Paris gives 1996 budget premature airing

Under fire from left and right over its economic thinking (or lack of it), the French government has hurried to release details of next year's draft budget.

The government seems to want to reassure financial markets and party critics that it is carrying on with radical economic reform, despite the departure of Economics Minister Alain Madelin last month. With high unemployment and a surging budget deficit, it has a tough job ahead of it.

Details of tax changes were issued by the Prime Minister's office more than a week before the draft budget was due to be presented to the Cabinet and a month before the budget bill is expected to go before parliament.

The package has two main goals. One is to encourage people to make better use of money that is "doing nothing" - tied up in savings accounts of different kinds. The tax changes on savings (which will mostly not come into force until 1997) would reduce tax relief on life- insurance contributions, and cut the thresholds applied to the taxation of income from stocks and bonds, effectively increasing the amount of tax payable. It is also planned to curtail some of the tax exemptions that apply to investment income and increase state revenue from the wealth tax. The government also plans more favourable treatment for small businesses.

These measures are aimed at shifting cash away from savings, towards spending, and reinjecting some life into the economy. But they have to be set against a 2 per cent increase in the standard rate of VAT last month - which was attacked for discouraging spending.

Another goal is fiscal austerity. The government aims to reduce the domestic budget deficit from this year's projected 322bn francs (pounds 41.2bn) to 290bn francs next year, with a view to meeting the EU's requirements for joining a single European currency before 1999.

Among specific measures proposed for 1996 is a 20-centime increase in the price of petrol and diesel fuel (equivalent to a rise of 3 per cent for petrol and 5 per cent for diesel); and a 3 per cent rise in the price of cigarettes and tobacco - on top of the 6 per cent rise when VAT was raised.

There must be a question whether the details offered so far give anything like the whole picture. The tax-raising measures will not generate enough cash to close the gap. The government is still looking set to miss its targets for revenue for this year, and there may be more - and tougher - measures to come.

The government is also committed to keeping public spending down and has reiterated its intention, revealed last week, to impose a pay freeze on the public sector. One aim of the budget leaks may be to convince the unions that other people besides themselves will be hit.

All seven unions representing public sector employees have called a strike for the middle of next month in protest against the government's plan to freeze public-sector pay in 1996. Their leaders are to meet the minister responsible for the public sector in an attempt to find a solution. However, the Prime Minister, Alain Juppe, seems determined to stick to his guns.

Public sector pay accounts for almost 40 per cent of all public spending, but the government has to weigh the possibility that serious labour unrest could affect the value of the franc and upset budgetary calculations that way. "I am convinced that the public employees remain open to a rational analysis of the situation," Civil Service Minister Jean Puech said yesterday. "It is job-creation that is the essential goal."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Senior Solution Architect - Contract

£500 - £600 per day: Recruitment Genius: A Senior Solution Architect is requir...

360 Resourcing Solutions: Export Sales Coordinator

£18k - 20k per year: 360 Resourcing Solutions: ROLE: Export Sales Coordinato...

Recruitment Genius: B2B Telesales Executive - OTE £35,000+

£20000 - £35000 per annum: Recruitment Genius: The largest developer of mobile...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue
E L James's book Grey is a reminder of how the phenomenon of the best-seller works

Grey is a reminder of how the phenomenon of the best-seller works

It's hard to understand why so many are buying it – but then best-selling was ever an inexact science, says DJ Taylor
Behind the scenes of the world's most experimental science labs

World's most experimental science labs

The photographer Daniel Stier has spent four years gaining access to some of the world's most curious scientific experiments
It's the stroke of champions - so why is the single-handed backhand on the way out?

Single-handed backhand: on the way out?

If today's young guns wish to elevate themselves to the heights of Sampras, Graf and Federer, it's time to fire up the most thrilling shot in tennis
HMS Saracen: Meeting the last survivor of a submarine found 72 years after it was scuttled

HMS Saracen

Meeting the last survivor of a submarine found 72 years after it was scuttled
7/7 bombings 10 years on: Martine Wright lost both legs in the attack – she explains how her experience since shows 'anything is possible'

7/7 bombings 10 years on

Martine Wright lost both legs in the attack – she explains how her experience since shows 'anything is possible'