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The Prime Minister, Michel Barnier, intends in particular to reduce public spending by around 40 billion next year. The government wishes, among other things, to postpone by six months the revaluation of retirement pensions initially scheduled for January 1.
The government’s budgetary roadmap is taking shape. In his general policy declaration to the Assembly, Tuesday October 1, Michel Barnier announced his intention to reduce the public deficit to 5% in 2025 and to 3% by 2029, after an expected slippage to 6.1% This year. To achieve this, the government plans to find 60 billion euros from next year.
Approximately “two thirds” of this budgetary effort, or 40 billion, will come from a reduction in public spending, assured the Prime Minister. He intends to find an additional 20 billion on the revenue side, in particular from targeted taxes and “exceptional”. Before the presentation of the finance bill to the Council of Ministers, scheduled for October 10, franceinfo summarizes what we know about the government’s first steps.
“Temporary” tax increases for the wealthiest and certain large businesses
To straighten out the public accounts, the Prime Minister announced “participation in collective recovery for large companies which make significant profits” and also intends to put in place “an exceptional contribution” of the “The most fortunate French people”. The Minister of the Economy has, however, already warned that this “effort” will only be “temporary” And “exceptional”. “There is no way this will last several years in a row at the same level for everyone,” insisted Antoine Armand, the Minister of the Economy, Wednesday October 2 on RTL.
The tax increases will only affect “those who have extremely high incomes”he added. On the business side, “VSEs, SMEs, mid-sized companies and a certain number of groups which are very exposed at the moment must not contribute more”. “The idea is to make the very large groups in the country which have made profits contribute, including in difficult situations”said the tenant of Bercy.
On the other hand, the Minister of the Economy assures that he “will not generally affect the tax scale for those who work on a daily basis” and it will not increase “taxation of the middle classes and upper middle classes”. For the moment, the government does not precisely quantify the revenue expected from these tax increases and refers for details to the presentation of the finance bill (PLF) next week.
Some 20 billion savings requested from ministries
The greatest effort to reduce spending will be required of the State. The ceiling letters sent at the end of August by the previous government already provided for a reduction of 15 billion euros in ministerial spending in 2025. The new government team intends to ask them for an additional five billion euros. However, due to the tight deadlines for preparing the budget, this additional effort could not be integrated in time into the finance bill sent to the High Council of Public Finances and will be defended by the government in Parliament via amendments.
The government believes that all public administrations must be involved. A little more than a billion euros in spending cuts will be required from state operators. “A smoothing” And “a moderation” of local government spending is also expected. Before the Finance Committee of the Assembly, at the end of September, the Minister of the Budget, Laurent Saint-Martin, expressed alarm at community spending “higher than the trajectory predicted”, evoking an additional “of the order of 16 billion euros for 2024”. In a report published Wednesday, the Court of Auditors suggests a gradual elimination of 100,000 employees in communities to generate “4.1 billion euros per year from 2030″.
The revaluation of retirement pensions postponed to July 1
The government also plans to curb social spending. SIn this aspect, retirement pensions will continue to be indexed to inflation in 2025, as Emmanuel Macron committed to in June before the early legislative elections. Traditionally, this revaluation takes place on January 1st. The government has, however, decided to postpone the entry into force of this measure until July 1. According to the Ministry of Labor, contacted by franceinfo, this six-month postponement will allow savings of around 4 billion euros in savings in 2025.
The indexation of retirement pensions to price increases is in theory provided for by law. But in practice, this rule has not always been applied. Successive governments have sometimes postponed the entry into force of this increase, or chosen to under-index pensions in relation to the level of inflation, or even simply to freeze them.
Around 1.5 billion in revenue in favor of the ecological transition
In terms of additional revenue, the government plans to generate around 1.5 billion euros thanks to measures to green the economy. Like the additional effort requested from ministries, these measures could not be integrated in time into the initial version of the finance bill and will be implemented by the government through amendments.
The executive is particularly considering a penalty on the most polluting vehicles and a strengthening of taxation on the modes of transport that are most harmful to the environment. Even if the government has not yet detailed which sectors will be affected, air transport representatives already fear being taxed more. Consequently, the CEO of the airline Corsair and president of the National Federation of Aviation and its Trades (Fnam), Pascal de Izaguirre, does not rule out, to AFP, an impact on the price of tickets passengers, arguing that “Airlines are not able to absorb such a tax shock”.