Outlook: A better deal in London than Paris

This is a real tale of two cities. In France, following more than a week of Gallic mini-riots and occupations, the Socialist government yesterday introduced the obligatory 35-hour week as the centrepiece of its effort to create nearly a million new jobs, even though this will increase the national wage bill by about 2.5 per cent.

Meanwhile, on this side of the Channel, the Government launched its extended New Deal, which will subsidise employers who take on unemployed workers and cut welfare to individuals who refuse to take up a job opportunity. It would be hard to devise a contrast that illuminated more clearly the difference in national economic philosophy.

The irony is that the ups and downs of the business cycle will favour the French economy this year, helping to chip away at the 12.5 per cent jobless rate, while the slowdown in the UK will perhaps put a halt to the decline in unemployment even as the New Deal gets into full swing. Neither trend is attributable to the government packages. In each case these are just supply-side measures which will only show results in terms of the number of people in work over the course of several years.

But the best indicator of the supply-side success of the contrasting Anglo-Saxon and Gallic approaches will be corporate profitability and investment. The UK's New Deal will, if only in a small way, improve the quality and reduce the cost of available labour. The French package will do the opposite, squeezing corporate profit margins. It is easy to see why the British approach will ultimately create a great deal more jobs.