For all the drama of the American Presidential election, the triumphs and travails of the Socialist party in France are probably more important for British politics.
Last week, I wrote about three unpleasant things I thought the next Labour government would have to accept. These were: An increase in personal taxes, a sustained decrease in corporate taxes, and an increase in the powers and scope of the European Union, preferably in return for a reduction in its cost. This did not get much of a cheer from fellow policy wonks in my party, understandably enough. In conversation with a friend, I jokingly dubbed myself Labour’s one man Department of Unpleasant Things
My Department of unpleasant things just went international.
When Francois Hollande won the French Presidency, I, like most on the left saw it as an electoral triumph for a anti-austerity, yet moderate, social democracy.
There was a certain personal parallel to the French election too. Faced with a publicity friendly, globe-trotting, sparky incumbent whose promises of change had come to little, The Parti Socialiste’s candidate won despite some believing the best candidate had been excluded, despite family drama and division, despite being criticised as nerdy, or dull. He did it through building an alliance of voters unhappy with the status quo, through a pragmatic, but extensive programme for reform and by building an image of solid competence over showy shallowness.
That was the election. Francois Hollande’s government is providing the other side to Labour’s French lesson.
The French government, led by Prime Minister Jean-Marc Ayrault is about to increase VAT to fund a reduction on Corporate taxation to encourage wealth creation. This is part of a 20 billion Euro reduction in business taxes, which will be balanced by a combination of additional spending cuts from 2014 and increased rates of VAT, which will now effectively be the same as the Coalition’s increased UK rate at 20%.
Why s Hollande doing this? Because he desperately needs to encourage job creation in France in order to generate both economic growth and overall tax receipts. (Personally, by the way, I think Hollande’s spending targets will prove very hard to meet, and we might well see further increases in personal taxation later in his term if I’m right.)
Equally, The French are having to work through the politics of EU power for much the same reason we are, because in order to get some of the things they really want, The French President is going to have to give up some of the things he’d like to have. We don’t yet know what he’s going to give up, but it’s the remorseless logic of the European Union that he’ll have to give up something.
This is all salutary for Labour.
Whether the Department of unpleasant things represents the sharp intrusion of policy reality on campaign rhetoric or an ideological closing of the overton window, is pretty much irrelevant for a governing party.
Any centre left government in Britain is going to have to work out how it will cope with the pressures that Hollande is wrestling with.
There is a path through the policy thickets – I’d argue for pressing hard the need for job creation and skills in the private sector, putting these first in spending rounds with issues like Industrial banks, SME support, and tax relief for those that do the right thing by their staff, all of which would make job creation in the private sector a feature of centre left policies, not a bug.
This ‘left growth strategy” would then need to be balanced by a clarity and determination to carry out deficit reduction out in a sensible, sustained, well-timed way and being clear about what all that means for personal taxation and benefits (especially at the upper end of the income scale), public service spending restraint, co-payments if we wish to expand social and child care, and a clear plan to deal with the increasing cost pressures in public services and welfare..
This wouldn’t be comfortable, or even pleasant agenda to sell to the electorate.
That’s why I’ve called it the Department of Unpleasant things.
Yet I’d argue the left is better off addressing these issues head on, focusing our progressive policy programme on increasing living standards and prosperity through broad-based job creation, and managing the fiscal consequences of that and the need to reduce deficits upfront, rather than finding ourselves backed and bullied into a less progressive version of an agenda we half suspected we would have to adopt anyway.