At the beginning of July, only the British should have gone to the polls to renew their Parliament. But by a stroke of political fate, the French, too, are called to vote on Sunday for the second round of early legislative elections, after the dissolution enacted by Emmanuel Macron. Two destinies crossed in more ways than one. On the other side of the Channel, the Labour Party obtained an absolute majority on Thursday, July 4. Eight years after Brexit, the United Kingdom is thus turning the page on the Conservatives who remained in power for 14 years.
Conversely, in France, the National Rally is still in the race to reach the threshold of 289 deputies that would allow it to implement its program. For L’Express, Catherine Mathieu, economist at the French Economic Observatory (OFCE) and specialist in the United Kingdom, analyzes the ins and outs of these two elections in light of the economic situation of two countries that are ultimately quite similar.
L’Express: How do you interpret the British vote from an economic point of view?
Catherine Mathieu: Above all, it should be interpreted as a desire to turn the page on the Conservative era. In terms of economic proposals, the Labour programme is very much in the centre. It is based on budgetary seriousness. Labour hammered this home throughout their campaign: if they won, they would focus on reducing public debt and reducing deficits without increasing taxes.
The aim was to pull the rug out from under the Tories, who were always attacking them, saying: “If you come back to power, you’re going to raise taxes and spend recklessly. It’s going to be a terrible situation in budgetary terms.” The new Prime Minister Keir Starmer has insisted on a kind of golden rule which consists in saying that the Labour government will only borrow to invest, while reducing public debt as a proportion of GDP over a five-year horizon. If Labour wants to implement the measures announced for public services, which undoubtedly contributed to their election, such as reducing queues in the health system, recruiting teachers, they will have few resources. They are now counting on a return to growth.
Have the lessons of Brexit been learned across the Channel?
All British people are well aware that this referendum took place eight years ago, at a time when everyone was very divided on the issue. But today, none of them want to bring the subject back up. We can take the example of the Liberal Democrats who, in 2019, during the previous elections, had included in their manifesto the return of the United Kingdom to the EU. As a result, they collapsed. Keir Starmer took care to say that there will be no going back in his lifetime. That gives you an idea of the situation. Everyone wants to turn the page.
On the one hand, the United Kingdom seems to be closing its populist parenthesis, on the other, France could open its own…
The United Kingdom has not completely closed its populist parenthesis. Reform UK, Nigel Farage’s party, despite the British voting system, won four seats. This is the first time they have entered Parliament. In several constituencies, it was a close call for them to win. There is still a fringe of the UK population that is very tempted by populist approaches such as curbing immigration, stopping the fight against climate change and abandoning all greenhouse gas reduction measures to give households more purchasing power. But they are fewer in number than in France. Even if we had the same voting system, we would not be at 30%, but rather around 16%. This is not insignificant. If we look at the two programs, we find similar elements.
Has the theme of purchasing power, omnipresent in the French electoral campaign, also focused attention across the Channel?
Not as much. Nigel Farage really insisted on immigration first, more than on the question of purchasing power, even if the British, like the French, saw their purchasing power deteriorate following the rise in energy prices in 2022. As for Labour, they really focused their campaign on change after fourteen years of Conservatives in power, with the speech: “We must put an end to the chaos”. They highlighted the various scandals that had broken out during the lockdown periods, criticized the attitude of Boris Johnson and the government teams or even mentioned the crisis surrounding Liz Truss’ budget in 2022, which panicked the financial markets. Finally, reducing inequalities and improving purchasing power took second place, much more than in France.
What is the situation in the United Kingdom today compared to France?
The British economy is recovering. In the first quarter of 2024, GDP grew by 0.7% year-on-year, after two quarters of slight decline. This is a small glimmer of hope for a potential recovery. Compared to France, growth has been roughly equivalent on both sides of the Channel since the 2016 referendum. Labour is also arriving at a time when inflation is slowing sharply to 2% year-on-year, compared to more than 11% in 2022. The Bank of England, in August, could thus begin to lower its key rate, which would allow a recovery in business investment and household housing.
France also wants to boost its growth. Do these two countries have the means to do so?
In macroeconomic terms, fiscal and monetary policies are quite similar in France and the UK. We have, however, had the beginnings of a drop in interest rates on the European Central Bank side, which we do not have for the moment on the Bank of England side. Public debt is approximately 100% of GDP in the UK and 110% in France. Public deficits are between 5 and 6% of GDP in France and the UK. So far, in France and for the new Labour government, there is the objective of reducing debt and deficits without increasing taxes, which raises the question of how to finance more spending that is needed, particularly in the health sector. This is going to be one of the main difficulties for the Labour government.
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