by Hugo Brady
Between June 4th and June 7th, Europeans will cast their votes to elect a new European Parliament (EP). Recent opinion polls indicate that they will do so without much enthusiasm. Indeed, there is every chance that the average turnout will be the lowest ever – it has fallen at every election since the first time that Europeans directly elected their MEPs in 1979, and sank to 45.6 per cent in 2004. But despite the prevailing apathy, this election matters. During its next five-year term, the EP will influence what the EU decides in areas as diverse as financial services, trade, climate change, energy security and immigration.
Why do European elections so often struggle to capture the public imagination? Evidently, voters think the stakes are lower than in national elections – or at any rate less clear. Unlike legislative elections in a member-state, European elections do not, strictly speaking, lead to the formation of a new government. Moreover, the EP can often seem distant because few voters know what it actually does. And even if they do, the areas where the EP exercises most influence seem technical and dull. Voters tend to be less interested in arguments such as home versus host regulation of service companies, or the pros and cons of ‘unbundling’ vertically-integrated energy companies, than in the subjects which dominate domestic elections – tax and spending, health and education policy, foreign and defence policy and so on. And on those issues the EP has no say.
MEPs are remote from most voters. The party list system used in most countries means that few electors know the names of their MEPs. European constituencies are huge, making it difficult for any voter to meet an MEP; in national politics members of parliament can more easily hold ‘surgeries’ to meet constituents. Furthermore, the process-heavy, non-adversarial way in which the Parliament operates attracts little media, and voter, attention. Political groups in the EP stand out less clearly than in most national assemblies. Although they are organised on a conventional left-right spectrum, they are composed of MEPs from very different national traditions, which makes them less monolithic. And there is not a great difference between the policies proposed by the three biggest groups, the centre-right European People’s Party (EPP), the centre-left Party of European Socialists (PES) and the Alliance of Liberals and Democrats for Europe (ALDE). Finally, the parliament lacks political theatre. Many of its proceedings revolve around consensus-building and horse-trading in specialist committees.
Eurosceptics sometimes argue that these flaws weaken the legitimacy of the EP as a representative institution. That argument is unfair for two reasons. The first is that the EP’s job is not to replace national assemblies but to complement them, by providing an additional layer of democratic representation in EU policy. The second is that the EP has become a serious actor. During its 2004-2009 term, it influenced EU policy in areas as diverse as climate change, energy, the cross-border provision of services, telecoms regulation and the authorisation of chemicals. This trend is set to continue, especially if – depending on Ireland’s autumn referendum – the Lisbon treaty enters into force. The EP would then have the power of ‘co-decision’ – an equal say to the Council of Ministers – over virtually all legislation, instead of around 70 per cent as is now the case. In particular, the Lisbon treaty would give the EP much more legislative power on justice and home affairs.
The future political balance of the EP will be largely determined by the outcome of voting in the big six member-states: Britain, France, Germany, Italy, Poland and Spain. The EPP seems likely to remain the largest political group in the Parliament, albeit with a reduced majority, despite the fact that Britain’s Conservatives are due to leave it. The Party of European Socialists (PES), for its part, should increase its representation, but only a little. When other groupings are taken into account – including the new group that the British Conservatives plan to lead – the centre-right is likely to dominate the EP.
If current opinion polls are to be believed, the mainstream centre-left will fail to draw much advantage from the current ‘crisis of capitalism’. In the largest member-states, centre-left parties are either unpopular incumbents (as in Britain, Germany and Spain), or in opposition and disarray (as in France, Italy and Poland). The great unknown is how well populist fringe groups of the left and right – those who are really opposed to the current political and economic system – will perform. It would still be a major surprise if fringe parties won much more than 50 seats in the 736-seat EP.
The balance of the parties matters for the leadership of the European Commission. In June the European Council is due to nominate the Commission’s next president. EU leaders are likely to offer José Manuel Barroso, who is affiliated with the EPP, a second five-year term. But if the PES becomes the largest group in the EP, they will try and insist on one of their own. The newly elected Parliament is due to approve the European Council’s nominee for Commission president in July. Assuming that the centre-right dominates the Parliament, Barroso will be voted in.
In the autumn the EP will hold hearings on the individual commissioners proposed by governments. These hearings matter. Five years ago, the EP did not like the look of Silvio Berlusconi’s nominee, Rocco Buttiglione, on account of his views on gays and women – and it forced Berlusconi to withdraw him. In January the Parliament will vote to invest the entire team of commissioners. If it is implemented, the Lisbon treaty will make more explicit the need for the appointment of the Commission president to ‘take into account’ the results of the European elections. In the long run, whatever happens to that treaty, the Commission is likely to become more directly accountable to the Parliament. But whether that makes Europeans any more willing to vote for MEPs is another matter.
Hugo Brady is a research fellow at the Centre for European Reform.
Friday, May 29, 2009
Thursday, May 21, 2009
Making a success of the EAS
by Charles Grant
If the Irish people vote yes to the Lisbon treaty at the second attempt, and the Czechs, Germans and Poles also ratify, the EU will set up an ‘external action service’ or EAS. This new institution promises to make the Union’s common foreign and security policy more effective. But of course an EAS will not mean that the EU suddenly develops a single foreign policy on every issue. The EU’s inability to develop a coherent approach to Russia, for example, would probably not be very different if an EAS was in place. Different member-states believe that they have different interests in Russia and so disagree on how to handle it.
That said, some of the EU’s incoherence in foreign policy can be put down to its often dysfunctional institutions, notably the rotating presidency; the split between both the High Representative (currently Javier Solana) and the external relations commissioner (currently Benita Ferrero-Waldner), and their respective bureaucracies; and the fact that the current institutions do not provide EU foreign ministers with high quality analysis on a number of important subjects.
The EAS should solve some of those problems. It will be a single bureaucracy made up of the merged foreign desks of the Commission and the Council of Ministers secretariat, as well as secondees from member-states. It will be led by the new High Representative or HR, fusing the Solana and Ferrero-Waldner jobs. That individual plus the EAS will take on the tasks currently performed by the rotating presidency, in terms of external representation and foreign policy.
If the member-states get the design of the EAS right – and give it the budget it needs – it should improve EU foreign policy in four ways.
1) The EAS should help the EU to join up its foreign policies. The EU has the potential to play a powerful international role because it has such a broad range of instruments at its disposal, such as aid, trade, soldiers, policemen, humanitarian aid, rules on asylum and visas, and so on. Neither NATO nor the UN can draw on such wide-ranging capacities. But in practice the EU rarely joins up its external policies. Within the Commission there is seldom much co-operation between the various directorates-general, let alone between those directorates and the Council of Ministers. By merging parts of the Commission and the Council into a single institution, the EAS should help to join up EU foreign policy. But it will still be a challenge to ensure that other parts of those bodies – such as the trade, enlargement, justice and energy directorates of the Commission – work in harmony with the EAS.
2) The EAS should be able to provide more high quality and common analysis to EU ministers. If the 27 governments view a problem in a similar way, they are more likely to be able to hammer out a common approach to it. The current institutions sometimes succeed in encouraging common thinking. For example the EU has taken a single line on Iran’s nuclear programme in recent years, partly because of the quality of the analysis provided by the Situation Centre (which gathers intelligence from the member-states) in the Council of Ministers. The EAS will have more resources and expertise than the current array of Brussels institutions. National diplomats seconded to it should help to feed in the best analysis from national capitals.
3) The integration of the Commission’s 120-odd overseas representations into the EAS should increase the EU’s clout. At the moment they focus (naturally) on the Commission’s priorities and are of little help to Solana and his team in Brussels, or to EU foreign ministers. In order to improve their performance and enhance their expertise in areas like political reporting and hard security, senior figures from national governments should be given prominent roles in some missions. These offices will need to have positions to represent in their part of the world, which will probably encourage the EAS to develop common policies. They will play a role in co-ordinating (though not managing) the work of member-state embassies. They will represent the smaller member-states that have no embassy in the country concerned. Even large member-states such as Britain or Germany do not have embassies everywhere and may find EU missions useful. In the longer run, small and large member-states may start to rely on missions as a way of saving money: if and when a government trusts the quality of the EAS’s work, it may decide to close embassies in countries that it considers relatively unimportant.
4) The EAS will eliminate the problem that a weak presidency can undermine EU foreign policy. The Czech presidency has, by general consent, been one of the worst in memory, and not only because the government collapsed half way through. When the EU is represented by the High Representative and the EAS it will, one may hope, be spared the embarrassments it has faced in the first half of 2009.
It is inevitable that the creation of the EAS will be a bureaucratic nightmare. Each of the existing bureaucracies, as well as the member-states, will fight to protect its specific interests. The EAS will need to be shaped by men and women of vision who can look beyond those interests. Whether or not the EAS is a success will depend, in part, on how well it meets four challenges.
1) Will the EAS attract very good people to work for it? National governments must send their best and brightest. It is not self evident that they will: the UK, for example, has not always sent its top diplomats to work in the Council of Ministers secretariat. The High Representative must be the kind of politician who inspires and whom bright young people will want to work for. And he or she will need to get on well with the president of the European Council (a new post) and the Commission president. The effectiveness of both the Commission and the Council of Ministers is marred by national flags being imposed on particular jobs. The High Representative must have the freedom to appoint the best people to the key jobs (of course, every member-state must have people in the EAS). He or she will also need deputies. Solana works about 100 hours a week, but the new HR will have extra responsibilities in the Commission and in chairing the meetings of EU foreign ministers. The HR will need at least five senior deputies: for traditional diplomacy, managing military missions, generating civilian capabilities, working with the various Commission directorates, and ensuring that justice and home affairs (JHA) is integrated into external policies. Other deputies may be needed to focus on specific regions.
2) Will the EAS succeed in stitching together policy on JHA with the EU’s foreign policies? A lot of the things the EU does that matter to the rest of the world are in areas like visas, asylum, illegal immigration, organised crime, counter-terrorism, police and judicial co-operation and border controls. At the moment the EU seldom joins up policies in these areas with other external policies. For example, when the JHA directorate general negotiates an agreement on the repatriation of illegal immigrants with a third country, it can offer to discuss visa rules, but not trade, aid or non-proliferation, which are handled by other parts of the EU. The EAS needs to find a way of integrating the EU’s work on JHA with other external policies.
3) When several parts of the EU are operating in the same problem country, will the EAS manage to co-ordinate their work? When there are several EU missions in the same country they tend not to work together. For example, when the EU peacekeeping mission arrived in Bosnia it found that the EU police mission, the Commission office and the EU special representative’s office had different objectives and did not want to work with it. There was little co-ordination from Brussels. There have been similar problems in Congo and Afghanistan. In order to ensure that the various EU agencies work together in such important places, the EAS should deploy a special representative to each of them. He or she should have the authority to co-ordinate the work of the various missions on the ground.
4) Will the 27 member-states identify with the EAS and trust it to promote their interests? Most small countries will see the value of a body that can represent them in places where they lack embassies. But there is a real danger that the foreign ministries of Britain, France or Germany could see the EAS as a rival source of power and as a competitor for money and the best people. They would then work round or against the EAS. The High Representative should therefore ensure that the big countries are given the chance to send good people to fill some of the top posts in the EAS. If the HR can establish an efficient bureaucracy that produces high-quality analysis, national foreign ministries will, hopefully, learn to respect it.
Charles Grant is director of the Centre for European Reform.
If the Irish people vote yes to the Lisbon treaty at the second attempt, and the Czechs, Germans and Poles also ratify, the EU will set up an ‘external action service’ or EAS. This new institution promises to make the Union’s common foreign and security policy more effective. But of course an EAS will not mean that the EU suddenly develops a single foreign policy on every issue. The EU’s inability to develop a coherent approach to Russia, for example, would probably not be very different if an EAS was in place. Different member-states believe that they have different interests in Russia and so disagree on how to handle it.
That said, some of the EU’s incoherence in foreign policy can be put down to its often dysfunctional institutions, notably the rotating presidency; the split between both the High Representative (currently Javier Solana) and the external relations commissioner (currently Benita Ferrero-Waldner), and their respective bureaucracies; and the fact that the current institutions do not provide EU foreign ministers with high quality analysis on a number of important subjects.
The EAS should solve some of those problems. It will be a single bureaucracy made up of the merged foreign desks of the Commission and the Council of Ministers secretariat, as well as secondees from member-states. It will be led by the new High Representative or HR, fusing the Solana and Ferrero-Waldner jobs. That individual plus the EAS will take on the tasks currently performed by the rotating presidency, in terms of external representation and foreign policy.
If the member-states get the design of the EAS right – and give it the budget it needs – it should improve EU foreign policy in four ways.
1) The EAS should help the EU to join up its foreign policies. The EU has the potential to play a powerful international role because it has such a broad range of instruments at its disposal, such as aid, trade, soldiers, policemen, humanitarian aid, rules on asylum and visas, and so on. Neither NATO nor the UN can draw on such wide-ranging capacities. But in practice the EU rarely joins up its external policies. Within the Commission there is seldom much co-operation between the various directorates-general, let alone between those directorates and the Council of Ministers. By merging parts of the Commission and the Council into a single institution, the EAS should help to join up EU foreign policy. But it will still be a challenge to ensure that other parts of those bodies – such as the trade, enlargement, justice and energy directorates of the Commission – work in harmony with the EAS.
2) The EAS should be able to provide more high quality and common analysis to EU ministers. If the 27 governments view a problem in a similar way, they are more likely to be able to hammer out a common approach to it. The current institutions sometimes succeed in encouraging common thinking. For example the EU has taken a single line on Iran’s nuclear programme in recent years, partly because of the quality of the analysis provided by the Situation Centre (which gathers intelligence from the member-states) in the Council of Ministers. The EAS will have more resources and expertise than the current array of Brussels institutions. National diplomats seconded to it should help to feed in the best analysis from national capitals.
3) The integration of the Commission’s 120-odd overseas representations into the EAS should increase the EU’s clout. At the moment they focus (naturally) on the Commission’s priorities and are of little help to Solana and his team in Brussels, or to EU foreign ministers. In order to improve their performance and enhance their expertise in areas like political reporting and hard security, senior figures from national governments should be given prominent roles in some missions. These offices will need to have positions to represent in their part of the world, which will probably encourage the EAS to develop common policies. They will play a role in co-ordinating (though not managing) the work of member-state embassies. They will represent the smaller member-states that have no embassy in the country concerned. Even large member-states such as Britain or Germany do not have embassies everywhere and may find EU missions useful. In the longer run, small and large member-states may start to rely on missions as a way of saving money: if and when a government trusts the quality of the EAS’s work, it may decide to close embassies in countries that it considers relatively unimportant.
4) The EAS will eliminate the problem that a weak presidency can undermine EU foreign policy. The Czech presidency has, by general consent, been one of the worst in memory, and not only because the government collapsed half way through. When the EU is represented by the High Representative and the EAS it will, one may hope, be spared the embarrassments it has faced in the first half of 2009.
It is inevitable that the creation of the EAS will be a bureaucratic nightmare. Each of the existing bureaucracies, as well as the member-states, will fight to protect its specific interests. The EAS will need to be shaped by men and women of vision who can look beyond those interests. Whether or not the EAS is a success will depend, in part, on how well it meets four challenges.
1) Will the EAS attract very good people to work for it? National governments must send their best and brightest. It is not self evident that they will: the UK, for example, has not always sent its top diplomats to work in the Council of Ministers secretariat. The High Representative must be the kind of politician who inspires and whom bright young people will want to work for. And he or she will need to get on well with the president of the European Council (a new post) and the Commission president. The effectiveness of both the Commission and the Council of Ministers is marred by national flags being imposed on particular jobs. The High Representative must have the freedom to appoint the best people to the key jobs (of course, every member-state must have people in the EAS). He or she will also need deputies. Solana works about 100 hours a week, but the new HR will have extra responsibilities in the Commission and in chairing the meetings of EU foreign ministers. The HR will need at least five senior deputies: for traditional diplomacy, managing military missions, generating civilian capabilities, working with the various Commission directorates, and ensuring that justice and home affairs (JHA) is integrated into external policies. Other deputies may be needed to focus on specific regions.
2) Will the EAS succeed in stitching together policy on JHA with the EU’s foreign policies? A lot of the things the EU does that matter to the rest of the world are in areas like visas, asylum, illegal immigration, organised crime, counter-terrorism, police and judicial co-operation and border controls. At the moment the EU seldom joins up policies in these areas with other external policies. For example, when the JHA directorate general negotiates an agreement on the repatriation of illegal immigrants with a third country, it can offer to discuss visa rules, but not trade, aid or non-proliferation, which are handled by other parts of the EU. The EAS needs to find a way of integrating the EU’s work on JHA with other external policies.
3) When several parts of the EU are operating in the same problem country, will the EAS manage to co-ordinate their work? When there are several EU missions in the same country they tend not to work together. For example, when the EU peacekeeping mission arrived in Bosnia it found that the EU police mission, the Commission office and the EU special representative’s office had different objectives and did not want to work with it. There was little co-ordination from Brussels. There have been similar problems in Congo and Afghanistan. In order to ensure that the various EU agencies work together in such important places, the EAS should deploy a special representative to each of them. He or she should have the authority to co-ordinate the work of the various missions on the ground.
4) Will the 27 member-states identify with the EAS and trust it to promote their interests? Most small countries will see the value of a body that can represent them in places where they lack embassies. But there is a real danger that the foreign ministries of Britain, France or Germany could see the EAS as a rival source of power and as a competitor for money and the best people. They would then work round or against the EAS. The High Representative should therefore ensure that the big countries are given the chance to send good people to fill some of the top posts in the EAS. If the HR can establish an efficient bureaucracy that produces high-quality analysis, national foreign ministries will, hopefully, learn to respect it.
Charles Grant is director of the Centre for European Reform.
Tuesday, May 05, 2009
Are the British the new French?
by Simon Tilford
The British tend to deride France as a hopelessly statist, anti-entrepreneurial country full of bolshie workers intent on extracting disproportionate rewards for their labour and a state too weak to resist them. This characterisation is not wholly inaccurate. But the implicit (and sometimes explicit) assumption is that the UK is everything that France is not. This is not the case.
In some respects, Britain now looks worse than France. For all its faults, France produces good public services and decent social outcomes, such as relatively low levels of poverty and high overall skills levels. Britain, by contrast, now combines a very big state, patchy public services, generally poor social outcomes and increasing barriers to wealth creation. This is a poisonous mixture. The situation can be rescued, but not without breaking some eggs.
The figures are arresting. Britain has gone from having one of the smallest states in the EU to one of the largest. In 2000, public spending accounted for 37% of GDP in the UK, just three percentage points above the US and a full 15 percentage points below France. By 2010 the OECD estimates that state spending will account for 49% of GDP in Britain, against 53% in France (52% in famously high-spending Sweden). Britain has already overtaken Germany and the Netherlands (44% and 46% respectively).
This unprecedented expansion of the British state would be less of problem if the UK now had Scandinavian (or even French) levels of public services or first-rate physical infrastructure. But improvements in British public services over the last ten years have been nowhere near big enough to justify the increase in expenditure. Most of the money has gone on increased employment and wages, rather than improvements in services. Perhaps unsurprisingly, given the stranglehold that the unions have on the public sector, productivity has stagnated.
It is also notable that Britain’s welfare-state is not comparable to that of Germany or the Netherlands, let alone France or Sweden. Unlike in these countries, many of the ordinary Britons currently losing their jobs will receive only derisory sums in unemployment benefits because these are means-tested. And only a forensic scientist could spot significant improvements in the country’s physical infrastructure. Britain’s roads remain as congested as ever and its railways expensive and unreliable.
Of course, the tax burden in the UK is still lower than in France. In 2008, taxes accounted for 49% of GDP in France compared to just 42% in Britain. But the gap between tax and expenditure in Britain is completely unsustainable, given the parlous state of the country’s public finances. How it is closed will to a large extent determine Britain’s economic prospects. If the gap is bridged by cutting expenditure, the UK stands a chance of returning to a relatively strong growth path. But if it is closed primarily through increased taxes, Britain will have a bleak future. The tax burden will be among the highest in the OECD, but public services (and the country’s social outcomes) will be nowhere near good enough to justify the tax take. In short, Britain will have Scandinavian levels of taxation and American levels of public services and social welfare.
The Labour party is poorly placed to sort out this mess because of its close links to the public sector unions. Under Labour the public sector has become a privileged class that is impervious to change and reform. By way of illustration, public sector wages are currently rising by close to 4% a year at a time of economic crisis. And this despite the fact that public workers are on average better paid than their private sector counterparts and enjoy generous pension entitlements. What about the country’s physical infrastructure? On the government’s forecasts, public investment will halve over the next 4 years. In fact, the only significant cuts the government intends to make are to investment.
The Tories stand a better chance of taking on entrenched public sector vested interests, but it will be a battle. Moreover, they will need to avoid the mistakes of the 1980s when they reduced spending by cutting services and investment rather than by increasing public sector efficiency. If they do this again, UK taxes will remain very high relative to what those taxes deliver in terms of services.
Britain still has strengths, of course. It is straightforward to set up a business in the UK and the labour market remains flexible. But overall Britain looks increasingly like one of the sick men of Europe, and certainly as sick as France. The French state is an efficient provider of services and quasi-state institutions construct and manage first-rate physical infrastructure. France, unlike Britain, has bitten the bullet on public pensions, increasing the retirement age to 65. The French have no qualms about allowing private companies to provide healthcare. Even the Tories do not appear to have the stomach for dismantling the NHS’s near monopoly on the provision of public healthcare.
The British need to get over the idea that they took all the difficult decisions in the 1980s and that Britain is an example for others to follow. It has a huge state, yet has poor social outcomes. Much of its growth in recent years has been down to a turbo-charged financial services industry and an unsustainable expansion of the public sector. Both trends have now run their course and the public sector has become a dead weight on the economy. Britain needs to concentrate on improving the climate for wealth creation. This will require much better public sector productivity and high levels of investment in human capital and physical infrastructure.
Simon Tilford is chief economist at the Centre for European Reform.
The British tend to deride France as a hopelessly statist, anti-entrepreneurial country full of bolshie workers intent on extracting disproportionate rewards for their labour and a state too weak to resist them. This characterisation is not wholly inaccurate. But the implicit (and sometimes explicit) assumption is that the UK is everything that France is not. This is not the case.
In some respects, Britain now looks worse than France. For all its faults, France produces good public services and decent social outcomes, such as relatively low levels of poverty and high overall skills levels. Britain, by contrast, now combines a very big state, patchy public services, generally poor social outcomes and increasing barriers to wealth creation. This is a poisonous mixture. The situation can be rescued, but not without breaking some eggs.
The figures are arresting. Britain has gone from having one of the smallest states in the EU to one of the largest. In 2000, public spending accounted for 37% of GDP in the UK, just three percentage points above the US and a full 15 percentage points below France. By 2010 the OECD estimates that state spending will account for 49% of GDP in Britain, against 53% in France (52% in famously high-spending Sweden). Britain has already overtaken Germany and the Netherlands (44% and 46% respectively).
This unprecedented expansion of the British state would be less of problem if the UK now had Scandinavian (or even French) levels of public services or first-rate physical infrastructure. But improvements in British public services over the last ten years have been nowhere near big enough to justify the increase in expenditure. Most of the money has gone on increased employment and wages, rather than improvements in services. Perhaps unsurprisingly, given the stranglehold that the unions have on the public sector, productivity has stagnated.
It is also notable that Britain’s welfare-state is not comparable to that of Germany or the Netherlands, let alone France or Sweden. Unlike in these countries, many of the ordinary Britons currently losing their jobs will receive only derisory sums in unemployment benefits because these are means-tested. And only a forensic scientist could spot significant improvements in the country’s physical infrastructure. Britain’s roads remain as congested as ever and its railways expensive and unreliable.
Of course, the tax burden in the UK is still lower than in France. In 2008, taxes accounted for 49% of GDP in France compared to just 42% in Britain. But the gap between tax and expenditure in Britain is completely unsustainable, given the parlous state of the country’s public finances. How it is closed will to a large extent determine Britain’s economic prospects. If the gap is bridged by cutting expenditure, the UK stands a chance of returning to a relatively strong growth path. But if it is closed primarily through increased taxes, Britain will have a bleak future. The tax burden will be among the highest in the OECD, but public services (and the country’s social outcomes) will be nowhere near good enough to justify the tax take. In short, Britain will have Scandinavian levels of taxation and American levels of public services and social welfare.
The Labour party is poorly placed to sort out this mess because of its close links to the public sector unions. Under Labour the public sector has become a privileged class that is impervious to change and reform. By way of illustration, public sector wages are currently rising by close to 4% a year at a time of economic crisis. And this despite the fact that public workers are on average better paid than their private sector counterparts and enjoy generous pension entitlements. What about the country’s physical infrastructure? On the government’s forecasts, public investment will halve over the next 4 years. In fact, the only significant cuts the government intends to make are to investment.
The Tories stand a better chance of taking on entrenched public sector vested interests, but it will be a battle. Moreover, they will need to avoid the mistakes of the 1980s when they reduced spending by cutting services and investment rather than by increasing public sector efficiency. If they do this again, UK taxes will remain very high relative to what those taxes deliver in terms of services.
Britain still has strengths, of course. It is straightforward to set up a business in the UK and the labour market remains flexible. But overall Britain looks increasingly like one of the sick men of Europe, and certainly as sick as France. The French state is an efficient provider of services and quasi-state institutions construct and manage first-rate physical infrastructure. France, unlike Britain, has bitten the bullet on public pensions, increasing the retirement age to 65. The French have no qualms about allowing private companies to provide healthcare. Even the Tories do not appear to have the stomach for dismantling the NHS’s near monopoly on the provision of public healthcare.
The British need to get over the idea that they took all the difficult decisions in the 1980s and that Britain is an example for others to follow. It has a huge state, yet has poor social outcomes. Much of its growth in recent years has been down to a turbo-charged financial services industry and an unsustainable expansion of the public sector. Both trends have now run their course and the public sector has become a dead weight on the economy. Britain needs to concentrate on improving the climate for wealth creation. This will require much better public sector productivity and high levels of investment in human capital and physical infrastructure.
Simon Tilford is chief economist at the Centre for European Reform.
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