PM announces more austerity

As expected, Prime Minister Fillon has unveiled a long list of new cuts affecting most people in France

8 November 2011

PRIME Minister François Fillon has announced a series of cuts in the second raft of austerity measures in a few months.

Speaking on TF1 news, he said: “There are not many governments that, a few months away from an election, would have the courage to take the decisions that we’ve taken.

“We’ve done it because it’s our duty to protect the French people from the very serious difficulties that many European countries that did not take the necessary decisions in time, are faced with.”

One of the key measures is raising the reduced rate of VAT applicable to restaurants and home renovations from 5.5% to 7%. Fillon said the “catastrophes” predicated by the hospitality and building trades as a result were exaggerated and it was still a “lowered” rate compared to the full 19.6%.

Certain benefits will be limited to the rate of growth, not inflation, notably family allowances and housing benefit.

The tax bands for income and wealth tax will also be frozen for two years (meaning the tax-free allowance and thresholds for entry into higher rates will not rise).

Taxation at source of investments will be raised from 19% to 24% to reduce the gap between taxation of these and of income from work.

As expected, the government is to speed up the rate at which the rise in the state retirement age is introduced. It is proposed it will rise to 62 by 2017 instead of 2018 - affecting people born from 1952-1956.

In addition, interest-free loans for first-time buyers will be axed in non new-build properties and the Scellier scheme, a tax break for investment in buy-to-let property, will go from the end of next year.

A temporary increase in corporation tax on the largest firms is also proposed.

In a symbolic gesture, Fillon said President Sarkozy and his ministers had agreed to have their salaries frozen “until the public finances are balanced”.

Fillon said they wanted to spare various necessities from increased costs, so there was no extra tax on energy.

The measures will have to be voted through parliament before they are final.

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