French left is too divided to soak the rich

Trip advisor. The electoral platform of France’s leftist parties seems to worry business types as much as the programme of Marine Le Pen’s far-right party Rassemblement National. Its soak-the-rich approach may look like a nightmare to wealthy people. But the plans’ detachment from economic reality, and deep divisions within the left, mean the 1% doesn’t need to lose much sleep.

The intricacies of French politics suggest that the coalition of hard- and centre-left parties contesting the elections on June 30 and July 7 under the “New Popular Front” (NFP) banner is unlikely to form the next government. It could still win the second-largest share of the vote, behind RN’s 34%, according to opinion polls.

If it wins, the NFP promises to increase public spending as soon as this year by around 25 billion euros to pay for, among other things, a 10% pay raise for civil servants and the repeal of President Emmanuel Macron’s pension and unemployment benefits reforms.

Other proposed measures, such as raising the minimum wage by 14% and capping the price of energy and “essential items”, would also hurt government revenues. They could cost a combined 43 billion euros in reduced social contributions and taxes as well as compensation for energy producers, the Institut Montaigne think tank noted.

Initiatives such as hiring more teachers and increasing social transfers would take the extra spending to 100 billion euros by the end of 2025, according to the NFP. In the longer term, total additional spending could reach 150 billion euros – or 5% of GDP.

The coalition proposes funding that through massive tax hikes. France does have scope for raising income or capital gains taxes. It only taxes income at the top rate of 45% above 177,000 euros, for example. In the UK, the same top rate hits at around 148,000 euros. But the NFP wants to introduce 10 more income tax brackets above that level. It also plans higher levies on wealth, inheritances and vaguely defined corporate “super profits”.

That package would raise 100 billion euros in extra tax revenue by 2025, assuming the tax base remains unchanged. But individuals and companies might soon find loopholes to “optimise” their tax situation, or, more radically, move abroad. That would shrink the expected revenue.

The exile may not be worth it. The NFP can barely hide the wide differences between its realist, pro-European socialist wing, which has government experience, and its far-left component. Whenever the French left has won power – in the early 1980s, the mid-1990s, and 12 years ago when socialist leader Francois Hollande was elected president – it took only a few months before far-left ministers were marginalised. After their initial frisson, the French rich may want to wait before packing their bags.