French fear cuts in 'Draconian' budget

The dates of state visits are not chosen by the guest, but President Jacques Chirac, whose visit to Britain begins tomorrow, could hardly have chosen a better week to be out of France.

For tomorrow and Wednesday see the start of the French parliament's discussion on next year's budget, and all the advance information is that the French are in for some very strong medicine indeed, with an anti-public service taste such as made last year's budget particularly hard to swallow.

The options - described variously as "drastic" and "Draconian" by officials - include a cut in spending on a major jobs programme, the "contract, initiative, employment" scheme that was the cornerstone of Alain Juppe's economic plan a year ago but has proved of questionable benefit.

Other possibilities are non-replacement of some or all the 50-60,000 state employees who retire each year; paring down special benefits enjoyed by state employees; and new restrictions on housing benefit.

The possibility of taxing family allowances has been broached, but is unlikely to be decided in time for next year's budget. Mr Juppe is also considering a crackdown on tax and benefit fraud following the findings of a special commission last week that more than 100bn francs a year are lost to the treasury through the black economy. In all, Mr Juppe is seeking savings of at least Ffr60bn.

Ministers have known of the proposals for spending cuts for two weeks. Mr Juppe called them together on 2 May to stress the need for a reduction in public spending in the budget for next year in view of new, and more pessimistic, deficit projections. They were reportedly told that all departmental budgets would have to be cut by at least 10 per cent and that nothing was to be regarded as off-limits.

An additional impetus for Mr Juppe's resolve to curb public spending was the tax-cutting theme that has re-emerged in Mr Chirac's public statements. During a recent visit to Amiens he said that "France has reached a level of taxation that must on no account be increased and can only come down". In a newspaper article marking the anniversary of his election, last week, Mr Chirac promised specifically that taxes would start falling in 1997.

Mr Juppe's government has to square this imperative with the equally urgent imperative to reduce public borrowing in time to meet the criteria set in the Maastricht treaty for joining a single currency by the beginning of 1999.

According to the timetable France has set itself, this requires public borrowing to be reduced to 3 per cent of GDP by the end of 1997. Many observers say that swingeing public spending cuts are necessary to meet this requirement alone, without trying to reduce taxes as well.

If, as seems likely, state employees are to be in the forefront of proposals for spending cuts, this takes Mr Juppe back nine months, when he sacked his economy minister, Alain Madelin, for risking social unrest by making similar proposals. The fact that he now seems prepared to at least consider the prospect suggests either that he is confident there will be no repetition of last year's public service strikes, or that there is no alternative.