibility of an extended lease signed up front, asking whether the landlord might entertain such an idea, the estate agent has immediately replied something like, Are you kidding, offer that and he’ll bite your arm off. The problem is the left wing entitlement mentality that says that landlords (and employers) are “bad” and that the tenant should be able to act as if he owns the place at his discretion when he so patently does not.

      • a-tracy
        Posted September 29, 2012 at 10:16 am | Permalink

        Interesting post Iain, I agree about halls for low waged workers looking for a bedroom to start their independent lives, not just for graduates but all aspiring workers under 25. It may help to stop this allocation of council flats and houses to 18 year olds when their parents stop being able to claim for them and kick them out.

        I’ve always wondered about social housing allocation Mr Redwood, I know someone who wanted to move out of private rental and she knew she wouldn’t have a chance of a social house – so she began to volunteer for citizens advice and quite soon afterwards was offered a social house. Although that’s not corrupt it’s not actively advertised as a way to increase your chances. You know most of us are raised not to be snitches.

        • lifelogic
          Posted September 29, 2012 at 12:52 pm | Permalink

          Indeed it is often a perk of the already relatively over paid state sector. Overpaid by about 50% when you include pensions, even more if you include perks like social subsidised housing (which is a large benefit and taxable).

          All paid for from over taxing the ones largely generating the wealth.

          • lifelogic
            Posted September 29, 2012 at 4:37 pm | Permalink

            “not usually taxable” I meant.

      • Bob
        Posted September 29, 2012 at 10:53 am | Permalink

        @Ian Gill

        Rent control would be approaching the issue from the wrong end. It’s a typically socialist concept, which would just undermine the rental market You may as well impose food price controls.

        The driving force for rental rates is housing benefit.
        Someone has just moved into a newly built three bedroom house with spacious garage, garden front and rear and en-suit bathroom all curtest of housing benefits.
        And that same someone refuses to work more than a few hours a week, as they would lose benefit. The system invites fraud and abuse, and fuels the rental market, because people are always less thrifty when spending other peoples money.

        There are no doubt unscrupulous landlords who encourage tenants to inflate rents based on housing benefit claims with “cash-back” to the tenant. There are also unscrupulous tenants, who abuse their landlords, turn the property into a slum, sub let, run up large arrears or rent and finally disappear without a trace leaving the landlord with the job for repairing a refurbishing the property at huge expense. Any attempt to sue, even if you could find the errant tenant result in nothing more that a large legal bill and little chance of recovering the debt.

        You shouldn’t criticize all landlords as unscrupulous, and pretend that all tenants are angelic victims; it’s often the other way around.

        • lifelogic
          Posted September 29, 2012 at 12:58 pm | Permalink

          “You shouldn’t criticize all landlords as unscrupulous, and pretend that all tenants are angelic victims; it’s often the other way around.” Indeed but not in “BBC think”. They would never see it that way.

          Even squatters are “angelic victims” according to the BBC, just helpfully “looking after” your property for you. Or more likely burning the wood work and banisters to keep warm, and leaving the place littered with rubbish and dirty needles – in my direct personal experience.

          • Iain Gill
            Posted September 29, 2012 at 3:33 pm | Permalink

            ah yes the BBC and its politically correct trendy arts grad view of the world, they need taking off the public payroll

        • Electro-Kevin
          Posted September 29, 2012 at 10:47 pm | Permalink

          Step-niece.

          Pregnant at 14. Never worked in her life.

          Given a new two bed house with garage aged 18. Has a dog, runs a car and credit cards.

          Talks and behaves as though she earns a wage and as though she is self-sufficient.

          • Electro-Kevin
            Posted September 29, 2012 at 10:50 pm | Permalink

            Her mother had encouraged her to stay out on Saturday nights aged 14. Repeating her own life cycle of benefit dependency.

          • Electro-Kevin
            Posted September 29, 2012 at 10:53 pm | Permalink

            This isn’t the only example. We are surrounded by it both here and in that part of the country.

          • lifelogic
            Posted September 30, 2012 at 4:23 pm | Permalink

            She is perhaps behaving “sensibly” given the absurd system that pertains and that Cameron continues to maintain. I blame the system mainly her friend will see her and perhaps do the same too.

      • Iain Gill
        Posted September 29, 2012 at 11:06 am | Permalink

        I agree not all housing association or council housing allocation is corrupt, but some clearly is, I think the evidence is fairly clear for all to see I am surprised to see anyone think otherwise. Even if you aint been around enough to see this I dont see why the state apparatus should be deciding house allocation even if it was above board. I know several people being harassed (last time I looked harassment was a criminal offence) to move out of their house because the state has decided they have too many bedrooms, one dear old lady I know is in a small 2 bedroom house being hounded constantly to move into a one bed property, she almost certainly has less than 12 months to live anyways I really do despair at the idiotic state apparatus doing this.

        I have demonstrated a number of times to the authorities that significant rule breaking is taking place, granted in other spheres of life, and been able to prove it, for instance in the NHS, in the police, big companies disregarding the Data Protection Act, Telco regulation, and so on, and have always found the end result is no change whatsoever and the perpetrators let off with a letter telling them off and nothing else. Complaining to state regulators of service is generally a waste of time, far better would be end consumers allowed to take their business where they want whenever possible.

        • lifelogic
          Posted September 29, 2012 at 1:01 pm | Permalink

          There is certainly huge corruption or bending of the rules here – if you are giving things away for 1/3 price you expect corruption do you not? Those in the know will get to the front of the queue, they know the rules and the people with authority.

        • sm
          Posted September 29, 2012 at 2:39 pm | Permalink

          State regulators:
          How can they be directed by consumer interest without being hijacked by supplier interests?

          We have supercomplaints but we really need to have class actions funded by the state driven by consumer (petition lists) once a threshold is hit.

          Why did it take so long to nail the banks on bank penalty charges etc?

          Why cant bounties be paid to whistleblowers or those who bring successful private prosecution against wrongdoing particularly at the levels where it really matters. Public malfeasance etc.

          • Iain Gill
            Posted September 30, 2012 at 10:42 am | Permalink

            Talk Talk are currently running with massively more complaints than any other Telco by a long mile. They have been told off time and time again. (What are the regualtors going to do about it? ed)

      • lifelogic
        Posted September 29, 2012 at 11:53 am | Permalink

        If you want lower rents you need less demand, more supply, more lending and cheaper build costs.

        So reduced “migration”, relaxed planning laws, lower cost for utility installations, lower building control cost, less OTT green drivel build regs and a functional banking system. Fear of rent control is the last thing you want you will kill the supply of flats to rent.

        • Iain Gill
          Posted September 29, 2012 at 12:50 pm | Permalink

          I am not pro rent control. The best way of keeping downward market pressure on rents is to allow tenants to move easily, not be stuck with 11 months of a short term tenancy which they are committed to if they have renewed just before they find another job in another part of the country or similar.

          More supply I agree with, but houses that folk actually want i.e. with a drive and not housing with rabid anti car prejudices imposed by the planning dept.

          Cheaper build costs, yes absolutely. Take away all this nonsense about private houses being forced to subsidise supposedly “affordable” homes, more cheaper supply would force rents down for everyone. And as I said before subsidise needy people by giving them money to spend on rent directly not by subsidising state housing provision, let the end consumer control their own spend and make their own trade offs in distance between potential jobs and potential homes etc rather than the state deciding (badly).

          Reduced migration absolutely, lets see some action not words, scrap ICT visas and their widespread abuse for a start.

          Yes, yes and yes.

          But open the market up to force rents down, and allow decent folk to have security of tenure if not forever at least a lot longer than 12 months.

          • wab
            Posted September 29, 2012 at 7:31 pm | Permalink

            One minute you are complaining that a 12 month lease means you can be kicked out after 12 months. The next minute you are complaining that a 12 month lease means you cannot leave for 12 months. It seems you just want tenants to have all the rights and none of the responsibilities.

            The real problem is not landlords but supply and demand. The ruling elite has refused to allow enough houses (and certainly nowhere near enough decent houses) to be built the last decade or two, where people actually want to live, because this might upset the propertied class. You know that something is wrong when half the cost of a house is the land on which it sits.

          • Iain Gill
            Posted September 30, 2012 at 6:23 pm | Permalink

            Re “One minute you are complaining that a 12 month lease means you can be kicked out after 12 months” I know what you mean but its business. I can book a hotel room for 12 months, and cancel at any point during the term with no penalty. I fundamentally don’t see the difference between that and renting a house. If you have been in a house for years you should be able to leave at any point with 3 months rent penalty max, not the 12 months or 6 months penalty you will face if you have just extended under the current system. And yes tenants should be able to get longer notice from the landlords than they need to give that’s the way it works in the entire rest of the developed world.

            If I was a landlord I would be happy with this in much the same way as I would be as a shareholder in a large hotel.

      • Ludwig
        Posted October 1, 2012 at 10:07 am | Permalink

        Iain, the rental market is not out of control. Unless there is evidence of collusion between landlords (and I have yet to see any evidence of this) then rents are set at market rates. As with anything, the market price is dictated by supply and demand. Just as with house prices, rents are too high in certain areas because of a poor supply of housing. The 6- and 12-month tenancy agreement also works for tenants as well as landlords. Tenants are not locked into long-term contracts any more than the landlord. If landlords are locked into longer tenancy agreements then there will be a decline in the number of rental properties which will drive rents even higher. Rent controls are a ridiculous proposal. What next? Should the government also dictate house prices? Car prices? Milk prices? How about salaries? Governments are no more able to determine the correct price of anything than they are to predict the weather next year.

  5. Mike Stallard
    Posted September 29, 2012 at 6:31 am | Permalink

    I only know one Swiss banker. He runs a hedge fund. He made his money in Singapore, he fancied Thailand so he bought a house there. He is Swiss so he and his Thai wife have a house there too. He quite often goes to America. He speaks English with an English accent, so I assume he went to school over here.
    Tax?
    I never got the chance to ask…….

    • Epimenides
      Posted September 30, 2012 at 9:03 am | Permalink

      Mike, he did not buy the house in Thailand, his wife bought it. It is illegal for any non – Thai national to own a house there. Tax is very favourable for expats in Thailand. It is 0%.

  6. Nina Andreeva
    Posted September 29, 2012 at 6:49 am | Permalink

    Now that Balls is now just as much a “fiscal hawk” as Osborne. It would be nice to see MPs practicing what they preach with regard to “austerity”.

    First because MPS appear to live just as long as everyone else the final salary scheme can go. Instead they can be automatically enrolled into NEST. This is of great importance as the global economy slows down it would be unfair for TATAs administrators in India to face the prospect of redundancy.

    As an MP you will also get paid what you earned in your last job. The days of ex student’s , SpAds, shop stewards, PR flaks etc getting their hands on a job that has never paid them so much money are over. This should end the problem of people who have a genuine talent and can survive in the real world being put off by a MPs relatively low pay

    Next to get the dole queue down the roles of MPs secretary, researchers etc are going up for open competition. No more will any other civil service job be handed out to an MPs mates or family members. Similarly as being a MP is such stressful 24 hour a day job the directorships, consultancies, the lawyers spending time in the courts is going too. When you retire the “revolving door” into business is going too. Though I suspect the biggest opposition here will be from Labour

    Reply : I think it would be wrong to pay us what we were paid before becoming MPs – though I would have been a big winner on that. You have to evaluate the worth of the MP job. There have been many attempts to do so, usually producing answers with higher pay than the public or the politicians think acceptable. The MP job requires working very long hours when Parliament is sitting, and irregular hours all the time. It does allow people to do second jobs – like being Prime Minister or Chief Whip.

    • Nina Andreeva
      Posted September 29, 2012 at 8:04 am | Permalink

      Thanks for that John. However one of your colleagues in the Bundesrat told me that they cannot employ their friends or family. However they too have been nobbled for building an over expensive creche . Sorry if the post sounded over cynical but the interview with Laws’ father does not help

      http://www.dailymail.co.uk/news/article-2210277/David-Laws-Father-Tony-ashamed-Lib-Dem.html

      • lifelogic
        Posted September 29, 2012 at 1:09 pm | Permalink

        Well said David Law’s father. How can anyone, who who gets a double first in economics at Cambridge, want to join the Libdems. They clearly have not even grasped the fundamentals of the subject. You cannot really even see them wanting to do it just as a cynical career move, can you, not with the Libdems?

        Perhaps he does honestly believe all the green guff, pro EU and soak the rich drivel?

    • Brian Tomkinson
      Posted September 29, 2012 at 8:56 am | Permalink

      John,
      How about payment by results? No, that wouldn’t work MPs would end up paying the taxpayers!

    • Disaffected
      Posted September 29, 2012 at 10:21 am | Permalink

      JR, the sentiment is that MPs need to set an example and include the renumeration of MPs along the same lines of other public sector workers. Start with the Nolan Standards on public service, criminal investigation before internal discipline, the police are meant to be independent, yet discussions are had with the Met Commissioner, when he/she should be left to form his/her own opinion. There can be little doubt a ‘policy decision’ was made not to prosecute so many MPs after the expense scandal broke. False accounting is a very easy offence to prove. Public interest certainly exists and there can be no excuse for the sham that has followed and continues with the Kelly report sitting on the shelf and MPs still getting RPI for their pension rather than CPI imposed by MPs on everyone else in the public sector. Second jobs and family employment need to be severely curtailed, it is not ethical in its current format, nor is the lobbying that Cameron was going to sort out. The long hours theme of your argument holds little substance when there are many examples of MPs on speech circuit tours and directorships etc.

      Back to the blog, Cameron and Osborn suggested an 80/20 split to balance the books. When are they going to make substantial in roads to the 80%? 2,000 new tax collectors give a hint of the true direction they are heading towards. As for Cameron’s disingenuous hint of a change in the relationship with the EU yesterday, he needs to look in the mirror and ask: will anyone believe him? NO. Daniel Hannan hits the nail on the head, Cameron’s argument for a direct in/out referendum on Scotland independence equally applies to the UK with Europe.

      It does not pay to work in the UK and little incentive for young professional people to remain here to try and do so. Young teenage girls are provided a living, house, energy bills paid for no more than getting pregnant. Their contemporaries who work, pay student loans, tax, share houses/flats and have the anxiety to make ends meet. The system is too skewed to welfare dependency as a permanent life choice rather than a temporary measure to help people overcome difficult times (as it was intended and should be). Therefore no incentive to do well at school and the teachers are not empowered to act as surrogate parents to motivate and steer wayward children in the right direction- a lot of people use state school as a glorified baby sitting service. Holland and every other socialist regime can tax to the hilt, but they will always run out of other people’s money.

      • uanime5
        Posted September 29, 2012 at 10:37 pm | Permalink

        Given that every capitalist regime ran out of other people’s money in 2008, due to the banks lending money they didn’t have to people who couldn’t pay it back, they’re in the position to criticise socialist regimes.

        Reply: Not so. Look at Canada. Australia etc

        • Lindsay McDougall
          Posted September 30, 2012 at 1:54 pm | Permalink

          And all of these events that occured in 2008 had nothing to do with the property bubble that the Brown/King monetary policy of 2001-2007 created? Pull the other one, it’s got bells on.

          • uanime5
            Posted September 30, 2012 at 7:36 pm | Permalink

            Since when have property bubbles been considered socialist?

      • prof
        Posted September 29, 2012 at 10:49 pm | Permalink

        true

    • lifelogic
      Posted September 29, 2012 at 12:06 pm | Permalink

      The key thing is not to have MPs paid too much otherwise they will always toe the partly line in desperation to cling on to their positions. The EU has some very generous provisions and par for this very reason. The last thing they want is any real democracy rearing its head. Just a superficial veneer is what they sort – and got.

      MPs pay is about right but their pensions are too generous worth nearly the same as the pay PA. Many however are also bought by outside “consultancies” and clearly often act in their interest not those of voters. The fake green area is particularly rife, trains, defense contract and certain professions, as are the Union payments. These need to be killed or controlling in some far better way. Otherwise these people just help themselves to tax payers money. There is no other real explanation for some on the insane laws and decisions passed.

  7. Peter van Leeuwen
    Posted September 29, 2012 at 7:26 am | Permalink

    Mr. Hollande, with parliament on his side, still has lots of wriggle room, e.g. lowering the pension age only for some, making the higher taxes a temporary measure. Besides, as British research (Richard Wilkinson and Kate Pickett) shows, a less unequal society is a better society with fewer health and social problems. European growth initiatives are on the agenda as well, so there is no reason to be gloomy on France.

    Reply Which European growth initiatives will stop the downwards plunge of the Euro area economies? There is no indication that Mr H thinks of the tax rises as temporary.

    • Brian Tomkinson
      Posted September 29, 2012 at 8:40 am | Permalink

      Reply to reply
      John,
      Peter has a delusional utopian vision of the EU where everything is good and can only be improved by more control by unelected bureaucrats.

      • Peter van Leeuwen
        Posted September 29, 2012 at 1:26 pm | Permalink

        This curious British concept about unelected:
        * Being voted for by fewer than 34000 citizens in a tiny English area, an utterly safe-seat foregone conclusion election, makes one so-called “elected” at the national stage (giving the power to start a war in Iraq)
        * Being elected by 27 democratic government leaders as their chairman makes one “unelected”
        * The life-long hereditary legislators, will they be there for another century?
        The Britons don’t cease to intrigue me.

        • Brian Tomkinson
          Posted September 30, 2012 at 8:57 am | Permalink

          Peter,
          Clearly we don’t intrigue you enough as you display your ignorance of our democracy. As for your EU version of democracy, it seems your maxim is to allow the political ‘elites’ to dictate and deny the people of the nation states any say or ability to remove them from office.

          • uanime5
            Posted September 30, 2012 at 7:42 pm | Permalink

            Given that the members of the European Council are the elected leaders of the members states the people of these countries can quite easily remove them from office.

            The members of the European Parliament are as easy to remove as members of the UK Parliament.

            But don’t let facts get in the way of your anti-EU rant.

          • Peter van Leeuwen
            Posted September 30, 2012 at 8:23 pm | Permalink

            Interesting to note that, over the last 20 years we have removed more EC commissioners from office than you (the UK) have removed prime-ministers from office.

    • Peter van Leeuwen
      Posted September 29, 2012 at 8:58 am | Permalink

      Quoting the Economist website (“One cheer” article): “a top rate of 75% for incomes over €1m . . . will apply only for the next two years, according to current plans”.

      On growth initiatives: the ideas in the “plan for growth in Europe” letter by Mr Cameron and others were partly translated into targets for the European Council June 2012: “Compact for growth and jobs”). The EC has its “Twelve levers to boost growth and strengthen confidence”. Whether all these will turn around Euro area economies, I’m no prophet, but I remain hopeful and optimistic for the longer term.

      • Lindsay McDougall
        Posted September 30, 2012 at 4:59 pm | Permalink

        Did you know that purchase tax, the forerunner of VAT, was imposed during World War One as a ‘purely temporary measure’?

        • Bob
          Posted September 30, 2012 at 6:28 pm | Permalink

          Do you know that the Dartford Crossing toll was supposed to be removed once the construction costs were recovered?

          When that point was reached the government decided to keep it in place as a “congestion charge”, despite the fact that it causes congestion (perhaps that’s what they mean by “congestion charge”?).

          Now it’s being increased to £2.

          Once a tax is imposed, it’s very rarely revoked.

      • Lindsay McDougall
        Posted September 30, 2012 at 5:11 pm | Permalink

        The weak economies of Southern Europe need TIME and a bit of INFLATION to turn their economies round. Germany, Holland and Finland are unwilling to let them have either, which is why the only way they will get growth is to leave the Euro.

        • Peter van Leeuwen
          Posted September 30, 2012 at 8:17 pm | Permalink

          @Lindsay McDougall:
          The euro is not really your business just as the dollar is not your business. Your’s is the pound and Mr Mervin King. Don’t expect Mr Bernanki or Mr Draghi to sit at the phone waiting for advice from Britain. Besides that, is the UK growing so fast now, with neither Germany nor Holland having any control over UK inflation? How well is devaluation doing for you?

          • Lindsay McDougall
            Posted October 1, 2012 at 10:27 am | Permalink

            I’m afraid that the Euro zone is our business because the disunity, chaos and incoherence within it is threatening the economic well being of countries outside it. Answer me two simple questions – do you want Greece and Spain to stay inside the Euro zone and do you have the first clue what is needed to achieve that outcome?

            As for the UK’s devaluation, we are past that phase and our currency is hardening against both the Euro and the dollar. However, these days we don’t make a big deal about our exchange rates; we just let the international currency markets decide them. That’s one thing that institutions of government can’t screw up.

            As for the dollar, if Barrack Obama is re-elected, God help it – because nobody else will.

    • Disaffected
      Posted September 29, 2012 at 10:25 am | Permalink

      How can the research have any validity? Wishy washy babble.

    • lifelogic
      Posted September 29, 2012 at 1:13 pm | Permalink

      The Spirit level is an absurd book just read it and think for a moment. Or read the debunking of it.

      • Peter van Leeuwen
        Posted September 29, 2012 at 1:44 pm | Permalink

        cannot trust British research anymore?

      • Bazman
        Posted September 29, 2012 at 5:58 pm | Permalink

        Is this a book about the MCSS? Cos’ it sounds like it. If you do not have less inequality then how are you going to have less police, less prisons, less health and social services of every kind. Most of these services are expensive and only very partially effective, but we shall need them for ever if we continue to have the high levels of inequality that create the problems they are designed to deal with. Several states of the US now spend more on prisons than on higher education. In fact, one of the best and most humane ways of achieving small government is by reducing inequality. Similarly, the assumption that greater equality can only be achieved through higher taxes and benefits, which presumably led the Taxpayers’ Alliance to publish its criticism of The Spirit Level, is also a mistake. We have been at pains to point out that some societies achieve greater equality with unusually low taxation because they have smaller earnings differences before taxes. Ram it.

  8. Denis MacShane
    Posted September 29, 2012 at 8:02 am | Permalink

    Actually, Hollande said “debt is the enemy of the left” in his campaign and he never pretended to be Canute. A survive et a void

    • Brian Tomkinson
      Posted September 29, 2012 at 8:49 am | Permalink

      Denis: “debt is the enemy of the left”
      Pity the last Labour government didn’t believe that too! Never mind, Cameron, Clegg, Osborne et al don’t seem to see it as an enemy either as they keep on increasing it inexorably.

    • Richard1
      Posted September 29, 2012 at 9:53 am | Permalink

      Too bad Labour MPs didnt think of that one when Gordon Brown was running up the unsustainable debt levels he did in the UK.

      • Disaffected
        Posted September 29, 2012 at 5:55 pm | Permalink

        Tories stated they were going to match Labour’s spending in opposition- and they literally have!!!

        • Bob
          Posted September 30, 2012 at 6:35 pm | Permalink

          @Disaffected
          “Tories stated they were going to match Labour’s spending in opposition- and they literally have!!!”

          No, surely they’ve exceeded it.

    • Nina Andreeva
      Posted September 29, 2012 at 4:43 pm | Permalink

      Den

      Would you care to comment on my earlier post on MPs taking the mick with their pay and conditions?

  9. Pete the Bike
    Posted September 29, 2012 at 8:03 am | Permalink

    “I hope UK socialists will take note that a socialist French President wants the deficit below 3% of GDP, en route for 0%.”
    You mean UK socialists like George and Dave, they are the ones that are running vast deficits, not Balls and Millipede.

    • Sue
      Posted September 29, 2012 at 9:07 am | Permalink

      “You mean UK socialists like George and Dave, they are the ones that are running vast deficits” – touché

      The whole “project” is socialist in it’s nature and construction. Where does that leave us right-wingers? The majority of Britons are not socialists, unlike France. This is why we will always be at odds with any relationship with the EU, save for a straightforward trade one.

      • Nick
        Posted September 29, 2012 at 12:25 pm | Permalink

        They aren’t telling the truth on the debts.

        They have hidden the debts that matter to you, your pension debts, off the books.

        In spite of promises, they won’t tell you what the debt is.

        Wonder why that is?

        Ah yes, we can carry on spending.

        Meanwhile look to the Czechs. Today, someone shot the president as a protest with a BB gun.

        We’ve had one politician in the UK stabbed by a constituent.

        Projecting forward, when people discover they have had their pension stolen by the kleptomaniacs in the state, I predict that there are enough nutters in the UK who will do likewise. Or even those denied their giros because its their human right.

        • Nina Andreeva
          Posted September 29, 2012 at 5:09 pm | Permalink

          Osborne and Balls would go right up in my estimation if they simply admitted that there is little that a UK government can do as long as the banksters still have their Obama sock puppet. Until you cleanse the system of the corruption as FDR and his Pecora commission did nothing will change and the economic system will just lurch from one crisis to another as the thieving and looting goes unchecked.

          Is Prof Black is correct that Sants’s FSA went hawking the City of London around Wall Street as being a sort of speakeasy where you can up to anything without the minimum of regulation? Black has credibility here being that London was the centre of AIG CDS operation and (sorry to mention them again John) MF Global’s shenanigans. Prof Black should be listened to due to the number of bandits he had locked after cleaning up after the S&L scandal of the mid ’80’s

          http://en.wikipedia.org/wiki/William_K._Black

    • Lindsay McDougall
      Posted September 30, 2012 at 2:02 pm | Permalink

      Balls and Millipede would run even bigger deficits.

  10. oldtimer
    Posted September 29, 2012 at 8:22 am | Permalink

    M Hollande finds himself with a tricky problem with his two major car makers, Renault and Peugot-Citroen. They are among the European car manufacturers with significant excess capacity and few immediately obvious alternative market solutions outside the EU. They want to reduce capacity, ie close factories. The French government is telling them they cannot do that. It will end in tears – unless, of course, he can persuade some Chinese manufacturers to buy up assets, and at a cheap price.

    • uanime5
      Posted September 29, 2012 at 10:41 pm | Permalink

      I’d say it’s more to do with French law preventing companies from firing anyone than the French government preventing this.

  11. Glenn Vaughan
    Posted September 29, 2012 at 9:50 am | Permalink

    So a politician has gained power by deceiving the electorate. Gosh! What a surprise!

  12. Richard1
    Posted September 29, 2012 at 9:57 am | Permalink

    M. Hollande is doing us all one huge service: he is providing a wonderful case study as to whether punitive tax rates on high incomes actually yield more revenue, as so many on the left claim. We will have a 2-year control case to see whether the 75% tax rate increases or decreases revenues to the French state from tax on incomes over €1 million. If not then there will be a good reason for the UK to try the opposite – lower rates and see whether that brings in more revenues.

    • lifelogic
      Posted September 29, 2012 at 1:15 pm | Permalink

      As if we need any more case studies!

    • uanime5
      Posted September 29, 2012 at 10:45 pm | Permalink

      1) Hollande’s plans are predicted to bring in €200 million in extra taxation so it’s highly likely that this will prove that you can get additional tax revenue by raising the levels of tax.

      2) Just because something doesn’t work doesn’t mean that doing the oppose will work. It’s entirely possible that neither approach will work.

      Reply. I like the realism about Hollande’s policies in 2). E 200 million is a tiny sum for his higher taxes, and he may not bring that in depending how many leave.

  13. Electro-Kevin
    Posted September 29, 2012 at 10:14 am | Permalink

    It’s handy to have a model of a high tax society close by – it can show us what NOT to do. Just as we must be a great example of what NOT to do for other countries that are successful and might be tempted to follow our model.

    I’ve just read the report from the Andrew Mitchell incident. Among all of the effing and jeffing he is alleged to have said ” … you don’t run this country.”

    Had I been the officer at the gate I’d have been sorely tempted to have replied “Nor does your party, Sir.”

    The twist to this, in all actuality, is the foreign aid aspect. The highy expensive and politically unpopular de-toxification of the Tory brand blown to smithereens in one unguarded outburst.

    We can handle heavy taxation if – and only if – it is used to support popular policies and to get this country back on track.

    As it stands the largest deficit in this country is the democratic one and it’s taxation without representation which is causing the most discontent.

    • sm
      Posted September 29, 2012 at 2:55 pm | Permalink

      What would have happened if illuminating if bad taste remarks had been made in reverse by the police towards Mitchell. I am sure he/she would have been dealt with expeditiously and probably ruthlessly.

      Now we can see who is above the law and who is not.

  14. Atlas
    Posted September 29, 2012 at 10:20 am | Permalink

    What with the big three in the Eurozone giving back-word on the presently needed bank bailouts, and now what John has reported on Hollande’s tax plans, it seems that we are really having a re-run of the 1930s.

    It needs a re-run of Hayek v. Keynes where the question is can you tax yourself back to growth and prosperity or do you just spend fiat money willy-nilly?

    I think Keynes considered the externalities of a Revolution due to austerity, more than Hayek did – hence the difference in approach.

    Really we need a currency whose value politicians cannot fiddle with – rather like Gold or Silver?

    • Nick
      Posted September 29, 2012 at 12:27 pm | Permalink

      Really we need a currency whose value politicians cannot fiddle with – rather like Gold or Silver?

      ==========

      Does that solve the problem?

      Consider this. Governments take money promising pensions. Governments spend the money. Governments have no assets for the pensions. Now the pensions are due.

      How does a gold or silver standard solve that? It doesn’t. You’ve been forced to hand over your gold, and now you need it back for your retirement, they have given it away.

      • Atlas
        Posted September 29, 2012 at 1:22 pm | Permalink

        Nick,

        Point taken. Trading in Gold does not solve the problem of somebody taking your gold and then squandering it leaving no assets to cover the redemption date.

        I was more thinking about the curse of inflation due to fiat money. At the moment we are in a race to the bottom with the Federal Reserve, the ECB and the Bank of England to see who can debase their currency enough so that, when the Chinese creditors come for repayment they end up with worthless paper.

        • A different Simon
          Posted September 30, 2012 at 10:46 pm | Permalink

          Atlas ,

          That appears to be one race we are winning .

          I am making less in sterling than I was making 5 years ago and even if my income had kept pace with the official understated rate of inflation it would be less in dollars than it was 5 years ago .

          What amazes me is that America seemingly manages to get away with printing on a massive scale without it having a significant impact on the purchasing power of the dollar .

          Being in the Euro must seem like a gold standard for the PIGS .

      • Bob
        Posted September 29, 2012 at 2:49 pm | Permalink

        @Nick

        You would have to borrow the gold to pay the pensions.

        At least the lender would know that you couldn’t print to repay the loan. And the interest would be payable in gold too.

        That would enforce some budgetary discipline at least (unlike what we currently have).

  15. a-tracy
    Posted September 29, 2012 at 10:28 am | Permalink

    How is the state pension funded in France, do they have national insurance?

    I thought they were having to work longer in France?

    What age can they get their State pension?

    • A different Simon
      Posted September 30, 2012 at 10:51 pm | Permalink

      Not sure .

      I do applaud the French for having the courage to try a 35 hour week in order to try and spread the work around a larger number of people , even if the results were not what they hoped .

      I have been on business in France several times and companies hire external consultants who are not subject to the 35 hour limit .

      One of the French consultants from Cap Gemini who was onsite was working over 60 hours a week until his wife gave him an ultimatum .

      • a-tracy
        Posted October 1, 2012 at 9:54 am | Permalink

        I hate being compared to France, Germany or any other Country when we don’t know the ups and downs of each system. You can’t look at one positive aspect without knowing what the flip side is.

        Whilst work-arounds exist e.g. self employed contractors having no rules and legislation on working hours to abide by all these restrictions do is harm legitimate PAYE operating firms and put up their costs eventually putting them out of business or forcing them to play the game.

  16. Ralph Musgrave
    Posted September 29, 2012 at 10:43 am | Permalink

    JR doesn’t often make mistakes, but he is wrong to claim our deficit should be reduced to 0% of GDP.

    First, over the long term a deficit is inevitable given the 2% inflation target. Reason is that inflation erodes away the monetary base and national debt, and assuming (to keep things simple) that the base and debt stay constant relative to GDP in real terms, then they have to be topped up annually via a deficit.

    Plus, if there is economic growth in real terms, the “topping up” has to be even more.

    Second, making deficit reduction an objective is ridiculous for a reason spelled out by Keynes. As he said: “Look after unemployment, and the budget looks after itself”. I.e. there are times when a large deficit is called for in order to boost the economy and employment. And there are times when a surplus is called for in order to stop an economy overheating.

    To say the deficit must be reduced is a bit like saying you should leave your heating on all year regardless of temperature outside.

    Reply I have been arguing for a lower deficit, not an immediate move to 0%. The Uk economy has worked best in the past with low deficits or small surpluses.

    • Nick
      Posted September 29, 2012 at 12:37 pm | Permalink

      1. Inflation doesn’t erode the national debts.

      Pensions are linked to inflation. As fast as you inflate the debt goes up.

      2. “Look after unemployment, and the budget looks after itself”

      Complete twaddle. The reason goes back to the debts. If you exclude all the big debts from your budget, it doesn’t work.

      1. The reported debt, 1,050 bn. The true debt, 7,000 bn. 13 times geared. Bar 800 bn, its all inflation linked. Pensions, state, state second, Post office pension, civil service, guarantees on pensions are the main debts. PFI, expected losses on other insurance, nuclear decommissioning are the others, and here its on the insurance losses that aren’t inflation linked.

      So the solution is that they won’t pay these pensions. The reason is there is no choice because its 13 times taxes. Ah, that means they will be on welfare. Er, no. It doesn’t matter what label you put on it, welfare or pension, the problem is they haven’t got the money.

      It’s a fraud. If you ask the treasury they state the plan is to change the law to deny people their pensions. That means as it stands the pension is legal. It’s a contract, otherwise they wouldn’t have to change the law.

      Now they are inducing people to pay money for the current pension knowing full well that they won’t pay. That is fraud.

      Also, not publishing the accounts is fraud. They have to be truthful in their accounts and they aren’t.

      • Ralph Musgrave
        Posted September 29, 2012 at 1:14 pm | Permalink

        We’re all perfectly well aware of the fact that national debts IN PRACTICE are not eroded because (as you point out) things like pensions tend to expand the national debt.

        My point was that ASSUMING JR’s zero deficit scenario, the national debt WILL BE eroded by inflation.

        Re your response to Keynes with the word “twaddle”, if I have to choose between a pronouncement by the world’s greatest all time economist and someone who responds with “twaddle”, I’m tempted to put more faith in the former than the latter.

      • Bob
        Posted September 29, 2012 at 2:57 pm | Permalink

        @Nick
        So after blaming our financial woes on the bankers, it turns out that they’re just being used as a scapegoat or smokescreen to hide the fact that the problems are a result of the concealment of public sector liabilities?

        Have I understood correctly?

    • zorro
      Posted September 29, 2012 at 5:37 pm | Permalink

      ‘To say the deficit must be reduced is a bit like saying you should leave your heating on all year regardless of temperature outside.’…….I would have thought that saying that the deficit must be reduced is more like turning the heating down because it has been on too long and can’t be afforded and put on a jumper instead to deal with the temperature.

      zorro

  17. Acorn
    Posted September 29, 2012 at 10:45 am | Permalink

    BTW. Having listened to a programme on the WS, I now realise that the “1%” elite referred to by the Occupy lot is actually 0.02%. Selectorate Theory reckons that Assad in Syria is sustained by a supporting coalition of just 3,600 elite persons that Assad keeps supplied with all the goodies that the plebs don’t get a sniff of. Plus some hard currency from the appropriate Tribes in Iran and Iraq. Less than fifty have jumped ship so far.

  18. NickW
    Posted September 29, 2012 at 11:31 am | Permalink

    Fortunately, our Deputy Prime Minister is an expert on encouraging growth through high taxation.

    Doubtless he will explain his impeccable reasoning in the fullness of time, once he has convinced Cabinet of the soundness of his policy.

    If the cost of continuing the coalition is that ruinous policy decisions are forced on the Government, the sooner it ends the better.

    85% of the population know that Clegg’s policies will cause only harm; it is to be hoped that Cabinet pays more attention to the 85% than it does to the few remaining Liberal voters. There are very sound reasons why Clegg has so few supporters.

  19. Bob
    Posted September 29, 2012 at 11:33 am | Permalink

    I see Dave is prepping Tory voters for the Corby by-election, by claiming that he now wants to hold an EU referendum after he leaves Downing Street.

    Shameless!

    • forthurst
      Posted September 29, 2012 at 3:08 pm | Permalink

      “I see Dave is prepping Tory voters for the Corby by-election”

      Just like the bbc which has suddenly discovered a plethora of alternative political parties which are not composed of “a bunch of fruitcakes and loonies and closet racists” or, in fact, anyone at all.

      Is that warmongering (dishonest man etc) getting worried about the ukip turnout?

  20. Kenneth
    Posted September 29, 2012 at 11:52 am | Permalink

    The problem is that the mainstream media in France is even more left wing than our BBC. Politicians find it easier to follow the path of least resistance despite the havoc it will cause.

  21. Bernard Juby
    Posted September 29, 2012 at 12:13 pm | Permalink

    The French are already disillusioned by Hollande. Not only do they not like not having a proper First Lady but they only voted him in because they did not want Sarkozy – who shot himself in the foot by not offering Marine le Pen a small position in his Government
    Armaillé, France.

  22. John Orchard
    Posted September 29, 2012 at 2:25 pm | Permalink

    If the Tories got Boris in as leader getting rid of Cameron and it was possible that should Nigel Farage be elected an MP and brought onboard then you have a good team and whatever the French do will be their concern as we should have been given an in/out referendum by then and able to do what we want, blocking our borders to any immigration and retrading with the Commonwealth.

  23. Neil Craig
    Posted September 29, 2012 at 3:03 pm | Permalink

    With the either honourable or idiotic exception of the Greens virtually all politicians always say growth is their first priority (as, except in times opf serious war, it should be).

    At the same time, with the exception of foreign politicians & UKIP, they never succeed. To be fair UKIP haven’t yet been in power so it can’t be said for certain that we would.

    Nor do any of them ever give any reason why they do not believe the proven formula:

    Economic freedom + Cheap Energy = Growth

    The cynical might believe they are lying.

  24. sm
    Posted September 29, 2012 at 4:24 pm | Permalink

    There are only so many rich people this is very true. (much less than 1%)

    However,we should also be aware of the $21 trillion estimated that is in offshore/secrecy taxhavens? Its early days and all it takes would be a french or an EU tax based on a citizens or residents worldwide income, however held.

    As France cannot use money printing/inflation what else are they going to do? I cant see secrecy tax havens surviving in an EU/US context if real democracy prevails.

  25. Bert Young
    Posted September 29, 2012 at 5:16 pm | Permalink

    I think we should be prepared for an influx of French Au Pairs !! I’m a “stay -at-home husband and father and looking forward to plenty of assistance .

  26. Christopher Ekstrom
    Posted September 29, 2012 at 6:20 pm | Permalink

    As usual the French lead by example; do the opposite & be certain of success. Sadly they are in the process of de-constructing the one thing they did right; gastronomy. Alas the Gauls did hold up those standards throughout the 20th. Now try finding a proper Bistro in Paris.

    Many rich (but not stratospherical so) Frenchman have already left. Hollande will simply give a nudge to the rest. Good for London & likely to increase the collapse of the Euro zone. VIVE LA FRANCE!

  27. Leslie Singleton
    Posted September 29, 2012 at 8:51 pm | Permalink

    Unmoderated all day again and it’s almost 10.00 pm. Soon I will lose my will to live. Sob!!

  28. uanime5
    Posted September 29, 2012 at 9:48 pm | Permalink

    According to the Telegraph Mr Hollande’s 75% tax rate on anyone earning over €1 million will raise €200 million of the predicted €16 billion tax revenues. According to the Laffer Curve this means that taxes are currently too low in France because raising them didn’t result in a fall in tax revenues. Therefore it can be concluded that taxes in France are not currently too high.

    http://www.telegraph.co.uk/finance/debt-crisis-live/9572499/French-budget-and-Spanish-bank-stress-tests-as-it-happened-September-28-2012.html

    Also the French are unlikely to go to Singapore, Hong Kong, or New York as French isn’t an official language of these countries.

    • Lindsay McDougall
      Posted September 30, 2012 at 1:50 pm | Permalink

      They are unlikely to go Algeria either. (words left out) Having had to flee one civil war already, they like to have property close to the airport.

  29. Lindsay McDougall
    Posted September 30, 2012 at 1:59 pm | Permalink

    It seems pretty unlikely that he will get the economic growth he is aiming at, so the deficit reduction target will be missed.

    In this case, Britain can have a little fun, create a little mischief. We can offer France a modest amount of financial support, conditional on France having left the Euro zone. I don’t think that our bluff would be called.

    • uanime5
      Posted September 30, 2012 at 8:05 pm | Permalink

      Alternatively the UK could try and adopt a strategy that promotes economic growth and demonstrate to the EU how it should be done.

  30. David Langley
    Posted October 1, 2012 at 9:35 am | Permalink

    Rob us more through the CAP!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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