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Diesel tax rises in 2015 budget

France to miss European austerity targets with €21bn of cuts - as La Poste ups cost of stamp to UK by 14%

FRANCE will miss European deadlines for reducing its public deficit, with Finance Minister Michel Sapin saying as he announced the 2015 Budget that the economic situation of “very weak growth and very weak inflation” would not allow full-blown austerity measures.

However, the budget still contained measures to increase diesel tax by 2 centimes to raise €800million and put the TV licence up by €3 to €136.

At the same time La Poste announced plans to increase stamp costs by an average of 7% from January 1 – raising the price of an ordinary “timbre rouge” from 66 centimes to 76.

However, the stamp for mail to the UK and Europe has gone up by double the average - by 14% from 83 centimes to 95 centimes. La Poste said it was to improve service.

Mr Sapin announced €21.5billion of spending cuts but said he was “refusing austerity” and reducing the debt “more slowly than planned” to give the economy a chance to grow, with a target of 1% for next year.

He confirmed news announced by Prime Minister Manuel Valls that nine million taxpayers will get an income tax boost by eliminating the first 5.5% income tax band.

This measure alone will cost €3.2bn but is seen as vital to head off challenges from the Socialist Left wing.

Alongside the €6bn of cuts announced this week in the social security and health budgets, with reduced bonuses for new babies, reduced parental leave, increased controls on non-generic medicines and reduced aid for better-off families to have child minders, the 2015 budget will be a major step towards reaching €50bn of savings over three years.

Europe had demanded that France’s deficit be cut to 3% next year but Mr Sapin said it would be reduced from the present 4.4% to 4.3% next year and 3.8% in 2016 – not getting under 3% until 2017.

The government will cut €7.7bn from its own ministries’ spending and reduce the money it gives to local authorities by €3.7bn. It will also cut 2,500 jobs in finance ministry, 500 in ecology and 300 from housing.

Mr Sapin said the government would sell public assets to bring in a further €4bn – with reports today already suggesting he plans to sell part of its stake in the Rungis fruit and veg market outside Paris or part of the Française des Jeux lottery agency.

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