Post by Carl LaFong on Apr 24, 2024 14:50:12 GMT
UK economy is turning into a French tribute act – without any of the hits
Telegraph article, archived here: archive.fo/mxGwh#selection-2535.4-2546.0
We have huge levels of government spending. We have punitive taxes. The state micro-manages the economy, offering lavish levels of welfare, while constantly racking up more and more debt.
True, we don’t have a boulangerie on every corner, and we don’t have riots every weekend – or at least, not yet. But in almost every other way, however, as Indermit Gill, the chief economist of the World Bank, pointed out this week, the British economy has slowly turned into a French tribute act.
There is just one catch. While France at least gets results from its sprawling state, the UK seems to get almost nothing. We face a fate far worse than our neighbour on the other side of the Channel – French levels of tax and debt, combined with practically third-world levels of investment and public services.
It is one of the ironies of the last half decade that instead of turning into Singapore on Thames or mimicking American dynamism after leaving the European Union, the UK has turned into France instead.
As Gill put it, “the country that used to be most like the United States in all of Europe was the UK. And you guys decided to go and become a lot more like continental Europe. You look like France, not like the US.”
It’s hard to disagree. Public spending in the UK rose from 39pc of GDP in 2019 to 50pc during the pandemic, and it has now settled at 44pc.
In France, state spending is a massive 58pc of GDP, while the US, even with President’s Biden’s huge increases in welfare payments and industrial subsidies is still only at 36pc. A country which has usually been closer to Washington than Paris is now starting to drift the other way.
This is happening across the economy. As Tuesday’s shocking figures for public borrowing showed, even with punishing tax rises the government is still nowhere close to balancing the books, with a deficit running at 4.4pc of GDP compared with 5.5pc for our neighbour. And of course, growth is miserable.
France is expected to expand by only 0.7pc this year, on IMF forecasts, while the UK will only manage 0.5pc. The USA, on the other hand, is projected to roar ahead at 2.7pc.
The problem is that while we’re increasingly mimicking the French public spending strategy, we don’t seem to get anything like the same results. If you are going to have a huge, intrusive state – and of course at least a few of us would prefer that we didn’t – then at least you might as well have the French version.
For all its faults, it certainly seems to have one redeeming feature. It is effective. On almost any measure you care to look at the French government machine easily outperforms the British one.
Such as? France has a far better health system, combining social insurance with state provision, and while the French are angry that average waiting times to see a GP have risen from four days before the pandemic to 10 that is far better than this country, where the waiting time for a routine appointment is 19 days, if you can get to see a doctor at all.
And while you might have to pay to drive on French motorways, they are at least beautifully maintained. Paris has also just started on a new TGV line, extending the route from Paris to Bordeaux down to Toulouse at a cost of a mere 14bn euros, a fraction of the cost of HS-2.
France added 320,000 homes to its supply in 2022, and only once in the last 20 years – when the pandemic disrupted projects – has the net gain dipped below 300,000 annually. In the UK, we added 234,000 in 2022, still down on our pre-pandemic peak. That’s roughly 100,000 fewer units, although the two countries have similar populations.
If you ever wondered why that charming holiday home in Provence looked so cheap, that’s part of the reason.
Elsewhere, France has a total of 56 operating nuclear power plants, the result of far-sighted, intelligent industrial planning over many years, and it is now Europe’s largest net exporter of electricity, with Britain of course one of the major customers.
By contrast, we have only nine, little idea when a new one will come onstream and are dangerously reliant on imported power to keep the lights switched on. The list goes on and on.
Sure, France’s constant meddling in the economy is often a disaster. President Macron’s determination to take Air France-KLM back into effective state control, with a 28pc stake, looks like it will end in tears.
Earlier this month, it had to bail out the IT “national champion” Atos with a €50m loan, and could be on the hook for more. Then again, it occasionally gets one right.
Macron has championed artificial intelligence, as part of his drive to create a “start-up” nation, and it looks like paying off, with the open-source chatbot company Mistral AI expected to be raising at a valuation of $5bn less than two years after it was founded.
In the UK, we backed the failed battery manufacturer Britishvolt, and the satellite firm OneWeb, which despite being bailed out by the state and touted by Boris Johnson as a potential rival to Elon Musk’s Starlink, ended up merging with France’s Eutelsat.
The government picking winners is usually a bad idea, but at least the French are better at it than most.
Sure, France’s debt to GDP ratio is higher than ours, but we’re headed in that direction.
A huge, over-extended state, with vast welfare entitlements and crushing levels of taxation, is terrible for growth. It pushes debt up to dangerous levels, drives the size of the workforce down, and deters both foreign and domestic investment.
Still, if the voters insist on a state of that size, it might as well at least be as effective and well-managed as the French version. Right now, the UK is heading for the worst of all possible worlds.
We will have French levels of tax and spending, combined with practically third world levels of state delivery – and unless we work out how to change that, we will be stuck with permanent stagnation.
Telegraph article, archived here: archive.fo/mxGwh#selection-2535.4-2546.0
We have huge levels of government spending. We have punitive taxes. The state micro-manages the economy, offering lavish levels of welfare, while constantly racking up more and more debt.
True, we don’t have a boulangerie on every corner, and we don’t have riots every weekend – or at least, not yet. But in almost every other way, however, as Indermit Gill, the chief economist of the World Bank, pointed out this week, the British economy has slowly turned into a French tribute act.
There is just one catch. While France at least gets results from its sprawling state, the UK seems to get almost nothing. We face a fate far worse than our neighbour on the other side of the Channel – French levels of tax and debt, combined with practically third-world levels of investment and public services.
It is one of the ironies of the last half decade that instead of turning into Singapore on Thames or mimicking American dynamism after leaving the European Union, the UK has turned into France instead.
As Gill put it, “the country that used to be most like the United States in all of Europe was the UK. And you guys decided to go and become a lot more like continental Europe. You look like France, not like the US.”
It’s hard to disagree. Public spending in the UK rose from 39pc of GDP in 2019 to 50pc during the pandemic, and it has now settled at 44pc.
In France, state spending is a massive 58pc of GDP, while the US, even with President’s Biden’s huge increases in welfare payments and industrial subsidies is still only at 36pc. A country which has usually been closer to Washington than Paris is now starting to drift the other way.
This is happening across the economy. As Tuesday’s shocking figures for public borrowing showed, even with punishing tax rises the government is still nowhere close to balancing the books, with a deficit running at 4.4pc of GDP compared with 5.5pc for our neighbour. And of course, growth is miserable.
France is expected to expand by only 0.7pc this year, on IMF forecasts, while the UK will only manage 0.5pc. The USA, on the other hand, is projected to roar ahead at 2.7pc.
The problem is that while we’re increasingly mimicking the French public spending strategy, we don’t seem to get anything like the same results. If you are going to have a huge, intrusive state – and of course at least a few of us would prefer that we didn’t – then at least you might as well have the French version.
For all its faults, it certainly seems to have one redeeming feature. It is effective. On almost any measure you care to look at the French government machine easily outperforms the British one.
Such as? France has a far better health system, combining social insurance with state provision, and while the French are angry that average waiting times to see a GP have risen from four days before the pandemic to 10 that is far better than this country, where the waiting time for a routine appointment is 19 days, if you can get to see a doctor at all.
And while you might have to pay to drive on French motorways, they are at least beautifully maintained. Paris has also just started on a new TGV line, extending the route from Paris to Bordeaux down to Toulouse at a cost of a mere 14bn euros, a fraction of the cost of HS-2.
France added 320,000 homes to its supply in 2022, and only once in the last 20 years – when the pandemic disrupted projects – has the net gain dipped below 300,000 annually. In the UK, we added 234,000 in 2022, still down on our pre-pandemic peak. That’s roughly 100,000 fewer units, although the two countries have similar populations.
If you ever wondered why that charming holiday home in Provence looked so cheap, that’s part of the reason.
Elsewhere, France has a total of 56 operating nuclear power plants, the result of far-sighted, intelligent industrial planning over many years, and it is now Europe’s largest net exporter of electricity, with Britain of course one of the major customers.
By contrast, we have only nine, little idea when a new one will come onstream and are dangerously reliant on imported power to keep the lights switched on. The list goes on and on.
Sure, France’s constant meddling in the economy is often a disaster. President Macron’s determination to take Air France-KLM back into effective state control, with a 28pc stake, looks like it will end in tears.
Earlier this month, it had to bail out the IT “national champion” Atos with a €50m loan, and could be on the hook for more. Then again, it occasionally gets one right.
Macron has championed artificial intelligence, as part of his drive to create a “start-up” nation, and it looks like paying off, with the open-source chatbot company Mistral AI expected to be raising at a valuation of $5bn less than two years after it was founded.
In the UK, we backed the failed battery manufacturer Britishvolt, and the satellite firm OneWeb, which despite being bailed out by the state and touted by Boris Johnson as a potential rival to Elon Musk’s Starlink, ended up merging with France’s Eutelsat.
The government picking winners is usually a bad idea, but at least the French are better at it than most.
Sure, France’s debt to GDP ratio is higher than ours, but we’re headed in that direction.
A huge, over-extended state, with vast welfare entitlements and crushing levels of taxation, is terrible for growth. It pushes debt up to dangerous levels, drives the size of the workforce down, and deters both foreign and domestic investment.
Still, if the voters insist on a state of that size, it might as well at least be as effective and well-managed as the French version. Right now, the UK is heading for the worst of all possible worlds.
We will have French levels of tax and spending, combined with practically third world levels of state delivery – and unless we work out how to change that, we will be stuck with permanent stagnation.
