The French government plans to spend 45 billion euros to protect households and businesses from energy price shocks in a budget focused on reducing inflation.
The Minister of Finance, Bruno Le Maire, indicated that the increase in the cost of gas and electricity would be capped at 15% from January. Gas and electricity price increases are currently capped at 4% until the end of the year in what is known as the tariff shield (tariff shield).
Outlining the key elements of his finance bill for 2023 on Monday, Le Maire said it was funded “to the last euro” and that the government’s No. 1 priority was to fight inflation at some point. unprecedented uncertainty due to Russia’s war on Ukraine.
“The biggest and most urgent challenge for France and other European nations is to bring down inflationary pressure,” the minister told reporters on Monday. “We don’t want to raise taxes and we want to protect households,” he added.
Special levies on energy companies were expected to reduce the net cost to the country of the price cap from €45 billion to €12 billion. The Mayor said €3 billion would be earmarked to help French companies threatened by soaring energy prices, particularly those “exposed to international competition”.
The French state is the majority shareholder of EDF, the country’s largest electricity supplier – it has pledged to take full control of the company – and has a majority stake in Engie (formerly Gaz de France ).
In an interview with the Journal du Dimanche, the Minister of Public Accounts, Gabriel Attal, declared that the fuel price cap “would block the rise in gas and electricity bills at 15% instead of 120%”. Without the 4% price cap this year, based on November 2021 prices – three months before the Russian invasion of Ukraine – the ministry estimated that French bills would have increased by 60% for gas and by 45% for electricity.
“The budget we are presenting is [a] budget to protect,” Attal said.
Income tax brackets will also be increased next year by 5% to partially mitigate the effects of inflation, meaning someone earning €2,000 a month would earn €200, Attal added. The top tax bracket for anyone earning more than €169,000 will remain at 45%.
The Mayor also announced salary increases for teachers as well as the creation of 10,000 new public service jobs, including 2,000 new teachers, and funding for 6,000 housing units for refugees and asylum seekers.
He said inflation is expected to remain at around 6% in the coming months before falling to 4% in 2023. The government’s second priority was to keep government spending below 5% of the country’s output in the aim of reducing them to the limit of the EU. by 3% of GDP by 2027, and to reduce public debt – which is expected to reach a record 270 billion euros next year – from 2026, Le Maire added.
Economic forecasts earlier this month suggest that growth in the French economy will drop to 1% next year from 2.7% this year. However, the independent High Council of Public Finances said the government’s growth forecasts were optimistic.
The government must push the budget through a fractious parliament that lost its majority in the National Assembly in legislative elections before the summer.