Saturday, 17 June 2017

Harder times ahead

A faithful reader of this blog has posted a number of comments about my last post ("A poisoned chalice" - June 13). I am most grateful for comments as they always give me food for thought, as well as a good peg on which to hang a few more points about the first round of the parliamentary elections, particularly the rate of abstention and the fact that most of Macron’s babes are political novices.

On the rate of abstention first. The first thing that struck me last Sunday was the fact that nobody I met, including officials at the polling station, seemed very electrified by the process. There was definitely no sense of anticipation that you sometimes feel in the air on election day, as there was, for instance, in the first round of the presidential election in 2007, when there were high hopes that Nicolas Sarkozy would be the man to put an end to 15 years of drift. This year, the big surprise was Emmanuel Macron’s score in the first round of the presidential election on April 23. Since then, mainly thanks to his highly skilled handling of unfolding events, there has almost been a sense of inevitability about them: getting the best of Marine le Pen in the TV debate, winning the presidency, the inauguration, first appearances on the international stage, the appointment of the government, the rise of his own political party and the disarray and even disintegration of the traditional ones. However difficult it was to predict all of these things at the outset, observing French politics over the last two months has almost been like watching a famous violinist playing a fiendishly difficult concerto or a pole-vaulter effortlessly clearing a two meter hurdle – they make it look so easy!  Little wonder that “The Economist “, on its cover this week, described Macron as “Europe’s saviour” and pictured him walking on water whereas Theresa May had sunk below the surface with only her shoes emerging!

One explanation for the high rate of abstention last Sunday is therefore that a lot of election-weary voters considered the parliamentary elections as more or less a formality. Many of those who bothered to turn out simply wanted to give Macron a boost and many of those who didn’t felt that there was little point in voting for an opposition destined to have little power in parliament anyway. Between the two of them, Marine Le Pen and Jean-Luc Mélenchon, who have expressed the most hostility to Macron and his policies, lost about four million votes between the presidential poll and last Sunday.

This overall impression is reinforced by my experience in my own constituency. I went to the public meetings of two candidates, one from LREM, and one from the Les Républicains, the party that, in its various guises, has held this seat in every parliamentary election since 1958. It selected a new but serious candidate, a personal friend and political ally of the Prime Minister and Alain Juppé’s former chief of staff. He was endorsed by all six local mayors. In his meeting, attended mainly by local worthies, he was clear and honest about the strategic difficulties facing his party and spoke of the need to co-ordinate parliamentary business with that of the local authorities. Whatever one’s political views, he came across as well qualified and well placed to be a good constituency MP. Last Sunday he polled not quite 23%, an unprecedented low watermark in this constituency for a candidate of his political persuasion

In stark contrast to this low-key public meeting, that of his LREM rival was more grandly organised, well attended and featured some nationally known figures. The talk was about Macron’s victory, his vision, and the need for a new departure. Points were made about climate change, renewable energies and Europe, none of which sounded more ground-breaking than an endorsement of motherhood and apple pie. They were dutifully applauded. Hardly a word was spoken about constituency matters, apart from a few bland sentences, like the need for more car sharing to avoid traffic jams at rush hours. Last Sunday, the candidate polled just over 48%, the best first-round result for the centre-left since 1958. He will no doubt be elected to represent the constituency this coming Sunday.

In France, it must be noted though that the role of an MP is not exactly the same as that of a constituency MP in the U.K. Listen to any member of the House of Commons, as I did to Jeremy Corbyn this week in his first speech to the House after the U.K. elections, and it is clear that he considers himself, together with his fellow MPs, as first and foremost the representative of his constituents. In France by contrast, MPs are called députés and are considered as “representatives of the assembled nation”  (“représentants de la nation assemblée”) as stated in the States General convened by Louis XVI in 1789, to which much of France’s modern political history and phraseology can be traced. Even if they are elected from a constituency, representing its interests is seen as a secondary matter to participating in the framing of legislation and monitoring the government of the day.

In this sense, the voters of my constituency, as well as those of countless others throughout the country, are being entirely consistent by sending to the Assemblée Nationale a député who represents a fresh political outlook more than  narrower political interests. As Emmanuel Macron has radically changed the political outlook for the next five years, it seems natural that, under the French system, voters should give him the parliamentary majority to underpin it. In any event, the opposition parties will take some time to reorganise themselves. Many of their supporters feel confused and disoriented  - a further reason for the high rate of abstention last Sunday and probably an even higher one this coming Sunday. 

The fact that the newly elected députés will represent the whole nation does not however give them instant and automatic knowledge of how parliament works. Which is why I have not been the only one to describe them as political novices. This is not meant to be derogatory. There is a lot to be said for new blood and fresh thinking in the somewhat stale Assemblée Nationale, but the government is probably right to consider that the controversial nitty-gritty of labour market reform is not an issue on which they should cut their parliamentary teeth. Some of the new MPs will learn fast, others will find the going tough. And inevitably, with a large number of seats under a single banner, they won’t all have the same views and factions are likely to form. After five years, some may end up joining whatever emerges from the centre-right realignment; others may go the other way and rejoin a rejuvenated Parti Socialiste. Whatever happens, the next five years will be fascinating to observe.

At the end of the period, if Macron’s ideas are implemented as announced, many will come to the end of their short parliamentary career as the number of MPs will be cut by about half. In addition, those who do stand for election to the next Assemblée will do so on the basis of a new voting system that will include a dose of proportional representation.

On Tuesday of last week, the French soccer team beat their English rivals in a friendly match in Paris. The French team scored the winning goal in the second half, even after one of their players had been sent off. It was an impressive and stylish performance. President Macron, watching the match with Prime Minister May, must have relished the victory, as proof of what Team France can achieve when it puts its mind to it. Might he have pondered a more symbolic significance as well? Whether he did or not, the French soccer team, for all its panache last Tuesday, is a long way from qualifying for the World Cup in 2018. Macron is only at the beginning of his campaign to reform France. Let the hard times roll!

Tuesday, 13 June 2017

Poisoned chalice ?

There is little doubt in most peoples’ minds that Emmanuel Macron scored a magnificent victory in last Sunday’s parliamentary elections. The mainstream media have been falling over themselves to find every possible synonym for “triumph”. “Macron sans opposition”, screamed a banner headline in “Le Monde “. The FT morning briefing on Monday was titled: ”Macron wins big”. The precise number of seats in the Assemblée Nationale won by candidates from his party, La République en Marche (LREM) allied with François Bayrou’s party, Modem, will not be known until after the run-off votes next Sunday, June 18. But it looks fairly certain that it will largely exceed 400 (out of 577), a very comfortable majority indeed.  Les Républicans, who have paid the price for their divisions over strategy, will end up with around 100 seats and the Parti Socialiste has been pulverised. Those former members of the party who stood under the Macron banner of LREM have come off well, whereas those that didn’t have faced intense competition from the more radical left-wing rebel party, La France Insoumise (LFI) led by Jean-Luc Mélenchon. Many former ministers and senior party officials have been ousted in the first round of voting, submerged by the on-going shock waves unleashed on April 23. In his much lauded rise to power, it has now become clear that Emmanuel Macron’s stroke of genius was to see, before anyone else, that the traditional parties of the left and, to a lesser extent, the right were so worn and torn that he just needed give them a powerful shove at the right moment to see them keel over and collapse in a heap.

Does all this mean that he will now have a free hand to reform the French economy by pushing through the bold programme that he has promised the country?  In the light of the consummate political skills he has shown so far, he may very well bring it off.  But a few words of caution are undoubtedly necessary.  

The first point to make is that turnout on Sunday was a measly 50%, the lowest for parliamentary elections since 1958. It suggests, among other things, that voters basically followed the institutional logic of the fifth republic: most of those who turned out considered that Macron should be given the parliamentary majority he is seeking and voted, almost automatically, for the candidates of his party, while many others felt that the outcome was a foregone conclusion and that there was little point in turning out to vote for the opposition.  Either way, it does not amount to a massive endorsement of his reform programme, at best an indication that voters are willing to give him a chance to do what he has pledged do. Naturally enough, little detail has yet been revealed, particularly on labour market reform.

When such detail emerges, it is unlikely to be scrutinised by a freshly elected lower house, largely populated by political novices with little or no knowledge of parliamentary procedure. The government has made it clear that, in order to expedite this first major reform initiative, it will simply ask parliament to approve enabling legislation and proceed further through the equivalent of executive orders (ordonnances). If this procedure is followed, most of the detailed measures will be drafted by civil servants and signed off by ministers, presumably with substantial input from trades unions. Parliament’s role will be minimal. Even if objections to the procedure are raised in the Senate, the membership of which has not been changed in the slightest by Sunday’s elections, it can only propose amendments that both the government and the lower house are constitutionally entitled to ignore.

If there is any serious opposition to whatever measure are put forward, recent history suggests that it will come only from the streets. In this respect, there is an interesting parallel with the 1993 parliamentary elections, that gave a similar, 472 seat, majority to a coalition of right-wing and centre parties. The President of the time, François Mitterand, was obliged to appoint a right-wing Prime Minister, the patrician Edouard Balladur, who interpreted his majority as a green light for bold reforms designed to ..........reduce high youth unemployment!  His labour minister attempted to introduce what was called an “initial labour contract” (contrat d’insertion professionnelle), aimed at young, first-time job-seekers. Under the proposals, they were to be offered a labour contract that employers could terminate at their discretion within two years while paying only 80% of the minimum wage. A wave of protests and street demonstrations by a united front of unions, university and high-school students forced the government to withdraw the proposals a few months later. Since then,  two similar initiatives have have been attempted by different governments and have met a similar fate for similar reasons. The conclusion that must be drawn is that in France, the size of a parliamentary majority is irrelevant in the face of a combined front of unions and students that is visibly, vocally and sometimes violently opposed to it. Nearly twenty-five years later, unemployment among young people is still stubbornly high.

Emmanuel Macron and his government must be keenly aware of these precedents and, one hopes, determined not to make the same mistakes again.  At least one member of LREM must have had all this in mind when he said (quoted by “le Monde”) during a victory celebration on Sunday evening: “the risk is that if there is no opposition in the Assemblée, it will eventually be expressed in the streets!”

There is no doubting the political skills that Emmanuel Macron has displayed in conquering and consolidating power. The next big question is whether he will be able bring the same powers of persuasion to bear on the exercise of power and overcome the many and varied forms of opposition that will rise to challenge him. In summary, will he be able to do not only better, but a lot better, than all the governments of the fifth republic since the onset of the economic crisis at the beginning of the 1970s?  We should know within a few months whether this talented young President is able to extract a magic potion from a potentially poisoned chalice.

Sunday, 11 June 2017

Punitive ecology

In Donald Trump’s announcement that he was withdrawing the U.S.A from the Paris climate agreement, much applauded by his captive audience and much decried by the rest of the world, one sentence struck me particularly: “I cannot in good conscience support a deal that punishes the United States - which is what it does”.

The idea that measures to reduce pollution and protect the environment are in some sense “punitive” is not new. In fact it reminded me of similar ideas expressed in France no more than 3 years ago by Segolène Royale, François Hollande’s erstwhile partner and, at the time, newly appointed Minister for the Environment: L’écologie ne doit pas être punitive” (ecology must not be punitive) she declared, putting a brave face on the government’s decision to abandon, in the face of popular protest, a toll for lorries using France’s highways, called the “ecotaxe”.

The initial idea was in line with what many of France’s neighbours have long since introduced, a special toll on heavy lorries using their roads, as a compensation for environmental pollution that all diesel powered lorries produce as well as increased wear and tear. The French government announced that it was introducing a similar scheme for the same reasons and that it would be operated through a series of automated toll gantries set up along main roads. The scheme was to be managed by a special purpose company. Many French regions applauded the move. Alsace and Lorraine for instance were particularly happy, given that many lorries heading North or South deliberately used French roads to escape the tax they would otherwise have to pay in Germany and Switzerland. Only Brittany objected, but it objected strongly. Road haulage firms, their representative organisations and farmers’ unions all claimed that the tax was unfair to Brittany because their largely agricultural region is a long way from Paris and would be disproportionately "punished". When the government showed no signs of backing down, the Bretons started to organise street demonstrations, sabotaged some gantries and in a stroke of genius that caught immediate media attention, took to wearing red phrygian bonnets, (“les bonnets rouges”) a powerful symbol of the reign of terror in 1794.

As happens so often in France, whenever there is a whiff of revolution in the air, threatening to bring more people out on the streets and the country to a standstill, the government eventually did back down and announced the suspension of the “ecotaxe”. It was on this occasion that Segolène Royal uttered her famous phrase. It may not have been punitive for Brittany, but it was a very different story for the French taxpayer, as the government eventually had to write off about €1 billion that had been invested in the gantries, the technology, the toll collecting company, salaries and ultimately, winding-up costs and severance pay.

Since 2014 of course, the reality of climate change has become increasingly evident and the need for concerted measures more urgent. In December 2015, the landmark Paris climate agreement was signed. Whatever each country has committed to in terms of reducing greenhouse gas emissions, it is clear that all governments are going to have to make difficult choices that will impinge on lives and livelihoods. Politicians who claim that they cannot countenance tough measures because they are “punitive” are only shirking those hard choices and are knowingly sacrificing long-term benefits for short-term political advantage. This is surely one of the components of populism, of which Donald Trump and, to a lesser degree, Segolène Royal can rightly be accused.

More forward-looking politicians are less afraid of popular opposition. Anne Hidalgo, the mayoress of Paris, is also readily accused of “punitive ecology” for closing a major artery along the Seine in Paris to motor vehicles and banning older cars from the city during rush hours. But, advised by a deputy for transport who is from the Green party, she has stuck to her guns. This being said, it has become increasingly clear to all that there are far too many motor vehicles in Paris at any one time for the good of peoples’ health and that of the planet. Anyone who regularly walks through the city’s streets cannot help being struck by the air and noise pollution, the endless queues of idling vehicles at traffic lights and the frequent gridlock at major intersections. And this, it should be noted, in a city which has one of the best public transport networks in the world. The Paris authorities have not yet gone so far as to publicly envisage road pricing but it will surely come one day, as it has to other cities in Europe and the rest of the world.

Even in France, where public opinion is often slower to evolve than in countries with a reputation for greater pragmatism, there is a growing realisation that enough is enough. As the years pass, environmentally friendly policies will slowly but surely come to be more applauded than decried and the phrase “punitive ecology”, it must be hoped, become as out-dated as the stagecoach.

Saturday, 3 June 2017

Me and Ahmed down by the schoolyard

As I was walking home from the gym yesterday, I passed a downtown primary school just as parents were collecting their children for the lunch break. All the colours of the rainbow were represented in the schoolyard, with the rainbow veering definitely to the darker side. Not surprisingly, this was reflected in the group of waiting parents: at a glance some European, some North African, including three mothers wearing headscarves, Sub-Saharan African and Asian. Impossible of course to tell who was French and who wasn’t, but the majority was clearly of foreign origin, even if their children were probably born in France.  Walking home after lunch, I passed a primary school in the upper part of town where a group of children, definitely on the lighter side of the rainbow, were being taken out on an excursion.

I don’t know how typical these scenes are of the western suburbs of Paris, but a friend of mine who runs an after-school centre for primary school and junior high school kids gave me some clues. Although our town passes for being well off, it is also home to people who struggle to make ends meet, many of them recent immigrants, and it has its requisite quota of 25% of public housing in the total housing stock. She tells me that of the 100 or so children she and her colleagues help with homework and other after-school activities, 80 are of foreign origin and one year she counted 27 different nationalities of origin, a large proportion originally from North and Sub-Saharan Africa, quite a few from Eastern Europe, some from Western Europe and some from Asia. Not many, as yet, from the swelling ranks of refugees from Irak or Syria.

During his campaign for the French Presidency, Emmanuel Macron promised that the French education system would concentrate more resources on primary schools, reducing class sizes to no more than twelve, whereas today they can be twice as large. And this on top of an existing scheme to assign two teachers to large classes. The problem is that this type of arrangement only benefits schools in areas deemed in need of special funding. In the Paris area this applies mainly to schools in areas with very high immigrant populations like the northern suburbs, but not to well-off suburbs like this one, which, as I wrote in a previous post, has returned an orthodox right wing MP to the Assemblée Nationale since 1958. As my friend remarked ironically: “kids from poor backgrounds are better off in poor areas than in rich ones!”

What this translates to in our town is that some primary school classes are far too large. Teachers do not take long to identify children who have serious difficulties with reading, writing and basic arithmetic in their first year of primary school.  They are clearly the ones who need early help. They often come from single parent families where French is not the first language and even if it is, communication within the family and with relatives and neighbours is minimal. If primary school cannot, for lack of teachers, give extra support to these children, if their initial difficulties are not tackled at this stage, they are constantly struggling and can easily enter the collège (a non selective junior high school) at 12 or 13 with serious learning deficits. From then on, they are in danger of becoming early dropouts or, at best, leaving school at the age of 16 with no qualification.

The French education system prides itself on being meritocratic and there are enough examples of children who have benefitted handsomely from it to prove that this reputation is still justified. In his first speech on taking office, Gérald Darmanin, the new budget minister referred with pride to his humble background as the son of a cafe owner and a cleaning lady and the grandson of an Algerian infantryman who fought in the French army. There are many others like him. But there are also many who, for lack of support at home or in school, fall through the net and end up unqualified and unemployed.  Successive waves of early 20th century immigration from Poland, from Italy and elsewhere have been successfully integrated into French society in the space of one or two generations, largely through school, but there has perhaps never before been such a large number of relatively recent immigrants from such a large variety of countries. And the pressure is unlikely to let up.

If Emmanuel Macron and his government wish to uphold France’s record in integrating immigrants from all parts of the world, the obvious place to start is primary school. But that means being pragmatic about the areas, towns and individual schools that deserve special support schemes. Apart from any other consideration, the investment could pay huge dividends if more children are helped to realise their potential and don’t end up in 10 to 15 years time as school dropouts living off benefits or worse. Unfortunately, politicians don’t always look so far ahead!

Sunday, 28 May 2017

Election marketing

Saturday is a market day in the town just outside of Paris where I live and at election time, activists are out in force, handing out leaflets, fielding questions and drumming up support for their respective candidates. Despite the absence of many voters over the long Ascension Day weekend, this Saturday marked the real opening of the campaign for the parliamentary elections on June 11 and 18. Candidates and activists were testing their arguments and voters were weighing them up.  There is clearly everything to fight for. The situation in this constituency, as in many others, is by no means clear-cut and the outcome very uncertain.

Our MP for the past 24 years is over 70 and not standing for re-election, like 216 other MPs in the outgoing Assemblée Nationale. The man selected to succeed him is a 45 year-old career politician called Gilles Boyer. He is a former political advisor to Alain Juppé and a close ally of the current Prime Minister, Edouard Philippe. He might therefore be expected to support the current government and campaign in its favour. But the local situation is a little more complicated: our sitting MP is on the right wing of the Les Républicains and has long been a close ally of Nicholas Sarkozy. He even romped home in the first round of voting in the parliamentary elections following Sarkozy’s accession to the presidency in 2007. His supporters would undoubtedly be put off by any successor moving significantly towards the centre and declaring his support for Emmanuel Macron.

Such considerations must have been uppermost in the minds of Macron’s party, Les Républicains en Marche (REM), who have, at the last minute, selected their own candidate, Jacques Maire, the son of a moderate trade-union leader in the 1970s and 80s. He has the advantage of living locally and ticks all the right boxes in terms of his background and experience, partly as a diplomat, partly in the private sector and with some experience of local politics, albeit in Brittany, another part of France altogether.  The activists handing out leaflets for Gilles Boyer were adamant that their candidate was in the opposition. Those canvassing for Jacques Maire were insistent that their candidate would help implement the new President’s programme.

Similar scenarios must be playing out in many other constituencies throughout France, as candidates and their parties continue to navigate the shock waves to the political establishment unleashed by Emmanuel Macron’s election. As I wrote in a previous post, les Républicains seem unsure of what voters are expecting them to do: support or oppose, oppose or support? And now that the Parti Socialiste has openly split into warring factions, candidates of the centre-left will face a similar dilemma.  They will probably all be spinning slightly different messages to voters according to the constituency they are standing in and whether they are incumbents or new faces. Only the extremes of both left and right will know exactly where they stand but, curiously, in this constituency at least, their posters are conspicuously absent from the hoardings and none of their representatives were anywhere to be seen on the market yesterday. Macron’s candidates from REM, mostly political novices, are hoping to ride on the new President’s bandwagon and present themselves as the surest supporters of his mould-breaking programme. As will undoubtedly be the case in most constituencies, the outcome of the first round of voting will depend largely on how voters react to the candidates they talk to or listen to in public meetings. The second round is totally unpredictable at this stage, as political strategies will be cobbled together on the hoof, depending on the outcome of the first round.

In this constituency, given existing political affiliations but also the triumph of Macron on May 7, Boyer and Maire will probably face each other in the run-off on June 18. Judging by the number of hoardings outside each polling station, there will be a total of ten candidates, all but two of them being also-rans. A worthy looking local lady is standing for the Parti Socialiste, but you have to look very carefully to spot its endorsement in the form of a very small logo in the bottom corner of her election poster. No left-wing candidate has been returned to parliament from this well-off constituency since 1958. Apart from that, we do have the attraction of a candidate from the Alliance Royale, a distinguished looking elderly gentleman photographed wearing a royal blue blazer and a neatly trimmed handlebar moustache and beard. He has clearly been encouraged to stand again by the grand total of 67 votes that he polled at the last election in 2012. Will he endorse the right-wing candidate, Boyer, in the run-off or go for the next best thing to a king, the representative of the republican monarch? Voters will no doubt hang on his every word on the evening of June 11.

As I left the market yesterday, a young woman activist with République en Marche emblazoned across her t-shirt was taking a photograph of a small trestle table on which an activist from Les Républicains had set out his wares. “You’re not supposed to have a table”, she called out as she stowed away her smartphone, “it’s against the rules!”

The campaign has only just started and it already promises to be a blistering affair!

Wednesday, 24 May 2017

The sideshow of pay-as-you-go

Only about 50% of French households pay income tax and 80% of them, like myself, pay in ten monthly instalments that are calculated on the basis of the previous year’s tax liability. These monthly payments can be adjusted once a year by taxpayers themselves, if they calculate that their tax bill will be higher or lower than that of the previous year. The tax administration’s website is a little forbidding at first, but once you have got used to it, works well and doesn’t crash. Last year, more than 40% of income tax payers used it to file their tax returns.

If all that sounds fairly straightforward, by French standards it is! I have therefore never understood why the previous government decided to shift to a pay-as-you-go system for income tax from 2018 onwards. After all, the simplest way of generating tax revenue from income, more or less as it is earned, would be to make monthly instalments compulsory, a change that would be simple to legislate, fairly painless to introduce and unlikely to trigger massive protests.

The new government has clearly been thinking along these lines as one of the first announcements by the new budget minister, Gérald Darmanin, was that the scheme would be postponed. Many consider that it will be abandoned altogether. There appear to be a number of reasons, both economic and political, for this change of heart.

Many businesses and their representative organisations have complained that they have better things to do than to act as the government’s tax collector. While it is true that pay-as-you-go income tax is standard practice in many other countries, businesses in France are clearly afraid that the finance ministry, faced with a simple or a complicated way of doing things, will go for a complicated one. In a country where the Labour Code and its appendices is a weighty tome that could knock a man unconscious at 20 paces, their fears are not unfounded. And it would not simplify matters for the taxpayer either, who would still have to fill in a tax form every year, both to report income that cannot be taxed at source and as a justification for a possible rebate.

But there are also some more overtly political reasons that go to the very heart of the French “social model”, as it is generally described. Broadly speaking, a system based on aspirations to equality and inter-generational solidarity, managed by the state. As health care and pension contributions are both compulsory and tied to employment, they have always been deducted at source, as well as unemployment and work-related accident insurance premiums and so on. There is therefore a fairly big difference between gross salary and take-home pay. Most people, not unnaturally, look only at the amount credited to their bank account every month, oblivious to the true cost of their health care and pension provision, of which their employers pay a far larger proportion. The self-employed are treated differently of course, and they know only too well how much their health care and pension provision costs them, especially as they are also required to chip in a portion of the “employers” contribution. And all this in a country, it should be noted in passing, which, according to Eurostat’s figures for 2014, is one of only two countries in the EU that spends more than 11% of its GDP on health care and where the amounts that patients have to pay out of their own pockets are extremely low. So much so in fact that it is now rare for patients to have to open their wallets at all when they consult a doctor, undergo surgery or pick up €100 worth of prescription drugs at a pharmacy.

This is where the obvious political challenge arises. Governments in general, and French governments in particular, prefer to give people the impression that the money they earn is “theirs” and that “the state” will take care of them in sickness or old age, rather than launch into complicated and politically loaded explanations about the funding of their heath care and pensions, always designed to appear as painless as possible. Emmanuel Macron has so far been no exception. In his presidential programme, he promised that employees’payroll contributions would be substantially reduced, entailing an automatic increase in purchasing power without a concomitant increase in salary. If however the pay-as-you-go income tax levy were to be introduced in January 2018, the beneficial effect of payroll tax reductions would be cancelled out by the perception of an overall loss of purchasing power, as the difference between gross and net salary would become bigger rather than smaller. Opposition politicians, particularly of the populist variety, would be quick to exploit the situation by claiming that working people were worse off than before and that the President had not delivered on the promises of his campaign.

But even that is not the whole story. The pay-as-you-go project is, in reality, little more than a sideshow, especially as revenue from personal income tax represents only about 20% of the total tax revenue raised by the French state. Behind it, there are clearly some fairly radical ideas, as yet not fully fleshed out by the new President and his government, about the future funding of an increasingly costly health care and pension system, as people live longer and require proportionally more health and social care as they get older. For France’s social model to remain viable, more money will have to be raised from somewhere. Despite recent reductions in their contributions, businesses have been claiming for years that they pay too much and must contribute less if they are to remain competitive.  The speed with which the new President and his government are trying to reform France’s rigid labour market is dictated, among other considerations, by the desperate need to raise employment levels and therefore the overall level of payroll contributions, as well as generate more consumer spending and, by extension, more VAT, by far the biggest contributor to overall tax revenue. Discussion of a promised increase in the CSG, a broad-based tax on all income that also finances the health care system, has so far been muted but will undoubtedly re-appear. Macron has promised radical pension reform but has also gone on record as saying that it will take the whole of his five-year term to put in place. Judging by previous, and less ambitious, attempts to reform France’s pension system, that may be optimistic. All these issues and their massive financial impact will only emerge more clearly as the future government comes to terms, as all its predecessors have had to, with greater or lesser degrees of success, with the competing requirements of reducing unemployment, cutting public spending, reducing a mountain of debt that is close to 100% of GDP while allowing working people to keep more of the money they earn.

Whatever spin a skilful President and government try to put on future developments, it will be a fiendishly difficult circle to square. My monthly income tax payments may vary slightly, upwards or downwards, in the years ahead, but I am a lot less sure about the prospects for a quick fall in the overall tax burden. And preparing to pay more from my own pocket!

Monday, 22 May 2017

Putting his best foot forward

President Macron must have carefully studied the video of his predecessor’s first visit to Berlin in May 2012. Many remember how the newly elected President Hollande looked awkward and flat-footed as he was firmly pulled to the right side of the red carpet by Angela Merkel during the welcoming ceremony and then tapped on the arm after the review of the troops to turn around and take the salute from the commanding officer. By all accounts, the rest of his trip did not go well either and he came away, as The Financial Times put it, “with a flea in his ear” for apparently being too pushy with Merkel about French ideas for reform of the European Union.

Just five years later, the newly elected President Macron seems to have learnt a lot from these mistakes and it was instructive to watch the TV footage of his visit to Berlin at the beginning of last week. He knew exactly on which side of the red carpet to walk, turned at exactly the right moment to take the salute and, according to reports, pledged that France would do its bit to restore its economic and financial credibility before asking Germany to loosen up its rigid positions on the Euro. To the pleasant surprise of the French press, Chancellor Merkel did not rule out future amendments to the European treaties in the press conference that followed their meeting.

Back in Paris, Macron’s first week in office has gone very much his way as well. The appointment of Edouard Philippe, a moderate member of les Républicains and an ally of Alain Juppé, as Prime Minister on Monday and the composition of his government, announced on Wednesday, have fulfilled a campaign promise: to form a government from both sides of the left/right divide. The resulting team has 22 ministers, eleven men and eleven women, a mix of fresh faces from civil society and a patina of experienced politicians that make it look both new and experienced. The key finance ministry has been entrusted to two men from Les Républicains, in a clever and apparently successful move to reassure the French business community: Bruno Le Maire, who was a candidate in last November’s primary and a 34-year old rising star from the same party, Gérald Darmanin, a former close ally of Nicholas Sarkozy. Le Maire speaks passable German, a rare quality among French politicians, and immediately announced that he would be seeking an early meeting with the German finance minister, Wolfgang Schäuble, as if to underscore the President’s commitment to reform in France. Darmanin, who will be in charge of the budget, announced, to the relief of many business leaders, that a new pay-as-you-go income tax scheme, due to be introduced at the beginning of next year, would be postponed. Many consider that it will be dropped altogether. 

Jean-Yves Le Drian, the highly respected defence minister under Hollande has, somewhat surprisingly, been moved to the Quai d’Orsay, his place taken by Sylvie Goulard, an MEP and an early Macron supporter. With her network of European contacts and knowledge of German, English and Italian, she strengthens Macron’s European credentials and will be a definite asset in the forthcoming discussions about a European defence initiative. Reports suggest that Macron was keen to establish his own authority over French defence policy after a period in which Le Drian and his powerful chief of staff had reputedly made the ministry a state within a state. A further sign, after his inaugural drive up the Champs Elysées in a military vehicle, that the young and relatively inexperienced Macron intends to stamp his own authority on this vital area of national policy.

Another much commented appointment is that of a popular environmental activist and former TV star, Nicolas Hulot, to be minister of “ecological transition”. Hulot had been approached by former presidents to play a role in government but had always pointedly refused. It is unclear why he has changed his mind this time, apart from the fact that, at the age of 62, it is probably the last opportunity he will get. Given his outspoken views, there are mutterings that he will fall at the first political hurdle the President asks him to jump. That being said, in his first media interviews he has made all the right noises, repeating the official commitment to reduce the share of nuclear power in electricity generation from 75% to 50% over the next fifteen years or so, confirming the closure of France’s oldest nuclear plant at Fessenheim in Alsace, after a period of “consultation”, and announcing the early appointment of a mediator in the politically explosive issue of the building of a new airport on a greenfield site at Notre Dame des Landes in Western France.

In preparation for the parliamentary elections in June, Macron’s party La République en Marche (REM) is fielding its own candidates, many of them political novices, in 526 of the 577 constituencies represented in the Assemblée Nationale. In the remaining 51 constituencies, candidates from other parties, like Bruno le Maire or Manuel Valls will be unopposed by REM. Another clever touch clearly designed to further boost the chances of a presidential majority after the elections. As one could have expected, Les Républicans have been thrown into disarray, with the more radical elements in the party calling for the exclusion of the Prime Minister, Le Maire and Darmanin, and the more moderate seeming to want to give the new President the chance he seeks to forge a new-look majority. Les Républicains will find it hard to fight the election campaign with a united voice and are pretty much in the dark as to whether they will end up supporting Macron’s government or opposing it.

Macron himself has clearly been pulling most of the strings behind these developments. His strategy has become clearer as he has moved to stamp his authority not only on events but also on fellow travellers, like François Bayrou, whose party has been deprived of the numerous constituencies he had apparently been promised. Bayrou has been given a consolation prize by being appointed Minister of State, Minister of Justice, where probably the most than can be hoped for is that he will do no harm.

Pollsters are suggesting that a majority of French voters are prepared to give the new President the parliamentary majority he is seeking. Whether Macron himself will remain equally sure-footed in the months to come as he was on the red carpet in Berlin remains to be seen. But the first omens are definitely favourable.