The French lesson that could save Rachel Reeves – and Britain’s economy |
Rachel Reeves faces a strikingly similar predicament to that faced by Pierre Moscovici, who became France’s finance minister under François Hollande in 2012. Moscovici – and Reeves – both inherited the classic problem of the modern centre left: expensive promises and no obvious way to pay for them. The economy was sluggish; unemployment was climbing above ten per cent and public debt was rising. Every proposal to raise revenue further provoked consternation from voters and business alike.
Reeves may find that signalling prudence isn’t enough and that a radical move away from socialist political orthodoxy is the only way
Reeves may find that signalling prudence isn’t enough and that a radical move away from socialist political orthodoxy is the only way
In France, the Socialist Party, elected on promises of redistribution and public investment, looked on any attempt at restraint as a betrayal of principle. Moscovici spent the next two years in a balancing act; raising taxes without provoking flight or revolt, promising spending that would not bankrupt the state, and hoping that the European Commission and financial markets didn’t lose patience.
Over a decade later, Reeves is also in tight spot. Granted Britain in 2026 is not France in 2012. The economy is not teetering on the edge of sovereign default, and there is no European Commission monitoring debt-to-GDP ratios. But the fiscal arithmetic is just as unforgiving, and the politics arguably worse.
Growth has been anaemic for years with productivity increasing by a mere 0.5 per cent annually over the last decade. Meanwhile, Britain is already taxing itself at levels not seen outside wartime, with total receipts exceeding 37 per cent of GDP in each year since 2020/21. The current government’s fiscal headroom is wafer thin. Every pound of new spending must be funded by an equivalent saving elsewhere or borrowed under........