PM seeks to slash public spending

PARIS: Prime Minister Edouard Philippe said France must break the addiction to public spending that has left its economy trailing peers as he outlined plans to rein in the budget and cut taxes.

In his maiden speech at the National Assembly as premier, Mr Philippe promised €20 billion (886 billion baht) of tax cuts by the end of President Emmanuel Macron’s term in 2022. Spending will drop by the equivalent of 3 percentage points of gross domestic product in that time and taxation will fall by 1 point, he said.

“We must face the truth about the financial situation of the country,” Mr Philippe said. “France can no longer be the champion of both public spending and of taxes. France has an addiction to public spending, and like all addictions it requires willpower and courage to kick it.”

Mr Philippe spoke a day after Mr Macron addressed a joint session of congress in Versailles. While Mr Macron’s speech was a lofty call for French renewal, Mr Philippe provided the nuts and bolts, laying out the timetable and the specific steps the government will take to revive an economy that has underperformed the euro zone for the past three years with unemployment roughly double the rate of the UK and Germany.

Mr Philippe won a vote of confidence in his government by a margin of 370 to 67. The number of votes against was the lowest ever for any prime minister setting out his agenda since France’s current constitutional arrangements came into effect in 1959, though the level of abstention was also at a record.

The prime minister’s address wasn’t just a dry rendition of his policy programme though. He began with an ode to the new parliamentarians from Mr Macron’s movement, pointing to a black female lawyer from a tough neighbourhood who benefited from affirmative action at an elite university, a female soldier who rose through the ranks and a Rwandan-born economist adopted by a French couple.

“You are an assembly that has been feminised, made younger, and renewed,” he said. Of the National Assembly’s 577 members, 430 were elected for the first time in June’s legislative elections.

Still, after the president’s soaring rhetoric on Monday, Mr Philippe’s message was very much focused on concrete measures.

Payroll taxes will be cut starting in 2019. Corporate income tax will be lowered gradually from 33.3% now to 25% in 2022 to converge with the European average. The wealth tax will be limited to real estate assets starting in 2019. And those actions will be achieved while keeping France’s commitment to its European partners to limit the deficit that has been part of every government budget for the past three decades.

French government spending accounted for 56% of GDP in 2016, the highest in the 28-nation European Union, according to Eurostat. While the tax burden of 48% of GDP was also the EU’s highest.

The government has already cancelled a planned pay increase for public employees for this year.