The minister of Finance Michel Sapin, and the secretary of State for the Budget Christian Eckert presented Wednesday, September 28 the finance bill 2017. Tax cuts, new spending, deficit reduction… the last text budget of the quinquennium has been the target of many criticisms.
Interview de Gilles Carrez, member of “Republicans”, president of the Finance commission at the national Assembly.
Growth, savings, shortfall… Would you rate the draft budget 2017 “serious”, as the minister of Finance Michel Sapin ?
I would reiterate the words of the High Council of public finance that we have received this Wednesday morning : the finance bill may contain uncertainties. The forecast of growth of gross domestic Product (GDP), at 1.5%, is described as “optimistic”. The consensus of economists oscillates instead between 1.2% and 1.3%. And this optimism can be reflected in the revenue projections. Same thing for the payroll. If it is overvalued, revenues from social contributions are also overvalued.
What about cost savings ?
- A number of them have been carried over to the following years. I of course think of the handling on the tax Credit competitiveness employment, which increases from 6% to 7% for companies in the next year, but the consequences for the public finances will occur in 2018. Same thing for the tax reduction for family jobs, or the tax on salaries.
I estimated that there are between 8 to 10 billion euros of planned spending, the impact of which will only take place in 2018. All of this is a mechanical well known before an election. However, it is necessary to pay attention to the terms. I would not say, contrary to what I sometimes hear in the opposition, that this is a budget “sincere”. The government makes quite a bit of gonflette, but it assumes it. He does not hide it.
The draft law provides for the employment, security, education. Do you think that this are not priorities?
- The job is a priority, of course. But the expenditure increases planned by the government focus on jobs helped. We believe that it is necessary to orient them to the learning credit or the reductions in charges on low-skilled jobs.
We share the choice of increased spending in the security and justice. This orientation will be defended during the budget debate this fall and will not be called in question in cases of alternation.
Finally, education is also a priority for us. But it does not necessarily lead to a rise in numbers of teachers. It may also go through a reform aimed to give more responsibility to the head of the institution, to streamline programs, notably in the second degree. We can even make savings by reforming.
The government plans for a billion euros of tax cuts for modest incomes. It is necessary to follow the declines that started after 2014 ?
- The taxes had increased after 2010, and it is necessary to follow this guidance to the downside today. But we believe that there has been a form of injustice in the organization of the tax cuts decided in recent years. They have touched the fiscal households which are at the entrance to the tax rate. Some are non-taxable. Whereas since 2012, those who have endured tax increases, for nearly 12 billion euros, are the middle classes and the middle classes do not.
François Hollande is coherent, since it is estimated there are ten years that it was rich from 4.000 euros in revenue per month. But in the paris region, given the cost of housing and transport, a home with 4,000 euros did not go that far, especially with the decline of the family quotient. So, yes to tax cuts, but on the condition that they also concern those who have experienced increases since 2012.
What drop would you suggest ?
- We would suggest not a general reduction of the tax on the income in the immediate future, but rather targeted measures, such as the increase in the family quotient. We further strengthen the tax reduction for family employment.
And for businesses, should it go further than the government ?
- After increasing taxes, the government has released the pressure in the wake of the report by Gallois, implemented a process of tax cuts called Pact of responsibility, which continues to spread and will reach 40 billion euros. He has fulfilled his commitment and I have a positive outlook on this.
On the other hand, the government was committed to remove the C3S, it was repeated numerous times, and it has dramatically changed the foot. Instead, it was decided to expand the CICE, which allows him to defer the bill from 2017 to 2018. This poses a problem in relation to the word of the State. The economy needs fiscal stability, it is necessary to make commitments and stick to it strictly.
Michel Sapin believes that the promises of tax cuts candidates in the primary to the right are “irresponsible”. Do you think that there is a higher bid, own to the exercise of the primary right ?
You’ll notice that I avoid to use such words about the draft budget of the government. It is necessary to look at more specifically the programs of François Fillon and Alain Juppé. The tax cuts will be secured by cuts in public spending identified. If there is an alternation, decisions will be taken in the summer or in the fall of 2017 to the program. François Fillon proposes 50 billion euros of tax cuts, but he expects to get € 6 billion of social VAT. Alain Juppé offers more moderately about 30 billion euros of tax cuts, but it also provides for a one-point increase of the VAT.
what are the anticipated savings ?
- On the unemployment insurance, the government has programmed $ 1.6 billion euros in savings, but we can go further. We can also look for housing assistance. One of the reforms that generates very large savings, it is that of pensions. You can go up to 65 years. If the accounts of social Security are so flattering to the minister of Health, Marisol Touraine, it is thanks to the 2010 pension reform. Without it, the accounts that would have degraded.
The planned savings in the project budget and in the programmes of the candidates are calculated with respect to the natural increase in public expenditure. In other words, if the expenses increase less than what is natural, it is an economy. But that is what we call “natural” ?
I can not answer you, because we do not know all the assumptions. My view is that we should abandon this method of calculation and reasoning to value absolute. The annual public expenditure are now 1,250 billion euros. A commitment could be : 1.260 billion euros in 2017, 1.270 billion euros in 2018, 1.280 billion euros in 2019, etc, You have to think like the consumer.
In case of alternation, it would return you on the reform of the levy to the source ?
- We consider the reform unnecessary and a source of difficulties, particularly start-up in 2018. Nothing is irreversible in the summer of 2017.
In 2012, in the midst of a crisis, the idea of limiting the debt was shared. Since then, an effort has been made. Where are we today ?
- there has been a slowdown in the pace of increase of public expenditure since 2012. Between 2002 and 2012, it has increased to 32 billion euros per year. Today, it is between 18 and 20 billion euros per year. There have been tax cuts, the deficits have decreased. In 2016, they will be 3.3% of GDP, whereas they were 5% in 2011. This means that one has the right to a little respite ? I don’t think so. Because that would mean borrow.
on The day where the interest rates would go up, the country would be vulnerable. More than two-thirds of French debt is held by non-residents. This is not a question of respect of the european rules, but of sovereignty. When the debt was 60% of GDP and that a portion of the loans were used as investment, there was no criticism. But if it is to finance the unemployment insurance, the debt, there is a problem. Michel Sapin has said : we have no other choice than to reduce our deficit and our debt. We need rigour in the alternation.
interview Wednesday, September 28 by Donald Hebert – OBS