Historic clean sweep for French President highlights weaknesses in UK energy policy

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By Bob Duncan

Recently elected French President Francois Hollande tightened his grip on power yesterday as his anti-austerity Socialist party and its allies won an absolute majority in this weekend’s parliamentary elections.

Hollande and his allies claimed 314 seats in the 577-member National Assembly (the lower house of the French parliament), according to early results confirmed by the French Interior Ministry.  Turnout in the second and decisive round of legislative elections was 56 percent.

It is the first time the Socialists alone have held the National Assembly in 30 years, not since the days of Francois Mitterrand, and it underlines once again that across Europe people are turning against the austerity agenda.

Former President Nicolas Sarkozy’s conservative UMP party, now leaderless, experienced its biggest losses since 1981, winning just 229 seats.

The results signal a clear French shift to the left, bolstering Hollande’s position to push through an anti-austerity agenda after years of government budget cuts.  Moreover, they represent a ringing endorsement of the growth-led policies which Francois Hollande has outlined.

“With a new, solid, large majority we can pass laws for change,” said Foreign Minister Laurent Fabius, adding “It gives us great responsibilities both in France and in Europe.”

Last month, Hollande said he wanted to balance the need to reduce the debts of European governments with efforts to stimulate growth.  This differs markedly from the recent decision of the UK government to continue with an austerity only programme, despite increasing calls for new measures to promote growth.

The prime minister, Jean-Marc Ayrault, said from this point on France will be fighting “to re-orient Europe towards growth, protecting it from speculation”.  The task ahead, he conceded, “is immense”.

The outright victory of the Socialist party and its allies gives them complete control of both the Senate and the lower house, allowing Hollande to push through legislation without the need to compromise.

Proposed reforms include an increase in the minimum wage, a partial return to retirement at the age of 60 and an increase in the value-added tax on goods sold in stores.  The government has also vowed to slap a 75% tax on incomes above €1 million (approx £803,000) and raise taxes on the revenue of large fortunes.

Hollande has already introduced some of his programs, which are centred on growth and spending, rather than austerity, reversing the policies of Sarkozy’s administration.  They include a “covenant for growth” of €120 billion worth of measures to stimulate growth in Europe, including developing renewable energies and biotechnologies.

Prime Minister David Cameron’s pre-election gaffe, when he snubbed Mr Hollande, may make it difficult for UK projects or businesses to take advantage of this growth covenant, isolating the UK still further from the rest of the EU.

In addition, it is now expected that French energy giant EDF will pull out of plans to develop a new generation of nuclear power stations in England, preferring instead to concentrate on the French domestic market, and on renewables in particular.

Chairman of the influential energy and climate change committee and former Tory cabinet minister Tim Yeo said that David Cameron must speak to his French counterpart, Francois Hollande, in order to decide what conditions are necessary for the state-owned French utility to fulfil its planned investment, following EDF’s downbeat report on the prospects for a new fleet of reactors in the UK.

“This is something that can only be done by the heads of government of Britain and France,” said Yeo. “There may need to be special arrangements for nuclear [separate from the regulation and subsidy of other forms of power].  Given the size of this investment – billions and billions, with a return on investment coming well into the 2020s – this has to involve the heads of government.”

This measure too, however, seems less likely to be successful in the light of Mr Cameron’s unhelpful recent history of dealing with the new French President.

Planned reforms for the UK energy sector by the UK government, laid out in a recent government paper, have come under fire from some energy companies as a veiled subsidy for nuclear power.  However the payments the nuclear industry would receive, from increases in domestic bills, are required in order to ensure the long-term certainty over policy that would be needed to make the large investments in nuclear power worthwhile.

Yeo’s call came as the head of one of the UK’s biggest investors in renewable energy, Scottish Power, warned that the UK was increasingly being seen as a risky place to invest in wind power, because of government meddling with established subsidy programmes.  He said the problem could result in higher prices for wind projects, putting off investors and imperilling the UK’s climate change targets.

Keith Anderson, chief corporate officer at Scottish Power, said: “The current delay in finalising this agreement is resulting in a number of very unhelpful rumours and speculation about last-minute political intervention potentially leading to this evidence based outcome being overridden.

“If correct, this could set an unwelcoming precedent for the UK energy sector and potentially have an adverse effect on investor confidence at a critical time for the UK energy industry.

“Up until now, we have prided ourselves in not having to factor in political risk to our UK investment decisions, but perhaps it is something we may need to consider in the future as we seek to invest billions of pounds in offshore, onshore and marine renewable energy projects.

“We want to help the UK achieve its carbon reduction targets, and to do this we need certainty and consistency in energy market regulation.”