The government presented its finance bill for 2024 on Wednesday September 27. François Ecalle, former magistrate of the Court of Auditors, was Franceinfo’s eco guest to analyze France’s future budget.
The government presented its draft budget for 2024 on Wednesday. But the news has caught up with the government: inflation persists. It forces the government to review its initial plans. There will finally be a fuel allowance for workers to respond to the rise in fuel prices, an indexation to inflation of social benefits, retirement pensions, and the income tax scale for a total cost of 25 billion euros. François Ecalle, former magistrate of the Court of Auditors, founder of Fipeco, an information site dedicated to public finances, estimates on franceinfo that the government’s spending forecasts appear relatively moderate.
franceinfo: The 2024 budget provides for the indexation to inflation of the scale of income tax, pensions and social benefits, which will weigh 25 billion euros. Do you think these expenses are necessary?
François Ecalle: They are largely inevitable. The indexation of pensions to inflation is in the law. Parliament could have voted for under-indexing, which it has already done in the past. But that would require changing the law. And in the current political context, I can’t imagine Parliament voting for this type of measure. There are therefore unavoidable expenses. The government’s spending forecasts for 2024 appear relatively moderate. In fact, in euros, it increases a lot, but it increases by 3% in euros for all public administrations, State, local authorities, social security. But if we take into account inflation and the fact that, for example, pensions should be increased by 5% on January 1, 3% is not much. If the government says “only 3%”, it is because it is still counting on the reduction or even the elimination of price shields on electricity or gas.
Do you consider these expenses necessary and ultimately quite reasonable? So much for austerity?
If we take into account these exceptional measures which will gradually disappear, the increase in spending is relatively reasonable. We see that the rest of the “normal” expenses still increase significantly in 2024. There is no real moderation of expenses. We have had an increase in expenditure in constant euros for all public administrations which is of the order of 2%. This is more than the growth in economic activity since the government forecast is 1.4. We are therefore beyond.
Do you think that the government is right to make this additional spending, particularly on defense and national education which is today the largest item of expenditure?
I think he cannot do otherwise politically because, typically on pensions, he will never find a majority to do what had already been done in 2018-2019: a deindexation of pensions. Now, economically, pension reform only affects future retirees. It does not affect current retirees at all. We are in a situation in France which is unprecedented at the European level, in which the standard of living of retirees is higher than that of the rest of the population. To make no effort on retirees, for me, that would not be absurd.
In this budget there is an environmental turning point: 30 billion allocated to green spending, 7 billion more than last year. Is it historic?
The government also announces the reduction of brown tax loopholes. In practice, this means a reduction in exemptions or the reduced rate on diesel from which farmers and public works benefit. All governments have broken their teeth on this issue. Because every time they talked about it, they saw demonstrations in the streets. We’re not going to gain much from a budgetary perspective because it’s going to be spread out over time, almost until 2030. And then, we’re going to compensate entirely with aid, particularly for farmers. We are therefore not going to gain much from a budgetary point of view. But on the other hand, from an environmental point of view, it’s good. This is all going in the right direction. Perhaps some will find that it is not enough, but we are moving in the right direction environmentally.
Would you say these predictions are credible? The government wants to reduce the debt to 109% of national wealth.
By 2027. In the immediate future, in 2024, it will not change much as a percentage of GDP. But the government’s idea is to gradually reduce the deficit to below 3% of GDP. These forecasts are firstly based on growth assumptions that most economists consider relatively optimistic. The government will tell you that last year, its growth forecasts for 2023, no one believed it and finally we will get there. But I still think it’s relatively optimistic.