how the New Popular Front intends to finance its economic program

Nine days before the first round of the legislative elections, the New Popular Front (NFP) prided itself, Friday June 21, on being “the only political force to present a budget and a program”. The alliance of left-wing parties, which notably brings together the Socialist Party, La France insoumise and Les Ecologistes-EELV, detailed the economic costing of its project during a press conference at the Maison de la Chimie, in Paris, then in a document posted online (in PDF).

The left coalition, which promises a program of “breakup”, is counting on 25 billion euros in new public spending from July. For “raise purchasing power” of the French, the index point of civil servants would be increased by 10%, the minimum wage by 14% (to 1,600 euros net), housing assistance (APL) by 10% and completely free public school (supplies, canteen , extracurricular, etc.). Two key reforms of Emmanuel Macron’s second five-year term would also be repealed: the pension reform – to reduce the retirement age to 60 – and that of unemployment insurance.

Another phase will bring spending to 100 billion euros at the end of 2025 with the hiring of teachers, care and medico-social professionals, the intensification of the thermal renovation of buildings or even the establishment of the “guarantee of autonomy”, a minimum income for young people. At the end of a third phase, at the end of 2027, the total amount of investments will reach 150 billion, with, in particular, plans for rail and freight, access to public services less than 30 minutes from home, support for the organic and agroecology sector, a comprehensive law against sexist and sexual violence, a culture budget increased to 1% of GDP and that of sport to 1% of the state budget.

To finance these measures, the New Popular Front is relying on several levers. The main one is fiscal, with a levy on “undue rents of capital”. In order to absorb the 25 billion euros in spending from 2024, the left wants an amending finance law passed on August 4 – a nod to the day of the abolition of feudal privileges in 1789. Objective: implement a tax on superprofits, particularly in the energy and agri-food sectors, and reinstate a wealth solidarity tax (ISF) – transformed into a real estate wealth tax (IFI) by Emmanuel Macron in 2018 – with “a climatic component”. These two levies would bring in 15 billion each, according to the NFP calculation.

The following year, the left plans to recover nearly 28 billion euros with the elimination of tax loopholes “inefficient, unfair and polluting” and some “flat tax” – a single rate tax of 30% on capital income.

Another major revenue measure: a reform of the progressiveness of income tax, with the establishment of a scale of 14 brackets – compared to five currently – and the establishment of an evolving CSG (generalized social contribution). depending on income. It would bring in 5.5 billion euros. Before the presentation of the figures on Friday, LFI European MP Manon Aubry assured Tuesday on France Inter that “all those who earn less than 4,000 euros per month, that is to say 92% of French people” would pay “less taxes”.

A revision of the inheritance tax, targeting the highest assets, would generate 17 billion euros in additional revenue. By 2027, other “structural tax reforms” are planned to reach the budgeted 150 billion, such as the application of the 2% tax on the profits of multinationals, proposed by the economist Gabriel Zucman, “the rise in power” of equal pay between women and men and the strengthening of the tax on financial transactions.

With this “fiscal shock” and the rise in wages, the left alliance is banking on the resumption of consumption, and therefore growth. This reached 0.2% in the first quarter of 2024 and slowed down sharply last year, to 0.9% (after reaching 2.5% in 2022), in a context of inflation and interest rates. high interest. “Our recovery must boost growth”which could reach 3% with this economic program in 2025 and 2026, estimates among Echoes the socialist and former vice-president of the National Assembly Valérie Rabault.

The elected official, who accepts fundamental disagreements with LFI, however recognized that the planned expenditure would widen France’s public deficit a little further (5.5% in 2023), while the country is under the influence of a European Commission procedure for non-compliance with European budgetary rules. While the Minister of the Economy, Bruno le Maire, reiterated his ambition to bring the public deficit below the threshold of 3% of GDP in 2027, thanks to cuts in State spending of 20 billion euros. , there “budgetary trajectory” from the left “projects a deficit of 5.7% of GDP this year, then 5.4% in 2025 and 5.1% in 2026 before landing at 3.6% in 2029”according to Valérie Rabault. “We do not finance the program by increasing deficits”nevertheless insisted Eric Coquerel, outgoing president of the Assembly’s finance committee, during the presentation.

Unsurprisingly, this economic program is severely attacked by the presidential camp. The French economy “would not withstand such a fiscal and budgetary shock”, said the Renaissance campaign team in a press release. She compares this program with that of former socialist president François Hollande, under whose mandate the levies “had been increased by 60 billion euros, triggering the ‘fiscal fed up’ of the French”. Furthermore, “with the new Nupes, the industry is over”according to the presidential camp, which put the number of jobs that would be destroyed at more than a million. “It’s a crusher of the middle class, these are tax increases on the middle class”for his part reacted the Prime Minister, Gabriel Attal.

The other measure strongly criticized by opponents of the left is the increase in the minimum wage to 1,600 euros net, accused by the government and bosses of representing a danger for employment in companies. “We will help them”responded outgoing Green MP Eva Sas during the press conference, citing financial support measures for SMEs and VSEs.

As for economists, proponents of a liberal vision, such as Lisa Thomas-Darbois, deputy director of French studies at the Institut Montaigne, also consider that “These measures can have deleterious economic effects. This is not neutral for the image of France and its financial attractiveness”, she told AFP. She claims that these measures would affect not only billionaires but also “millionaires and slightly wealthy people”.

“It is difficult to see how [ce programme] will not lead entrepreneurs to massively leave elsewhere”, written for his part on the social network X Olivier Blanchard, former chief economist of the International Monetary Fund (IMF). On franceinfo, Olivier Rédoulès, director of studies at the liberal Rexecode institute, considers that “very clear direction” of the NFP is “to move towards more state intervention in the economy”.

To prevent tax exile, the left plans a restoration in its original version of the“exit tax”a tax implemented under Nicolas Sarkozy in 2011 and simplified by Emmanuel Macron in 2018. As for the return of the ISF, the economist Julia Cagé, one of the economic guarantors of the New Popular Front, maintains that it will bring in three times more that “four five” billion before its transformation in 2018. Result of the “fiscal policy” of the Head of State, according to her: the 500 richest people represent 50% of GDP today, compared to 10% ten years ago. In 2021, a report from the deputy general commissioner at France Stratégie demonstrated that the abolition of the ISF and the establishment of the “flat tax” had not yet resulted in measurable positive effects on the economy.

For Henri Sterdyniak, economist interviewed on franceinfo, this program is “Keynesian” [du nom de l’économiste britannique John Maynard Keynes] because “we need to boost demand in France and Europe”, “social because it includes income guarantees” And “ecological because we set ourselves the objective of reorienting the activity taking into account ecological constraints”. The specialist, classified on the left, however points out “contradictions” between these “constraints” And “the comeback” promised, as well as a “lack of details on financing measures”.