There follows a period of political chaos, shaken by repeated General Elections and coalitions, during which the new party goes from strength to strength, exerting pressure on the mainstream. Eventually it gains power, and make changes that define the social contract for the next 80 years.

Prophecy? No: history. The name of that party, adopted 120 years ago, was Labour. But even if history doesn’t repeat itself, it does seem to be rhyming. Except, this time, Labour are the incumbents, and the insurgents are snapping at their heels: this week a shock poll revealed that among trade union members, as many now support Reform as Labour. 

Trade union members. Labour was literally founded by trade unionists. The whole point of Labour, then the insurgents, was to give a voice to working people excluded from the political process. So what happened? Why does “labour” no longer vote Labour? The story is complicated, but perhaps the central underlying change is that the kind of “labour” that drove the emergence of Labour simply isn’t the political force in Britain that it was in 1906. 

The industries have gone. So, too, is the empire that supplied raw materials for those industries, and a ready market for the finished products. And in the aftermath of this disintegration, the industrial working class that once organized, mobilized, and founded a political party has fractured into multiple interests. In turn, some of these are as under-represented now as the industrial working poor was in 1906 — but for radically different reasons. 

When the “Labour Representation Committee” met for the first time in 1900, they really were giving a voice to the voiceless. At the time only around 60% of adult men could vote, and the poorest workers had no direct political representation. Meanwhile, living and working conditions for this class were so grim as to prompt national concern about public health.

The Labour Party was founded to be that voice. Their organizing principles, leadership, and initial funding were drawn from already well-established trade unions, and set out to provide representation for Britain’s working class. The party succeeded, and its arc transformed the country: devising, institutionalizing, and finally outliving an entire template for national solidarity.

Its grand, historic triumph was the welfare state. Social housing, unemployment benefit, and — centrally — the National Health Service all came together first as campaigning causes and then, after two world wars, as a comprehensive vision. All was facilitated by the increase in administrative capacity occasioned by total war, and energized by the cooperative effort and sense of common, national purpose engendered by the struggle. 

But the same wars that created that capacity and reservoir of goodwill also ended the British Empire, which was the larger economic unit on which our national industrial model was based. The replacement of “imperial preference” by the US-led GATT began to chip away at industrial profit margins. Over the same period, the postwar Labour government nationalized key industries in the hope of preserving them for the public good rather than the benefit of a few plutocrats. That in turn empowered the unions, who agitated for better pay even as Britain’s entry into the EU began to bleed factories away to cheaper European countries.  

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By Mary Harrington

Matters came to a head in the late Seventies, in the Winter of Discontent: a high-point of industrial action, and a low-point for functioning government. Public patience with nationalized industry and over-mighty unions ran out. Margaret Thatcher was elected; and by dint of privatizing swathes of industry, and closing the mines, she broke the unions and opened a new national chapter.  

Her interventions were socially costly, miring some parts of the country in deindustrialization, poverty, and despair even as they aided other parts of the economy to get moving again. And yet through all this the overall postwar social contract established by Labour more or less held, and has continued to hold. Everyone pays taxes according to their ability; anyone who needs help can receive it. Political debate is mostly about the fine detail. 

But a central effect of the transformation Thatcher wrought was to tilt Britain — including its working class — ever further from the industrial economy for which the welfare state was founded. In the process, the funding, administration, and scope of welfare have grown ever more politically problematic. 

Who is the “us” for which this solidarity is available? On what basis? This question has grown harder to answer among the people whose interests were, historically, given coherence and voice by Labour, as that class has evolved since the end of Britain’s industrial era. Now, a once cohesive, unionized, industrial proletariat comprises a multitude of sometimes contradictory economic and political subgroups. Many work in the public sector or for the “Blob” that, despite Maggie’s complaints, has mushroomed since her day and is now the strongest bastion of trade unionism, and directly or indirectly state-funded. Others bought their social houses, became prosperous, and joined the aspirational classes; these, along with those self-employed as tradesmen, have often been transformed by years of filing their own tax returns into fiscal conservatives. 

Others again, especially in the de-industrialized Midlands and North, languish on welfare, or struggle in the gig economy. There are countless other pathways too. But identifying a common political interest among them has grown increasingly difficult. Accordingly, Labour has sought to triangulate a new political coalition: now Labour’s “people” are (among others) bourgeois progressives, public-sector workers, students, ethnic minorities, welfare recipients, plus a tribally Labour rump of the old industrial working class. Where internal contradictions appeared, these were papered over by people, especially the latter group, having no other viable political vehicle. 

But this coalition doesn’t look as though it’ll hold much longer. For one thing, parts of the coalition now do have other places to go. But for another, the political measures now required to sustain Labour’s flagship political achievements are on their way to destroying the solidarity on which those achievements were predicated. Labour was founded, with justice, to give political representation to a class whose conditions were miserable and voice non-existent. Its greatest victory was the postwar welfare state, which continued — even after the demise of the industries that gave rise to it — to set the template for how a civilized modern country should take care of its own. 

But now the strain is showing. Falling birth rates have shrunk the working-age tax base, meaning taxes have to rise just to keep services at the existing level. This has begun to prompt increasingly sharp questions about value for money, not to mention intergenerational justice. To mitigate this, successive governments have sought to replenish the tax base and boost nominal GDP via inward migration. And even if this had, for a while, something like the desired economic effect, it also depressed native wages, especially at the lower end of the scale.

Meanwhile, policymakers who pursued this strategy didn’t take into account the attenuating effect that rapid demographic change would have on the sense of collective solidarity upon which the whole postwar welfare state was premised. The sociologist Robert Putnam showed that the greater the “diversity” within a community, the less civically engaged it was: less volunteering, fewer voters, less charity donation and fewer community projects. His findings have been disputed, but the point is an intuitive one: if a welfare state is about taking care of “our own”, you need to be able to define “our own”. 

But the modern Labour Party, perhaps as a byproduct of the post-industrial coalition it embraced, can no longer answer the question: who is the “us”, for whom social solidarity should be defined and sustained? Who is “our own”? In these formless conditions, then, the contract that Labour created for the country is showing signs of implosion. Meanwhile, those with the most to lose from the end of a cohesive “imagined community”, the lumpenpetitbourgeoisie that evolved from the Old Labour working class, are among the angriest about its perceived dissolution, into GP waiting lists, petty crime, high street money-laundering, two-tier everything, and all the mutinous rest of it. 

Anecdotally, if I had a pound for every mutter I’ve heard from people who would once have voted Labour, about how our taxes mostly seem to fund seaside holidays for Afghans, I’d be able to fund my own week away in Cromer. In the end it probably doesn’t matter how often the idealists repeat that asylum is a trivial cost, relative to adult social care, or that it’s not that many sexual assaults. Perception matters for public consent to taxation. And the public perception is, increasingly, that the “us” is paying the taxes, but the solidarity is directed elsewhere.

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Of course, none of this is to blame law-abiding migrants, all of whom surely just want to get on in life. But it adds up to a situation in which public enthusiasm for the postwar social contract is up against a shrinking tax base, in a population on its way to being so multicultural that national solidarity as such is now unimaginable save to those who depend economically on the state, are rich enough not to feel the pinch, or else wildly idealistic about a community of all humanity. 

Perhaps unsurprisingly, those still supporting Labour typically fit this description: public sector workers and welfare dependents, well-off lefties, and a rump of true believers. But even this latter group is increasingly defecting to the open-borders Green Party. Meanwhile, now, the other lot — the Old Labour voters Labour so long took for granted — also have somewhere else to go. Among those now thoroughly disillusioned by Labour’s refusal to define “us” with any clarity or purpose, many — even, it appears, among those still active trade union members — are going. 

That “somewhere” is an unknown quantity, led by a man considerably longer on charisma than attention to detail. It’s a caucus that’s faced accusations of dodgy funding, and which is accused from one side of being a Roman salute away from full-fat Hitlerism, and from the other of being the “Uniparty” in a teal-colored tie. But it’s also, as plainly as was the Labour Party in 1900, giving a voice of sorts to a currently voiceless political constituency. 

History doesn’t repeat. But, sometimes, it does rhyme. If either side of Reform’s critics turn out to be right, the lumpenpetitbourgeoisie are in for a bitter disappointment. Even if the critics are wrong, I doubt this group will exactly get their small-c conservative wish, of an “us” that’s once again solidaristic and cohesive, just like after the two wars. But either way, I think eventually a version of this political caucus will do again what the Labour Party did before, for better or worse: rewrite the social contract. 

What was remarkable, however, was an unexpected cri de coeur from the Prime Minister in the days before the confidence vote that ousted him. Bayrou had tried, and failed, to balance the books. Even the threat of an IMF takeover hadn’t helped. With little left to lose, Bayrou declared that the winners in French society have been the baby boumeurs. On live TV, two weeks before the confidence vote, he called them out for their selfishness. The next morning he likened French workers to slaves, arguing that France will be “forcing them for decades to repay the loans lightly decided upon by previous generations”. 

Plus ça change, you might say. Fiscal profligacy and debt have long been a French forte. To find France’s last balanced budget, you would have to go back to 1975, 50 years ago. But with the deficit estimated at 5.4% of its GDP in 2024, its debt at 114% of GDP, and Greek bonds now outperforming French ones, France is living beyond its means. And this splurge of public money is not reflected on the ground. French growth, at 0.6%, is sluggish. Domestic consumption is flatlining and investments are being held back. There is no engine in the French economy.

So where’s the money going? The Left has blamed supposed handouts to heavily taxed French companies. Marine Le Pen sees immigration as the big fiscal drain of our time. But anyone who takes a cold look at the raw numbers can spot the issue: a quarter of all public spending in France goes towards pensions, well above the EU average. At roughly €420 billion per year, this is by far the French state’s largest category of spending. It is comfortably more than what France spends on its education, defense, security, transports, research, justice and infrastructure combined. To put this in context, France’s pension spending could fund 30 new Channel Tunnels per year, or all of China’s military spending for around 300 days. A single minute of France’s pensions spending could comfortably fund even the most lavish state summit at Versailles. 

Worse still, pension spending keeps rising. In 2024, France increased pension spending by another €14 billion in 2024, just to keep payouts in line with inflation, despite the government scrambling to find billions in cuts elsewhere. And this was far from a one-off occurrence: of the €1 trillion of additional debt taken on during the Macron presidency, half can be traced back to pension spending. 

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None of this was the intention of the architects of France’s pension model, which was set up in the immediate aftermath of the Second World War. The scheme relied on mandatory contributions that, in theory, constituted a “deferred salary” for when you retire. In practice, 28% of the total labor cost of a working-age French citizen goes towards pensioners. Taxpayers can only hope the next generation will be able to do the same. 

Back then, when the scheme was founded, there were four to five working-age Frenchmen for every pensioner. Now, that ratio has fallen below 2:1, and will only get worse in the years to come. The boumeurs, in other words, paid into the system when there were plenty of workers per pensioner, and are now enjoying its benefits at the expense of a diminishing workforce. And their pensions are but one example of the boumeurs’ unparalleled run of generational luck. Having enjoyed cheap housing when house-building rates were high and net migration low, the boumeurs are much more likely to own property. They have also enjoyed targeted tax cuts and other benefits. As a result, their disposable income outperforms the national average, a first time in French history and an international oddity. 

Emmanuel Macron, who will now have to form a new government, had tried to tackle pensions. When he was elected in 2017, he marginally increased taxes on pensioners. In 2019, he put together a plan to simplify the pensions system, eventually giving up during the Covid pandemic. In 2022, he increased the legal retirement age to 64, weathering massive protests. But he has never offered a true challenge to pensioners, not least because he owes his presidency to the grey vote. In 2022, 69% of 65+ year-old voters backed him over Marine Le Pen, while Le Pen edged him in the 18-34 category. 

The boumeurs have carried out a generational coup, but it is one that has largely gone unchallenged by the rest of the population, despite the burden on their paychecks. There are, of course, dissidents: some of these are economists, while others are X activists. These online posters have made into a global meme sensation the archetype of the head-in-hands millennial Nicolas, 30 ans, paying for the glass-clinking pensioners Bernard and Chantal, as well as the immigrant Karim. “Nicolas qui paie,” the catchphrase goes.

But the activists are the exception. Largely oblivious to where their taxes are going, French millennials provide little incentive for politicians to speak up for Nicolas against Bernard and Chantal. In 2024, when asked by pollsters which parts of public spending should be axed, 32% of the respondents went for family subsidies, 30% for unemployment benefits, and only 6% chose pensions. Perhaps the remaining 94% retain the deluded hope that they, too, will be able to enjoy the largesse of taxpayers when they retire.

Despite the divisions of French politics, then, there is one point of unity. Every single political party is terrified of touching the sacred cow of pensions. When Michel Barnier, the previous prime minister, pushed to have pensions only partially indexed on inflation — rather than bound to it — he was toppled by Le Pen. For now, her National Rally party is very happy to continue making inroads into Macron’s gray vote. With pensioners making up 35% of the electorate — as well as being the cohort most likely to vote — few politicians have a shot at ultimate power without them. 

Time and again, voters have reminded politicians to keep the taps on. In 1981, they elected the socialist President François Mitterrand, who dropped the retirement age from 65 to 60. It’s taken 40 years and hundreds of protests later for France to increase it painstakingly to 64. In 1997, the French voted for the Left and the 35-hour legal work week. 

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Is this the end of the Fifth Republic?

By Richard Vinen

The longer the system persists, the more absurdities emerge from it. In the public sector, where salaries have been largely frozen for more than a decade, you often hear of situations where senior retired bureaucrats earn more in inflation-adjusted pensions than their waged successors. In education, French teachers are very poorly paid by European standards. Where is the money going? Pensions again. The state artificially props up the total employment cost it pays for teachers only to send the difference to cover for pensions. Everywhere you dig into France’s public spending, you find more hidden pension spending. Thanks to these artificially pumped up social contributions — which go towards former soldiers’ pensions — France’s Ministry of Defense can claim it reaches Nato’s 2% of GDP target. France’s pensioners unintentionally saved their country from Donald Trump’s wrath.

Less amusing for attentive French taxpayers is the reality that pensions spending has got so far out of control that public debt is now used not to pay for tomorrow’s investments but to subsidize the comfort of yesterday’s workers. And it is indeed comfort that is often being paid for, rather than actual need. In 2024, two-thirds of the increase in French savings were made by pensioners. Those aged 70 or over save, on average, 25% of their income, whereas 30 year olds only save 9%. These inequalities between generations pave the way for inequalities within generations, between those who will inherit and those who won’t. And the latter will see the rungs of the property ladder glide further out of reach.

Tragically, those inheriting property will do so, on average, in their 50s or 60s: too late to have a family, but only a few years before they, too, retire. Rinse, repeat. Many economists on the Left call for higher taxes on inheritance, but in the meantime the flow of transfers from the active population to the inactive continues. Inheritances and other financial transfers are expected to reach 20% of French GDP by the end of the next decade.

The French economy, as well as French society, is full of distortions created by the pensions gravity wall. Because their employees are so heavily taxed, French companies struggle to hire, and are therefore rendered less competitive. Meanwhile, the cost-of-living crisis, worsened by this high tax rate, has dragged fertility into a nosedive. Only a decade ago, it was at replacement rate. This decline in fertility will make France’s pension model even less tenable in decades to come.

This is not to say that pensions are the sum of all of France’s problems. The French economy in general is over-regulated, while uncontrolled immigration is applying further pressure to France’s social contract. But it is inescapably true that at the heart of France’s dismal fiscal situation is the matter of pensions.

At some point, the warning lights will be succeeded by sirens. Perhaps intervention might be necessary. Credit rating agencies have either downgraded France’s credit ratings or given a negative outlook for future ratings. In a desperate last attempt to keep parliament on board, Bayrou’s economics minister warned that toppling the government could have the IMF knocking at the door. For now, that is an unlikely scenario, but that doesn’t mean that France isn’t in trouble. When the next global crisis arrives, France will have to deal with it with very limited fiscal firepower. Come the next global technological revolution, France will have little fiscal space to invest. Even now, France’s dismal fiscal situation hamstrings Macron’s ability to fully lead a new era of European defense, despite his having laid the political groundwork for this kind of cooperation.

In 1991, one of Bayrou’s predecessors as prime minister, the Socialist Party’s Michel Rocard, prophesied that, in the years to come, the French pensions problem would be enough to topple five or six governments. Under Macron, in the last eight months alone, two already have fallen over that very issue.

And yet something has changed: never has a politician been as frank with the electorate about the pensions black hole, and its mode of intergenerational extortion, as Bayrou has been. In his last words to the National Assembly on Monday, he doubled down: “We have broken the bond of trust between generations, the very foundation of the social contract. Young people feel like a sacrificed generation, trapped in a form of servitude from which they must be freed. True awareness also means that older generations should come together to ease the burden of debt that the young will one day have to repay.”

It remains to be seen whether this last act of panache will be seen as a genuine cri de coeur or the ravings of an old politician on the eve of political retirement. Short of Macron calling yet another snap election and somehow winning a majority — based on current polls, he would most likely lose dozens of seats — the next prime minister will be in charge of another minority government and France’s fiscal situation will continue to slide.

And yet, while the situation is critical, it is not fully urgent. France can still afford a few more rating agency downgrades. Its cost of debt is rapidly becoming the highest in Europe, but, given that inflation still outpaces interest rates, the French state can still borrow. The French economy will continue to stagnate for years until it hits a serious fiscal wall or major economic crisis that would force the country to make massive reforms or sink.

So as long as the water boils slowly, the frogs might not know yet that they are being irreversibly cooked. Just enough time for France’s boumeurs to continue to reap the rewards of their generational coup.

Uber never seems to be out of the courts. In America, eleven cases are currently sitting with the 9th US Circuit Court of Appeals. In the UK, the ride-hailing company looks set for a trip to the Supreme Court in its fight against a tribunal ruling that its drivers should be classified as workers.

The plight of gig workers has become the cause celebre of workers’ rights. Greedy gig platforms are condemned as the modern-day equivalent of the exploitative factory owners of the industrial revolution. Sick pay? The minimum wage? Bargaining rights? Not for the ‘gigger’. Instead there’s flexibility and control – which, the companies argue – is why people sign up.

The CitySprint case was brought by a single employee, but as with those against Uber, the implications are sector-wide. As this model matures, the relevant companies will need to make changes. The greater concern should be the spread of gig-style labour models to non-gig work – and we’re already seeing that happen.

The gig economy works for the many

Companies arguing that workers want flexibility are not wrong:

• Detailed research by the RSA think tank found that more than half of UK gig workers viewed the work positively, citing advantages like flexibility or decent pay; and 63% of current workers agreed that it allowed them to have more “control and freedom over when they work”.[2. Brhmie Balaram, Josie Warden and Fabian Wallace-Stephens, ‘Good Gigs. A fairer future for the UK’s gig economy’, RSA, April 2017]
• A McKinsey report looking at America and Europe found that the majority of gig workers are independent contractors by choice.[3. .‘Independent work. Choice, necessity and the gig economy’, McKinsey Global Institute, October 2016] They also found that for every worker whose primary earnings are from contracting, but would prefer a traditional job, more than two traditional workers would like to become independent contractors.

The controversy engulfing the gig model risks undermining what makes gig work so attractive to so many.

And it risks ignoring the broader benefits that disruptive app-based companies such as Uber, TaskRabbit and Handy are delivering – making services cheaper and more accessible for consumers; directly connecting service providers with their market, in real time; and lowering the barriers to entry for people seeking employment, particularly for young people.

The benefits of removing the middleman shouldn’t be underestimated. There are now gig platforms for social care workers, supply teachers and health workers, cutting out the agency fees and paying higher wages. These are people who are better off because of the advent of gig platforms.

This is not to say that greater protections for workers are unwarranted. While a majority of gig workers are actively choosing that model of work – often supplementing other sources of income – a good chunk, estimated at just over a quarter in the UK and US, do so out of necessity. That is, they can’t find sufficient ‘regularised’ work elsewhere.

And while many gig platforms have developed in sectors that were already heavily skewed towards self-employment (something critics conveniently forget), that doesn’t mean action shouldn’t be taken to raise standards – particularly when more and more people are working in this way. Plus, strictly speaking, there is a difference between being self-employed, running your own enterprise, and being an independent contractor working for a single company.

A review of “good work”, commissioned by the UK government and triggered by concerns about working conditions in the burgeoning gig economy, argues the onus should be on the companies:[4. .‘Good work: the Taylor review of modern working practices’, 11 July 2017]

“The best way to achieve better work is not national regulation but responsible corporate governance, good management and strong employment relations within the organisation, which is why it is important that companies are seen to take good work seriously and are open about their practices and that all workers are able to be engaged and heard.”

The RSA recommend a ‘Charter for Good Work in the Gig Economy’, a collaboration between government, companies and representative bodies to agree a set of standards that value workers.[5. Brhmie Balaram, Josie Warden and Fabian Wallace-Stephens, ‘Good Gigs. A fairer future for the UK’s gig economy’, RSA, April 2017] As the gig economy grows, putting more traditional employee-based firms out of business, and disrupting new industries, it’s right that businesses take seriously the economic and social security of their workers – contractors or not. A Charter would be a good place to start.

The greatest challenge, however, is the threat of the gig model being bastardised by unscrupulous businesses looking to increase profits at the expense of their workers. As a joint report by two UK parliamentary committees this week put it: “willingness to exploit workers should not be a competitive advantage”.[6. .A framework for modern employment, Second Report of the Work and Pensions Committee and First Report of the Business, Energy and Industrial Strategy Committee of Session 2017–19, 15 November 2017]

It’s called the gig economy for a reason – workers get paid for discrete ‘gigs’, like hanging a picture, developing an app, cleaning a flat; and they perform multiple gigs for multiple clients. That’s why it’s a form of self-employment. And why self-employment and employment are treated differently. Blurring those lines to cut costs is a cynical move that makes a mockery of the age-old ‘social contract’ between business, workers and the state.

We can already see it happening.

Take budget airline Ryanair for example, recently in the news for cancelling thousands of flights. Ryanair uses ‘self-employed’ pilots, thereby enabling them to avoid employee-related taxes and benefits.

Writing in The New York Times Liz Alderman and Amie Tsang report on conditions at Ryanair similar to those experienced by gig workers at companies such as Uber and Deliveroo: pilots and crew say they only get paid for flight time, not preparation; their hours are not guaranteed; and they have to cover their own, unavoidable, expenses such as hotels and transport, even their own uniforms.[7. Liz Alderman and Amie Tsang, ‘Jet Pilot Might Not Seem Like a ‘Gig,’ but at Ryanair, It Is’, The New York Times, 16 November 2017]

Unlike genuine gig workers, however, Ryanair pilots are not undertaking ‘gigs’. They work for one company, on that company’s schedule – how is that different from an employee? If the trade made by self-employed people is flexibility and control in exchange for fewer benefits, Ryanair pilots are getting all of the downside and none of the upside.

What happens when Ryanair is no longer an outlier but the norm? That’s not so difficult to imagine. The rise of the actual gig economy has been swift, and we didn’t see it coming.

Management consultancy firms could decide to make their consultants contractors, and their HQs the ‘platform’ for allocating labour. Major retailers could start allocating shifts as ‘gig’ work – the next step from zero hour contracts? A major hotel chain could start getting housekeeping or reception services on a flexible, as-needed basis. Or a factory starts contracting assembly line workers according to the ebb and flow of orders.

That’s a level of disruption no economy or society is prepared for, and one that requires an entirely new approach to tax and social security.

The two UK parliamentary committees warning of the risks of exploitative behaviour have gone so far as to draft legislation which, if enacted, would introduce “a new presumption of ‘worker by default’”, that “would require companies to provide basic safety net standards of rights and benefits to their workers—or prove that their working practices are genuinely reflecting of self-employment.”[8. .‘Committees publish bill to end exploitation’, Work and Pensions and Business, Energy and Industrial Strategy Committees, 20 November 2017]

Such a measure will undoubtedly raise the heckles of businesses and their trade body cheerleaders. They will call it heavy-handed; burdensome regulation that stifles innovation. But if employers continue pushing at the limits of what society deems fair and decent, if they rip up the social contract, then they shouldn’t be surprised when society pushes back.