On May 6, the French elected Francois Hollande as their new President, only the second Socialist leader to succeed at the polls under France’s Fifth Republic. Promises of growth instead of austerity, combined with the ever-increasing unpopularity of Nicolas Sarkozy, gained Hollande 52.7% of the French vote.

Francois Hollande celebrates his success at the polls (Zimbio.com)

Looking beyond French national politics, many will be curious to see how the dynamic of the EU’s Franco-German axis, previously embodied in the close partnership dubbed as “Merkozy”, will now shift as a result of Hollande’s election. German Chancellor Angela Merkel formally backed Sarkozy’s campaign and it was their unified determination that drove the tough austerity policies across Europe, spurring on spending cuts, rising unemployment rates and double-dip recessions in member states such as Britain and Portugal. With Merkel’s key ally now ousted and Hollande’s talk of renegotiating the EU fiscal treaty, it is unclear whether the two leaders will be able to reach a compromise between their polarized policies on finding a solution to the economic crisis.

It is becoming increasingly apparent that for the European public, austerity is too bitter an antidote for the EU’s ailing economy. In the Greek elections, held on the same day as the second round run-off in France, anti-austerity parties gained the biggest share of the vote, with New Democracy and Pasok, the parties that had agreed Greece’s most recent bailout deal, failing to win enough votes to form a coalition. With Greece’s government currently locked in a political impasse, the future of fiscal regulation in Europe looks uncertain.

Hollande’s push for growth in his policies is certainly an outright rejection of the current hard-line austerity rules; his policies include using the EU budget to initiate economic growth, for example through projects aimed at improving infrastructure across the continent, as well as creating euro-bonds. He also famously campaigned on renegotiating the EU fiscal treaty that was agreed by EU leaders last year. Hollande argued that this fiscal compact, which focuses on budgetary restraint for member states in an attempt to prevent any future debt crises, should also encourage growth and employment.  However, Angela Merkel, well-known for her staunch support of strict fiscal discipline, insists that that there can be no renegotiation on the fiscal compact. There are difficult decisions to be made; Hollande’s victory could be the start of an entirely different Franco-German relationship with neither leader ready to back down.

A significant feature of the French elections was the success of Marine Le Pen, leader of the French far-right party Front National, who won 17.9% of the vote in the first round. This is a significant increase compared to the 10.4% her father, Jean Marie Le Pen, gained back in 2007. Although Marine Le Pen worked hard to rebrand the party in her campaign, moving away from the racist and in particular anti-Semitic ideology propagated by her father, she is firmly opposed to the euro and continued with the party’s usual nationalist and anti-immigration rhetoric. The fact that she gained almost a fifth of the votes signals a certain malaise within French society concerning the EU and its values. This was echoed in the Greek elections, when the far-right party Golden Dawn managed to gain 21 seats in Parliament. The recent success of extreme right parties in a number of EU member states suggests not just a rejection of Europe’s financial policies but of the European Union itself. In the current economic climate, disenchantment with the EU is swelling and the extreme parties are creeping ever closer onto the political stage.

In a last-minute attempt to gather far-right voters before the second-round vote, Sarkozy delivered a starkly nationalist speech at a rally, claiming that he didn’t want to “let France dilute itself into globalization” and that “Europe has let the [idea of the] Nation weaken too much.”  But Hollande’s victory shows that mainstream French voters are more concerned with the state of the economy than nationalism. Hollande certainly seems aware that his next movements will be under close scrutiny, declaring in his victory speech: “Europe is watching us, austerity can no longer be the only option.” It remains to be seen whether Hollande will succeed in changing the course of the increasingly unpopular wave of austerity measures and be able to influence growth in Europe.

Only actions, not words, can break bones. People can, however, be just as badly damaged by hateful things said about them. So why should not the criminal law be made to protect people as much from malicious words as from physical assault?

I raise this question in light of a common reaction that I have discerned among several North American commentators to news of the recent acquittal by the Danish Supreme Court on hate crime charges of free-speech campaigner Lars Hedegaard.

Read the rest at the Library of Law and Liberty Blog

Street Cred, by Stephen L. Clarke, examines how financial regulations, introduced to protect consumers, have, ironically, been wielded to defend the market position of big commercial banks against new entrants. Clarke uses examples of successful local banks in parts of Europe to show how a rejuvenated local banking sector could more effectively serve British businesses and consumers.

• Full press release
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Brand appeared with Chip Somers, chief executive of drug rehab charity Focus 12. They were adamant that most drug addicts needed compassion rather than criminalisation, but also argued that there was an overuse of substitute treatments (such as methadone prescriptions) in the current drug treatment regime in England and Wales. Somers explained that addicts could too easily get ‘locked’ in to years of addiction by methadone. Many addicts on methadone prescriptions also fail to come off all illegal substances.

So while there may be some initial health advantages to substitute treatments and other harm reduction strategies (reduced use of shared needles, for example), the long-term welfare prospects for serious addicts remains bleak. Instead, abstinence-focussed treatments that encourage users to cease all drug use and deal with the problems that led them to become addicts in the first place offer a lot more promise.

This is one finding of Rehabilitating Drug Policy, a report that we have just released. The report argues that the availability of methadone and other substitutes is one important public health and crime reduction tool; but that by becoming almost a default option both for GPs and clinicians working in the prison system, it has come to be over-used and misapplied in many cases. The evidence increasingly supports an expanded focus on abstinence as a key path to recovery, especially for seriously addicted drug users.

The full report is available here.

The collapse of the Netherlands centre-right coalition government marks the latest in a long line of Eurozone governments to be brought to its knees by the debt crisis plaguing the EU. The implementation of austerity measures proved too much for the government of Prime Minister Mark Rutte, which has been in power since October 2010, and consequently, the future of the fiscal compact has been brought into question.

The demise of the Dutch cabinet appears to be at the hands of one man: Geert Wilders, leader of the Dutch People’s Freedom Party (PVV). The Dutch governing coalition began to unravel when one of the PVV’s MPs, Hero Brinkman, left the party in despair of its leadership. He stated that “I can no longer function in a party that completely centres around one person”. Brinkman has long campaigned for improvements in democracy within the PVV party, which has no members, no internal elections, and no youth movement. It is essentially a one-man endeavour. Until Brinkman’s departure, the PVV party was keeping the coalition government afloat, however, his exit meant that the government’s support diminished to exactly half of the 150 seats in the Staten Generaal, which in political terms is considered an unsustainable minority.

Rutte’s resignation became inevitable over the weekend after Wilders walked away from negotiations on the implementation of austerity measures in the Netherlands, which are necessary under the Stability and Growth Pact. It is a requirement that the national debt must not exceed 3 per cent of GDP, which meant that approximately €14billion of cuts were required in the Dutch budget for 2013. Wilders claimed that these cuts would hit pensioners the hardest and affect growth, and laid blame for the crisis with the EU when he proclaimed “we will not accept to have our people bleed at the hands of bureaucrats in Brussels”. The irony in this statement lies in the fact that, as EU Commission spokespeople have continually reiterated in the face of Wilders’ criticism, the 3 per cent rule was created not by the Commission but by an agreement between all member states at the June 1997 meeting of the European Council in Amsterdam, chaired by the Netherlands during the Dutch EU presidency. Wilder’s antagonism towards the negotiations is reported to come from the fact that he has been denied his demand for a referendum on leaving the euro and re-introducing the Dutch Guilder. Nevertheless, only last week politicians remained optimistic that the parties would reach an agreement on the 2013 budget, a draft of which must be submitted to the European Commission by 30 April, despite warnings from leader of the Green Left party Jolande Sap that “the fate of the country lies in the hands of one man only, Geert Wilders”.

However, optimism soon faded as Wilders abandoned negotiations and withdrew his support for the government. Questions are now being raised about what this political crisis means for the future of the fiscal compact. Rutte will remain in a care-taker role until elections are held, and still needs to prepare a budget to be sent to the Commission by Monday. Nevertheless, the crisis places the approval of the fiscal compact in the Netherlands in jeopardy. Germany insisted on the introduction of the compact to cut borrowing immediately, and it was hoped that this would restore stability to the Eurozone. However it is doing the opposite.

The Netherlands is not the first government to be undermined by the fiscal compact; Rutte is not the first politician to be forced to resign over its ratification. The Greek, Portuguese, Slovakian and Slovenian governments all succumbed to pressures related to the crisis in 2011. However, the Netherlands could not single-handedly derail the ratification of the compact as only 12 of the 17 Eurozone countries need to approve it for it to come into force. Nevertheless, when a core, northern, Eurozone country, the ally of Germany in the pursuit of the fiscal compact, is unable to approve its introduction, it is a damning statement to the rest of the Eurozone, particularly those members that are less financially stable than the Netherlands and those that have been more wary of the fiscal compact.

With Francois Hollande’s policy of renegotiating the fiscal compact seeming ever more popular in France, as his defeat of Sarkozy appears a distinct possibility in the second round of the presidential election in two weeks’ time, the people of Europe are clearly unimpressed with the EU’s approach and are standing up against austerity measures. And at the front of them is the apparently most influential man in the Netherlands right now: Geert Wilders. As Maxime Verhagen, the leader of the Christian Democrats in the Dutch coalition, remarks, “the hope for a strong response to the crisis has been drilled into the ground by Wilders”. Unfortunately, this may be true not just for the Netherlands, but for the entirety of the Eurozone.

Gift Aid

Tax relief on charitable donations uses a scheme called Gift Aid. The HMRC self-assessment guidance explains how Gift Aid donations are treated.

Claiming back higher rate tax
If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 50 per cent and the basic rate of tax 20 per cent on the total ‘gross’ value of your donation to the charity or CASC.
For example, if you donate £100, the total value of your donation to the charity is £125 – so you can claim back:
• £25 – if you pay tax at 40 per cent (£125 × 20%)
• £37.50 – if you pay tax at 50 per cent (£125 × 20%) plus (£125 × 10%)

So the donation is £100, the tax relief, given to the charity, is £25 and the tax relief to the donor is £37.50. The reasons for these precise amounts are not obvious. Compare a basic-rate donor with a top-rate one.

One might expect the gross donation to be twice the net. In fact, the gross donation is £125, and the charity gets it all. The odd part is that the net donation, the discretionary amount that the donor chooses to devote to the charity, is actually £62.50, not £100. The donor effectively gets full relief on a smaller donation. Whether higher- and top-rate donors know that they are expected to scale up their donations by as much as eight pounds to five is uncertain.
On this basis, there is no difference between the basic-rate taxpayer and the top-rate tax-payer. Both allocate money to the charity out of their gross, untaxed income. The charity gets it all. The top-rate payer gets more relief, but only after having more tax demanded in the first place. The top-rate payer also has to wait to get reimbursed for some of the contribution, but this is a minor consideration.

Differences

But differences there are. In terms of disposable income, the basic-rate taxpayer has to find £100 for the charity to benefit by £125. The top-rate taxpayer has only to find £62.50. Where a donation brings tangible benefits to the donor, those benefits that still qualify for relief are not taxed, but are purchased out of gross income.

Benefits to the Donor

The Royal Academy of Arts recognizes some of this in its Patrons scheme. ‘Silver’ Patronage costs a minimum of £1,500 per year. Patrons are offered a programme of events and exhibitions in return but the Academy declares the benefits to be worth £600 commercially and therefore not eligible for Gift Aid. But if a donor especially wants the extra benefits of ‘Gold’ membership, the £4,000 Gift Aided donation requires a lower rate taxpayer to forgo the full £4,000 of post-tax income and pay £600 of National Insurance, the top-rate counterpart does without £2,500 and pays NICs of £100.

National Insurance

Since there is no equivalent of tax relief for National Insurance contributions, the basic-rate payer normally has to find more money than the higher-rate payer. Tax reliefs are generally at the marginal rate. At top-rate tax levels, the marginal rate of National Insurance is only 2 per cent. NI calculations are seldom simple, but the difference is fully ten per cent of the gross income.

Improvements

Is there a way out of the Chancellor’s tangle? The biggest actual discrepancy surrounds National Insurance Contributions. Raising the rate of NICs for earners in the upper tax bracket would allow the Chancellor to keep the rates of charitable relief intact while asking the richest to pay more to the Exchequer.
A more visible change that would make paradoxically less difference to donors and charities would be to alter to the definitions of net and gross. Instead of reducing the donor’s contribution by a reimbursement in the tax return, the top-rate donation as paid to the charity could be treated as the net donation.

The charity claims 25 per cent relief on top, as now. Then at the time of the tax return, HMRC could pay further relief to the charity, so that the net donation plus the two reliefs amounted to the gross earnings. In 2011/12, a payment of £100 is reduced to a net £62.50 to match a gross donation of £125. Under this suggested change, a payment of £100, taken as the net, is grossed up to £200. (At the new 45 per cent top rate, it would be £182 gross, but the illustration is complicated enough already.) It takes away the apparent injustice that HMRC return money to top-rate tax payers, which has already confused at least one commentator. As now, it is not the donors that enjoy the tax relief, but the charities.