The end of the Welfare State as we know it?

President Macron can't hide from his troubles (WSJ)

The end of the welfare state as we know it?

Having just spent time in France, it seems to me that the French state's financial problems are even worse than the UK's. 

According to Françoise Fressoz of Le Monde newspaper, "We have all become totally addicted to public spending. It's been the method used by every government for half a century – of left and right – to put out the fires of discontent and buy social peace."

"Everyone can sense now that this system has run its course. We're at the end of the old welfare state. But no one wants to pay the price or face up to the reforms which need to be made."

I think that sums up very neatly the near impossible challenge faced by France, UK and most well established democratic countries. 

Working People Pay Pensioners More

"French pensioners are making more than the average wage. The Organisation for Economic Co-operation and Development puts France as the only developed country where average incomes for the over-65s are higher than for working-age citizens.

The average income for over-65s in France is about 1 per cent higher than it is for workers, after taking into account taxes and other social contributions, according to analysis by the Financial Times of figures from the OECD group of advanced economies and the Luxembourg Income Study, a not-for-profit group.

The state pension can pay as much as €23,184 (£20,135) a year in France, while in the UK the full new state pension pays £11,973 a year, going up 4.7 per cent to £12,535 next year, in line with average wage growth."

"France’s pension spending accounts for nearly 14 per cent of its GDP, compared with 5 per cent in Britain. France spends more than €400 billion (£347 billion) a year on pensions."

The Times September 17th 2025

How incompetent are our governments when they changed the pension source from each individual creating a future funding pot to to a system where today's workers fund today's pensioners. That released that valuable future pot which got spent and left us in an unenviable situation where today's workers can't afford to fund today's pensioners! Another example of short term-ism to win the next election regardless of the consequences.

So we know that the big problem in the UK, France and many other countries is that we can no longer afford to fund state services. The state is living beyond its means and it literally cannot continue. The two big ones are welfare and pensions, both far far more generous than our states can afford. As Margaret Thatcher once said "The problem with socialism is that you eventually run out of somebody else's money". And the failure of successive governments to act means we are reaching that point. The economy is not growing fast enough to make up for all the extra spending.

So what is the answer?

The solutions are: reducing expenditure, increasing taxation and growing the economy. We will need to do all three. In spades. We will have no choice. But any government that really goes to town on this will be voted out. That's the dichotomy!

Quote of the Month

"Almost everything that I dislike about the right in America, and here and in Europe, I can say is probably the fault of the left..... The left's greatest sin - and I say this as a sort of leftist - is that it would rather be right than effective."

Stephen Fry at an interview on Triggernometry, December 2024.