(Bloomberg) — The French government detailed spending plans for next year that will test voter appetite for pouring public money into the climate transition at the same time as withdrawing support for inflation-hit households.
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The 2024 budget includes a €7 billion ($7.4 billion) increase in investment in green programs to €40 billion, Finance Minister Bruno Le Maire said on Wednesday. Promised tax cuts will be delayed, meanwhile, and measures that have shielded households from soaring power prices will be withdrawn.
“All studies show that French people are worried about climate change, but they want solutions that are affordable,” said Anne Bringault, programs director at NGO Réseau Action Climat.
President Emmanuel Macron’s past attempts to prioritize green investment haven’t gone well. An increase in carbon taxes in 2017 sparked the Yellow Vests movement that spiraled into months of sometimes violent protests over the cost of living. He ultimately backtracked, spending billions of euros on tax breaks for households to try to restore calm.
Since his reelection in 2022, plans to announce a long-term green strategy for the climate transition have been delayed amid anger — firstly over pension reform and then after a police shooting of a teenager in June.
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Overshadowing the risky shift in political priorities is a pressing need to rebuild public finances after Macron championed a “whatever it costs” approach to spending during the Covid pandemic. The state has spent €36.8 billion euros on aid to offset energy costs.
The government also predicts that higher interest rates will drive up the cost of financing debt to almost €75 billion in 2027 from less than €40 billion this year.
“This budget is undeniably a first step in an ambitious repair of our public finances,” Le Maire told a news conference. It will target savings of €16 billion next year, he said. Overall spending will be €5 billion lower.
In a sign the government is keen to shift the burden of paying for the green transition to businesses from households, Le Maire confirmed it would introduce an additional tax on airports and toll roads. This is expected to raise some €600 million next year.
“Investment needed for the ecological transition is extremely high and absolutely essential,” Le Maire said. “The best financing method is to make sure those who pollute more contribute more.”
Paris airports operator ADP SA estimated an impact of about €90 million on its core earnings in 2024. This would gradually decrease from 2025.
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Macron has also asked his government to pressure the oil industry into selling fuel at cost and plans to reintroduce checks of no more than €100 euros to help low-income workers who rely on cars for travel at a cost of around €430 million next year.
“It’s very limited, but it’s much more pertinent as we don’t help households who don’t need it,” Macron said in a television interview on Sunday. “I want to be clear: We are exiting the ‘whatever it costs’ approach.”
Still, Le Maire said tackling the impact of inflation on households remains the top priority. The government plans to forfeit around €6 billion of potential revenue by pegging income tax thresholds to inflation, in a costly move for public finances. Indexing to price increases will also push up spending on welfare benefits by €4.5 billion and on pensions by €14 billion.
The French president also said this week he will overhaul power markets to regain control of electricity prices by the end of the year.
“Macron is trying to avoid measures that could generate a movement similar to the Yellow Vests,” said Antonio Barroso, deputy director of research at political advisory Teneo.
The government will nonetheless seek around €10 billion of the €16 billion of savings by phasing out energy price shields for households. The Finance Ministry has said it will also begin cutting long-standing fuel support for farmers and the construction industry next year. Other areas being targeted include €1 billion of savings on labor market support and a €700 million reduction in outlays for unemployment benefits.
A reduction in levies on production in France — a key plank of Macron’s pro-business reform agenda — has been delayed. His plan to cut €2 billion of taxes on households has been pushed back until 2025 at the earliest.
The country’s debt office, Agence France Tresor, said separately on Wednesday that it will issue a record €285 billion of medium-, long-term debt net of buybacks next year.
(Updates with ADP comment on transport infrastructure tax in 11th paragraph.)
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