France in need of 'shock therapy' and lower taxes

 

Paris

France needs “shock” therapy to break its downward economic spiral, including a substantial cut in payroll taxes, the government was told today.

A dire official report by the former boss of Airbus and the French railways – hotly disputed even before it was presented – suggests 22 remedies to restore France's collapsing competitive position in Europe and the world.

Louis Gallois, one of France's most respected businessmen, said that the country needed a "competitiveness shock … to stop the slide [and] the stagnation", which has lost 750,000 industrial jobs in a decade.

Mr Gallois proposed a €30bn (£24bn) cut in the high payroll taxes paid by employers and employees to finance the welfare state. The shortfall should be made up by other income and consumption taxes but largely by cuts in spending, he said.

The Gallois report, which was commissioned after the left won the spring and summer elections, presents President François Hollande, right, and his Prime Minister, Jean-Marc Ayrault, with a serious dilemma. Mr Hollande has rejected advance talk of shock economic treatment and called for a "pact on increased competitiveness" to be negotiated by unions and employers.

The President's poll ratings have slumped into the mid-30s, partly because he is accused by both right and left of dithering in the face of rising unemployment and a stagnant economy. But the Gallois report, by placing the emphasis on cutting social charges, is likely to deepen, rather than ease, tensions between unions and employers.

Payroll taxes or social charges which fund unemployment pay, healthcare and pensions, add 40 per cent to the average French wage bill. Cuts in these taxes have long been championed by the right but little has been done by successive centre-right governments. A sharp cut in taxes is dismissed by most trade union leaders as an attack on the welfare state.

Mr Gallois said that €30bn, the equivalent of 1.5 per cent of GDP, should be chopped from the total payroll bill – €20bn from employers' contributions and €10bn from payments by employees. His report also called, less controversially, for government action to boost research and good design; more democracy in the workplace; more public-private investment partnerships; and a relaxation of red tape for small businesses.

One other proposal in the Gallois report will be deeply controversial, however. He suggests that France, which has few energy resources of its own, cannot afford to ignore its vast potential reserves of "shale" gas. Mr Hollande has already ruled out licences for the underground explosions needed to release these reserves.

The retreat of French industrial strength, which began in the 1970s, has accelerated in the past decade and has now reached a "critical level", the report says. France has lost competitive ground compared with Germany but also compared with Sweden and Italy.

Senior members of the government will meet today for a first "seminar" to discuss the report.

News
people
News
people
Arts and Entertainment
Keys to success: Andrew and Julian Lloyd Webber
arts + entsMrs Bach had too many kids to write the great man's music, says Julian Lloyd Webber
Voices
Left: An illustration of the original Jim Crowe, played by TD Rice Right: A Couple dressed as Ray and Janay Rice
voices

By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Arts and Entertainment
Hand out press photograph/film still from the movie Mad Max Fury Road (Downloaded from the Warner Bro's media site/Jasin Boland/© 2014 Warner Bros. Entertainment Inc.)
films'You have to try everything and it’s all a process of elimination, but ultimately you find your path'
Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films
books

New essay by JK Rowling went live on Pottermore site this morning

News
Russia Today’s new UK channel began broadcasting yesterday. Discussions so far have included why Britons see Russia as ‘the bad guy’
news

New UK station Russia Today gives a very bizarre view of Britain

News
people

Top Gear presenter is no stranger to foot-in-mouth controversy

Arts and Entertainment
Keira Knightley and Benedict Cumberbatch at the premiere of The Imitation Game at the BFI London Film Festival
filmsKeira Knightley tried to miss The Imitation Game premiere to watch Bake Off
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Mobile Developer (.NET / C# / Jason / Jquery / SOA)

£40000 - £65000 per annum + bonus + benefits + OT: Ampersand Consulting LLP: M...

Humanities Teacher - Greater Manchester

£22800 - £33600 per annum: Randstad Education Manchester Secondary: The JobAt ...

Design Technology Teacher

£22800 - £33600 per annum: Randstad Education Manchester Secondary: Calling al...

Foundation Teacher

£100 - £125 per day: Randstad Education Chelmsford: EYFS Teachers - East Essex...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes