UK rises in global economic freedom index while France slips further behind

 
Guy Bentley
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UK is world's 13th freest economy (Source: Getty)

The UK has bumped up the global rankings of economic freedom thanks to limiting the size of government and cutting taxes.

The conservative Heritage Foundation released its annual index this week which uses 10 different metrics to gauge the amount of economic freedom in a given country. The UK has moved up one spot from last year to 13th, just behind the US.

Compared to its closest neighbors the UK remains a relatively liberal economy ranking 5th out of 43 countries in the European area. Heritage raised the UK's score by 1.3 points over the past five years. The coaltion's focus on cutting government spending helped boost Britain's position in terms if fiscal freedom despite failing to meet its deficit targets.

In 2014, after several years of stagnation, stronger growth pushed the UK's GDP past pre-crisis levels while unemployment hit a five-year low. The Washington think-tank cited cuts in corporation tax cuts and solid protection of property rights as part of the UK's success.

Britain's flexible labour market and an efficient business environment gave it an edge over many European partners. However, Heritage argued government spending is still far too high.

Heritage sees a very different economic story across the channel. France's economic freedom score fell making it the world's 73rd freest country in 2015. The Eurozone's second largest economy suffered big falls in labour freedom and government spending. Even compared to fellow continental economies France came jut 33rd out of 43, well below the regional average.

There has been very little reform of the French state, with inefficient bureaucracies stifling innovation. Growth has stagnated, and unemployment remains high. Complex regulations have made French property some of the most expensive in the world despite weak demand.

The ability to hire and fire workers is restricted to a far greater extent in France than it is in the UK. Labour market flexibility is still one of most contentious areas of reform in Europe.

French government spending is one of the highest on the continent at 57 per cent of GDP while tax revenue comes to a little over 45 per cent of GDP. However, the French financial sector in Hertiage's view is still "sophisticated and relatively resilient".

President Francois Hollande abandoned the highly controversial 75 per cent tax rate for those earning over €1m and has promised a more friendly business environment.

David Cameron repeatedly has attempted to draw a favorable comparison between the stagnant economies in the Eurozone and the UK in the run-up to this year's General Election.

(Source: Heritage Foundation)

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