France's government will raise welfare and pension payouts next year to help households fight inflation while also seeking to get its public finances under control, Finance Minister Bruno Le Maire said on Wednesday as he presented the 2024 budget bill.
"The primary challenge is obviously to respond to the worst inflation crisis since the 1970s that is hitting developed countries without exception," Le Maire told journalists.
"The second challenge is to bring down debt and reduce the deficit."
But as France winds down costly price caps on gas and power prices, Le Maire warned that the state alone could no longer bear the cost of fighting inflation.
The government has in recent days put pressure on France's biggest food retailers to sell car fuel at cost and is moving forward annual food price negotiations between retailers and producers to get lower prices faster to consumers.
After spending heavily this year and last to help households and businesses cope with the energy price shock, the government has little choice but to rein in the support with its deficit reduction plans at risk of getting blown off track.
The Haut Conseil des Finances Publiques, an independent fiscal watchdog, said plans to cut the public sector budget deficit from an estimated 4.9% of GDP this year to 4.4% in 2024 lacked ambition and risked leaving France lagging other EU countries.
The government aims to gradually reduce the fiscal shortfall over the coming years until it falls below an EU ceiling of 3% in 2027.
In terms of revenues, the government aims to green its tax policies by raising taxes on businesses and activities that pollute more and using the proceeds to fund green investments.
To that end, the 2024 budget bill will gradually reduce a tax break farmers and public works companies currently get on their vehicle fuel while an existing tax on the most carbon-emitting cars would be reinforced under an existing incentive/disincentive programme.
The government will also hit toll road operators and airport operators with a new tax, raising an estimated 600 million euros annually.
Le Maire said that the 2024 budget would implement a global corporate tax minimum of 15% agreed among nearly 140 countries in 2021 and was expected to generate tax revenue of 1.5 billion euros in 2025.
The budget did not include plans for a tax increase in airplane tickets that had been mooted over the summer. Nor did it include a tax increase on short-term rentals that would hit AirBnB, although a finance ministry source said it could be added by lawmakers in parliament.
Meanwhile, the government plans to increase investments in environmentally friendly projects by 7 billion euros, bringing the total next year to 40 billion euros. (Reporting by Leigh Thomas; editing by Christina Fincher)