Frangleterre… Labour Mobility undermines Tax and Spend regimes

Pimlico Plumbers will be a familiar brand to many readers – it has a prominent advert on the approach into Waterloo station. But the company is now calling for plumbers who are fluent in both English and French, and says applicants will be interviewed by a native French speaker. This is just the tip of the iceberg. The original French school in London, the Lycée Français Charles de Gaulle in South Kensington, has been around for many years. Recently, however, it has opened new outposts to meet rapidly rising demand. Entirely new French schools are springing up across the capital.

London is now on the verge of becoming the fifth largest French city, measured in terms of the number of native speakers of the language. To all intents and purposes, London elects a member of the French National Assembly. The constituency covers the whole of the UK, Ireland, and parts of Scandinavia, but the bulk of its electorate lives in London.

Intriguingly, the French MP is a member of the Socialist Party, although she admittedly won by a fairly narrow margin. Cynics may say that it is easy to vote for a tax and spend policy when you do not have to pay. Large parts of the UK have conformed to this model for many years. But the election result suggests that London attracts two distinct groups from France. The sudden surge of French interest in London is undoubtedly in part due to President Hollande’s punitive tax regime on those who are already successful. Equally, however, there has been an influx of young people, who still retain what some would call political idealism and others naivety. Yet the fact that they are here, improving their English, making themselves marketable on an international scale, means that they are the tax base of the future, a dynamic element of society.

The key point is that talent, whether realised or still just potential, is now mobile on a scale unimaginable to previous generations. Combine this with another fact. HMRC now estimates that 30 per cent of all income tax is paid by just 300,000 people, less than 1 per cent of all taxpayers. The premium now placed on skill, and the resulting widening of the income distribution, is a key driver of this outcome. Rising income inequality is not just a feature of Anglo-Saxon economies, but a worldwide phenomenon.

These two developments call into question the long-term viability of the post-Second World War social and political model in Western Europe, based as it is on a state which actively redistributes resources on a large scale.

There is a tremendous ongoing furore about multinational firms avoiding tax, even though for the most part this is perfectly legal. But if governments are sufficiently resolute and willing to act in concert – a big “if” – something could be done about it. Short of building barbed wire fences on borders and bringing in the old Soviet system of internal passports, however, people can always move. And it is the taxpaying base, the dynamic and the successful, that has the greatest ability to do so.

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