Reducing France's debt while fighting inflation and investing in the energy transition: the government presented, on Wednesday 27 September, a draft budget for 2024 that responds to these "three challenges", before parliamentary debates that promise to be hectic.

The government is facing a difficult equation in its draft budget, the first to want to turn the page on the health and energy crises.

"We must (...) steer our public finances by meeting these three challenges," said the Minister of Economy and Finance, Bruno Le Maire, before the presentation of the budget to the Council of Ministers.

This #PLF2024 is the first ambitious step to accelerate the deleveraging of our country and reduce our public spending.
Keeping public finances well means guaranteeing the future of the France and allowing it to be free and independent.

— Bruno Le Maire (@BrunoLeMaire) September 27, 2023

Some €16 billion in savings are planned for next year as well as a new tax on motorways, but in a context of drastic interest rate increases, "if (...) We are pressing the budget accelerator, we will go into the background," he warned.

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However, the debates promise to be electric in Parliament. Deprived of an absolute majority in the Assembly and probably of support in the opposition, the government could resolve to adopt it without a vote by resorting, as last year, to Article 49-3 of the Constitution.

In this context, Bruno Le Maire called on the three components of the majority to "responsibility" and to speak with one voice, one year after the heated debates provoked by an amendment of the MoDem on the taxation of "superprofits".

State spending to increase from €496 billion to €491 billion

The government wants to give guarantees of budgetary seriousness, faced with a debt that has exceeded 3,000 billion euros and a deficit largely outside the European nails that ranks the France among the bad students of the euro zone.

It is for him a question of "credibility" before the verdict, in the coming weeks, of rating agencies on the financial health of the France.

Most of the savings will come from phasing out exceptional measures to reduce electricity bills for households and businesses (around €14.5 billion).

To this will be added the reductions in aid for employment policy (1 billion), 700 million from the reform of unemployment insurance, the postponement of part of the production tax reduction (CVAE) for companies, the abolition of the tax advantage for non-road diesel or the increase in the penalty on polluting vehicles.

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Bruno Le Maire also said he was open, during the upcoming debates, to a reduction from 71% to 50% of the tax allowance for furnished tourist rentals such as Airbnb.

In total, state spending will increase from €496 billion to €491 billion, excluding debt charges.

The objective is to reduce the deficit from 4.9% of GDP this year to 4.4% in 2024 – a figure deemed "optimistic" by the High Council of Public Finance, then to 2.7% in 2027, below the European limit of 3%.

Debt is expected to decline less decisively, stable at 109.7% of GDP in 2024, reaching 108.1% at the end of the five-year period, well above the European maximum (60%).

Creation of a new tax on motorways and airports

But if it wants to tighten the purse strings a little, the executive intends to continue to set itself up as a defender of purchasing power in the face of inflation that is beginning to decline but remains a politically sensitive subject.

Faced with a new surge in prices at the pump, he will take out the checkbook and offer an allowance of 100 euros to the most modest households going to work by car, at a cost of 430 million euros.

The indexation to inflation of the scale of income tax (4.8%), pensions (increased by 5.2% on 1 January) and social benefits (4.6% on 1 April) will weigh 25 billion euros.

In a bill also presented on Wednesday, the timetable for commercial negotiations between large retailers and their suppliers is advanced with the hope of accelerating the fall in prices in supermarkets.

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In addition, there are other constraints slowing down the decline in spending, first and foremost a debt burden that will increase to more than 52 billion euros next year and may become the first budget item in the future ahead of the National Education.

The strategy of "rearmament of public services" also limits the room for manoeuvre, with nearly 5 billion in additional appropriations for the army, police and justice, and 3.9 billion for school education, as well as nearly 8,300 additional state employees. The ecological transition will benefit from an additional €7 billion in 2024.

On the revenue side, a tax on motorways and airports will bring in €600 million per year, while the fight against tax and social fraud will be stepped up.

Beyond that, the executive maintains its red line: no tax increase. It is even a question of lowering them in the coming years.

With AFP

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