The “whatever the cost” is over, but state spending is skyrocketing despite everything. The government unveiled its draft budget for 2022 on Wednesday (September 22), which reflects the imminence of the presidential election and makes the opposition cringe. Here is what we can learn from it.
With the end of “whatever the cost”, the government anticipates a drop in all state spending by 34.5 billion euros (−7.9%). The last budget of Emmanuel Macron’s five-year term, on the other hand, announces a pretty swelling of the envelope allocated to ministries, with nearly 12 billion euros additional. This is without counting the investment plan of 20 to 30 billion euros and the creation of a commitment income for young people, which the executive must unveil soon and integrate into the draft budget during the parliamentary debate.
However, the government has not yet announced any new savings measure at this stage. This is not a surprise: the last budget of a five-year term is never the most ambitious in terms of expenditure control, even if it is traditionally amended after presidential and legislative elections.
On the right, we are already attacking a “spending euphoria” seven months before the presidential election, in the words of Eric Woerth, LR chairman of the Finance Committee at the National Assembly, in Le Figaro (article reserved for subscribers). Presidential candidate and ex-LR Xavier Bertrand called Emmanuel Macron “president of the debt” on Wednesday in The echoes, when Valérie Pécresse repeats over and over again that the tenant of the Elysée “burns the cash register”. On the left, the rebellious French deputy Alexis Corbière denounces “a president in campaign with public means”.
For its part, the High Council of Public Finance, which issues an advisory opinion, denounced on Wednesday an incomplete 2022 budget, which prevents it from giving a “fully enlightened” opinion. “In 2022, the forecast of revenue and expenditure are very likely underestimated,” says the latter.
The government has chosen a “stimulus and investment” budget for 2022, Bruno Le Maire defended on Wednesday, assuring the “total sincerity” of the executive on these budgetary choices.
The sovereign, education and sectors of the future are strengthened
The High Council of Public Finances underlines that the government has not yet unveiled the amount of its investment plan “France 2030” devoted to innovation and the sectors of the future, which should be in the order of 20 to 30 billion euros over several years. Among the targeted areas: digital, green industry, biotechnology and agriculture.
An additional 1.7 billion euros had been budgeted for Defense, an increase of 26% compared to last year, which should in particular finance new armament programs, investment in space defense, innovation and intelligence as well as the rise of cybersecurity.
The budget of the Ministry of the Interior should increase by 1.4 billion euros in 2022, to finance modernization spending, complete the objective of recruiting 10,000 police and gendarmes over the five-year term or meet the promise Beauvau for security, with an extension of 500 million euros.
The means to justice should also be increased: some 700 million euros more (+ 8%) are planned for 2022 according to the framework document, in particular to finance the penitentiary and judicial real estate programs and to strengthen the justice of proximity.
National Education will benefit from an extension of 1.7 billion euros, including 700 million for the revaluation of salaries, while losing 175 positions. On the higher education and research side, an increase of 760 million euros should finance the programming and research law, including a tenth for the upgrading of careers. In addition, 250 million euros have been budgeted, in particular for grants based on social criteria and measures related to student living conditions (including meals at 1 euro for grant holders).
Spending will also be on the rise for the “Work and Employment” component of the budget, with nearly 500 million additional euros, to which is added a similar amount from the recovery plan. These sums should in particular finance the “1 young, 1 solution” plan launched in 2020 and the establishment of a commitment income for young people, announced this summer by Emmanuel Macron and which has fallen behind schedule. Here too, the budget may be larger than expected, since the latter measure could approach two billion euros per year, according to the Ministry of Labor.
Other sectors benefiting from an increase in the budget include transport (350 million euros), housing (500 million euros) and emergency accommodation (500 million euros) and disability (500 million euros). The culture budget will increase by 273 million euros.
No new tax measure
Lower income tax, abolition of wealth tax (ISF) and creation of the tax on real estate wealth (IFI), reduction of production and corporate taxes, abolition of the tax on housing… Emmanuel Macron’s five-year term was marked by major tax reforms. “Over the entire five-year term, more than 50 billion euros in taxes were not levied on our fellow citizens. It had not happened for twenty years!” the Minister of the Economy, Bruno Le Maire, and the Minister Delegate in charge of Public Accounts, Olivier Dussopt, were delighted on Tuesday.
The tax promises of@EmmanuelMacron are required: abolition of housing tax and reduction of income tax.
More than 50 billion € in taxes remained in the hands of the French over the five-year term. pic.twitter.com/zfTi5LYwt4
– Bruno Le Maire (@BrunoLeMaire) September 21, 2021
The schedule of tax cuts decided before the crisis is maintained, but the government will not take any new tax measures in the 2022 budget, to the chagrin of those who would like a contribution from the wealthiest households out of the crisis.
This year, the 20% of the population who still paid the housing tax on the main residence will therefore benefit from a reduction of 30%, before its total abolition in 2023. Businesses, for their part, will also benefit from a further reduction in corporate income tax. In accordance with the movement initiated in 2018, it will be reduced to 25% for all companies, against a maximum of 33.3% in 2017.
A reduction in deficit and debt
The Ministry of the Economy promises to devote part of the best expected revenue to deficit reduction thanks to dynamic growth this year (+ 6%), then in 2022 (+ 4%), according to government forecasts. The deficit should thus be reduced from 8.4% of GDP this year (against 9.2% in 2020), and to 4.8% next year, for a debt that would still reach a record level of 114% of GDP. in 2022, after 116% in 2021.
Given the missing information, the High Council of Public Finances assured, “at this stage”, not to be “in a position to comment on the plausibility of the deficit forecast for 2022”. On the other hand, he considers the government’s 6% growth forecast for 2021 “cautious”, which suggests more income if the economy does better, and “plausible” the forecast of 4% growth for 2022.
In addition, the government undertakes to amortize the State debt linked to the Covid-19 crisis, estimated at 165 billion euros, over twenty years, by allocating each year approximately 6% of the surplus revenue generated in comparison with the year 2020. In 2022, the government will devote 1.9 billion euros to it.