Any other business

Any other business: How François Hollande let France miss the global recovery train

Plus: Labour's Lloyds plot, and the case for fewer homeowners

25 January 2014

9:00 AM

25 January 2014

9:00 AM

I’ve always respected stationmasters, but that sentiment is not universally shared. A distinguished friend of mine across the Channel described François Hollande the other day as ‘un chef de gare, sans aucune dignité’ — and it’s not difficult to picture the little president, peaked cap awry, trousers unbuttoned, haplessly waving his whistle as the last train à grande vitesse departs for the Eurotunnel laden with talented compatriots who see no future in France.

As modern socialist leaders go, Hollande is beginning to make Gordon Brown look statesmanlike. Nicknamed ‘Flanby’ after a cheap custard pudding, he has left decision-making to his ragbag of ministers and done nothing to steer France towards economic recovery. He was finally stirred into a response by global attention to his sex life, but the big gestures in his press conference last week — a €30 billion cut in payroll taxes and a €50 billion reduction in public spending  — can have scant impact before 2017 when, if his party lets him stand again, Hollande will face re-election. By then, the UK should overtake France to become Europe’s second largest economy behind Germany, and London will have a bigger French population than Clermont-Ferrand.

The French have long been reluctant to correct the over-dominance of the state in their economy because they believe the high quality of life they have enjoyed in recent decades is the product of well-directed public investment. They’re not entirely wrong about that, but it can’t go on if their taxes won’t pay for it and the private sector that drives growth is suffocated — while financial markets are on constant watch for the incipient debt crisis that has recently been labelled the ‘baguette bomb’.

Most damaging to France’s future prosperity are multiple disincentives to entrepreneurship, self-employment and hiring anyone to do anything. Start a new business and you’ll pay thousands of euros in tax and registration fees before you find your first customer. Take on a caretaker who expects to be paid through the official ‘cheque emploi service universel’ system and you’ll cough up 11 separate categories of social security contribution amounting to 70 per cent of her wage. In short, someone should take an axe to the whole contraption of discouragements to effort and innovation.


But it’s hard to imagine even a nation of statists like the French re-electing a nincompoop whose inactivity and boudoir distractions have caused his country to miss the entire global economic upswing. Come 2017, this stationmaster might as well turn out the lights on the empty platforms, swap his cap for a scooter helmet, and slip back to his next mistress’s apartment.

Not so much a plan

Our own would-be socialist leader Ed Miliband took a barrage of City flak for his half-baked scheme to force the ‘big five’ banks to sell off branches in the interest of generating greater competition in small business lending and savings products. I have long been an advocate of ‘challenger banks’ that might bring localism and the lost art of relationship banking back to the high street, so I don’t dismiss Miliband’s plan out of hand — except, of course, that like his ‘energy price freeze’ it isn’t really a plan at all, just another political missile designed to distract attention from a rapidly improving economy and position himself as the voters’ champion against big capitalism.

He and Ed Balls must have been disappointed that the announcement did not cause a bigger fall in bank share prices, because it was also clearly designed to spike George Osborne’s hopes of selling off the taxpayers’ remaining 33 per cent stake in Lloyds any time soon. A first institutional placing last September of 6 per cent of the recovering bank went well, but accusations that the Royal Mail sell-off a month later was ‘botched’ have made some ministers jumpy about further attempts to tap the market. Osborne, however, likes nothing better than an exchange of political artillery, and one rumour has it that he will now bring the Lloyds sale forward to the earliest possible date, in late February, just to spike Labour’s guns in return.

Landlords and tenants

Is our home-owning democracy becoming by default a nation of landlords and tenants? My eye is caught both by a TV ad for boiler repair services aimed at owners of multiple properties, and by a Savills survey showing that Britain’s private landlords, of whom there will soon be a million, have profited mightily from rising house prices over the past decade: the equity in their properties is estimated to have grown from £384 billion to £818 billion.

What with negligible savings rates, falling gold and uncertain stock markets on one side, government oiling of the mortgage market on the other, and gross rental yields of 6 per cent plus, buy-to-let has looked steadily more attractive for investors. In London, every development of new flats these days is marketed primarily as a buy-to-let opportunity: more than 70 per cent are bought by foreigners, a high proportion as safe-haven investments to be rented out, while domestic buyers are often City boys swapping cash bonuses for bricks and mortar.

Meanwhile, wannabe first-time owner-occupiers press their noses to estate agents’ windows and complain that the dice have never been more loaded against them — with politicians ever eager to take their side. But we forget the negative effects of our national urge to be home-owners, debt-laden as we have to be to fulfil that desire. A fluid rental sector is good for labour mobility and new-business growth; a continental system in which couples rent until they are comfortably able to buy the one home in which they hope to live for the rest of their lives makes for less volatility in house prices. As buy-to-letters count their riches while your offspring look forlornly at basements they can’t afford in distant suburbs, you may not see this as a turn for the better. But in the long run I suspect it might be.

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  • balakris

    Ok socialist france is a disaster.
    But how about comparing ‘conservative’ britain’s economic performance with ‘conservative’ Germany’s?
    That would be more of like to like.

    • First L

      Recent figures showed that Britain’s economy will overtake Germanys in 2030. If we remain on our current course that is.

      Kiss that goodbye if Ed Miliband becomes our next PM.

      • balakris

        Pray what would be the sources of this miracle?-mfg is dying, north sea is running out, in any case gone if the scots vote independence.
        Property, the city?
        Milliband has no vision, true. But cameron even less so.
        And france has much better mfg. on a recent trip to th u k, i saw mainly renault cars.

        • James

          You must have been visiting a Renault car yard. Renault has an even lower market share in the UK than Citroen, under 2%.

        • First L

          The largest financial centre in the world outside of New York and Beijing perhaps?

          Cameron is the incumbent. He’s spent four years setting out his vision and while he’s had some failures, he;s also had notable successes. Miliband has had a single policy – tax the banks. He’s offered this six different times, each time using it to fund a completely different initiative. He’s also been shown up on National Radio as being economically illiterate (against Martha Kearney and on National TV as being weird repeating the same answer seven times to seven different questions), he’s caved in to the Unions, called businesses parasites and wants to turn us into a Socialist country.

          For someone not even resident here to claim that he is competent in any way whatsoever is hilarious.

          • balakris

            I never said milliband has a vision.
            It’s axiomatic that no conservative pol will have a vision-bec it smacks of socialist planning. Cameron should go around advertising he has no ‘vision’, in fact.leave all to market forces and we’ll be fine.
            A great pity that the u k is turning insular, bec in the e u it’s the most open country to foreigners.you don’t know your own strengths.
            I am a supporter of conservatism of the macmillan, ken clarke variety.far better than labour-old or new.
            Btw, it’s rather hilarious that we are exchanging on this in one of the most right wing mags of the world.there are rarely debates i guess as all of you are of the same mind-except right vs radical right.
            I mostly strongly disagree with spectator but i love the style and wit.
            Thanks

          • First L

            If you think the Telegraph is one of the most rightwing magazine in the world then you are seriously deluded. In America it would be regarded as practically communist.

          • balakris

            Speccie , not telegraph.
            Yes the u s is weird.

          • First L

            😛 Writing from Disqus. Still, I think even the Speccie would be considered liberal in the US 🙂

    • Tom M

      Socialist anywhere is a disaster. Britain never will compete with Germany and hasn’t done so for over 75 years. They have a totally different mindset.
      Britian can however compete economically with France and has done so reasonably successfully over the same period. Each country has had it’s share of government clowns (the present French incumbent a good French example as with the previous two UK prime ministers).
      What always interests me in comparisons like that is where has all the UK’s money gone? From a standing start after WW2 France has done economically as well as the UK but from a much lower base and without the benefit of income streams like North Sea oil and still managed to create an enviable infrastructure. Why so?

      • balakris

        As far as i know, france’s infra is the result of conscious govt policy, spdg.
        And french mfg has stood up better to global competition. Their nuclear power is another example of far better public sector proving it needn’t be evil necessarily.
        The interesting point about germany is that they have these worker mgmt councils in companies-irrespective of party in power.
        An avowedly capitalist economy at that.
        Any lessons?

        • Tom M

          Quite agree with what you say although my question still stands why can their governments provide world class infrastructure such as roads,rail and health and our’s can’t? Why do they have a successful nuclear industry where in the UK we aren’t even in the “informed customer” class anymore? (that was a comment made to me by a now retired ex employee of the UK nuclear industry).
          Worker management councils, well yes but from personal experience of German businesses and their worker’s councils it would be hard to see Len Mclusky successfully participating in one.
          My current favourite about German councils is the story related by Jim Ratcliffe (Grangemouth boss). Ratcliffe was talking to the union rep on the worker’s council in a plant in Germany. Ratcliffe asked the union rep if he was happy with the bonus the company had recently paid. “Very happy” the rep responded “but I would rather you had invested the money in the company”.

          • balakris

            What you imply is germany has more responsible unions and union leaders. I agree. But france has difficult unions, still a better performing public sector.
            I think the u k is too polarised in economic policy-you don’t have such sharp differences on role of govt, welfare,on the continent, whoever is in power. Is there really much diff between hollande, sarkozy or merkel and the social dems-today they are in coalition.
            It’s this consensus that is missing in the u k-the unfortunate switch from macmillan style toryism-and the overriding importance of budget balance and monetary policy. Just these couple of macroeconomic tools won’t get anywhere.
            The shallowness of thinking of those in power!

  • John Smith

    Hard luck for France but the more sensible people have a vision of Labour’s policies. Just across the water

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