Budget 2024: government plans to save 16 billion euros

Whatever It Takes is completely over. To reduce France’s heavy debt, the government will present a 2024 budget at the end of September that includes savings of 16 billion euros, amid weaker growth than expected.

Indeed, the draft budget presented on September 27 to the Council of Ministers was affected by the gloomy economic situation, which forced the executive branch to revise its growth forecast downward to 1.4%, compared with 1.6% of gross domestic product for next year.

Continued growth

“Growth will continue to progress in 2024,” Economy and Finance Minister Bruno Le Maire told reporters after forecasting 1% for 2023. And we continue: “This will be driven by our manufacturing output, the eventual end of the inflation crisis and the resumption of consumption.”

On Thursday, the European Central Bank raised its benchmark interest rate again to a record high. The move aims to combat inflation but increases the cost of debt for France. The cost of this, estimated at 38.6 billion in 2023, is expected to reach 48.1 billion next year and 74.4 billion in 2027.

Serious budget

In this more difficult context, and as the October verdict from ratings agencies Fitch and Moody’s approaches on France’s financial health, the government intends to provide assurances about the seriousness of the budget. Le Maire said the government deficit should rise from 4.8% of GDP in 2022 to 4.4% in 2024 and then to 2.7% at the end of the five years, below the European target of 3%.

“This acceleration in debt reduction is fundamental at a time when all our European partners are committed to this path,” he argues. No more billions of euros spent at will to support households and businesses during the pandemic.

End of tariff board

The government plans to save $16 billion next year, most of which will come from phasing out the electricity price shield that has kept bills in check. Equivalent to 10 billion euros. Added to this will be cuts to business aid (4.5 billion) and employment policy (1 billion), as well as 700 million from unemployment insurance reform.

To bring money into the state coffers, the government is improving the “excess profit taxation” of highway concession companies and intends to increase the gas excise tax (tax), “without affecting the consumer,” Bruno Le Maire emphasized. He also questions the “high” profitability of oil refining, in which TotalEnergies ranks first in France.

The minister also expects to combat fraud (1.5 billion per year by 2027) and introduce a minimum corporate tax (1.5 billion from 2026). CVAE, a production tax that burdens businesses, will be repealed next year to the tune of $1 billion.

7 billion for energy transition

However, this tightening of the screw does not, according to the minister, call into question the government’s strategy of reducing taxation for businesses and households, which has underpinned its policies since 2017. For households, the income tax scale will increase by 4.8%. , but they’ll have to wait until 2025 to see the promised $2 billion tax cut materialize.

At the same time, the government can boast of a budget with a green tint: 7 billion euros will be allocated for the energy transition. Brown tax loopholes (favoring fossil fuels) will be eliminated, such as the one that cut taxes on off-road diesel. “All brown tax revenue, down to the euro, will go towards the ecological transition and greening of our economy,” the minister said.