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New cuts harshest since 1945


FIVE of France’s biggest unions have called for a day of action on December 13 against a second austerity plan - the toughest since 1945.

The second plan, involving €7 billion worth of savings, follows August’s first €12 billion batch.

Announcing the new measures Prime Minister François Fillon said the 2012 budget shows levels of austerity not seen since 1945.

Some measures will affect everyone, including raising VAT on such common services as home renovations, books and takeaways.

In a joint statement, the unions said: “It places the burden on workers, which will deepen inequalities and plunge thousands of families into difficulty.”

They called for December 13 to be a high point of protest rallies with people from all trades joining forces. They said the whole first half of December should be a time for people to protest to “government, elected officials and company bosses”.

The unions object strongly to the fact that the second batch of measures “include welfare matters without the government having met us or listened to us”.

They represent a range of workers from teachers and train drivers to court workers and tax inspectors.

Mr Fillon earlier told journalists: “We have 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. Not many governments, a few months away from an election, would have the courage to take the decisions we’ve taken.” The plan is said to be necessary because growth predictions for 2012 have been lowered from 1.75% to 1%. It will - the government hopes - help stave off the risk of France’s AAA credit rating being lowered, which would deepen its economic problems.

There are fears a third plan could follow but this has been denied by ministers including Budget Minister Valérie Pécresse, who called the claims “totally unfounded.” The government hopes the measures will help achieve a 0% deficit by 2016. Ms Pécresse said: “We are going to ask of the French people efforts we have never asked before... We want to get out of debt.”

Measures in the second plan, which had yet to be fully passed by parliament as Connexion went to press, include:

The lower rate on some services will rise from 5.5% to 7%, although not in retail food, energy or services for the disabled. This includes labour and materials for home renovation by a firm and restaurant meals. The latter have attracted lower TVA since 2009, theoretically (although not always in practice) in connection with pledges to lower prices. Professional bodies in the sector consider the pact is now broken so prices may rise. This measure also affects home services (tutors, cleaners, gardeners etc), transport tickets, books, cinema tickets, paid-for TV channels, parking spaces, fast-food, hotel, B&B and gite accommodation (see below). The change means, for example, a €10,000 renovation will cost €10,700 with TVA rather than €10,550.

Certain benefits such as family allowances and housing benefit, will be revalued in 2012 according to expected growth (1%) not the expected rise in prices (1.7%). It will not affect income support benefits ASPA and RSA or AAH disability benefit. This means family allowance for a family with three children will be €289.81 (1% increase) a month rather than €291.82 (1.7% increase.) The revaluing will also move from the usual January 1 to April 1.

Tax bands
The bands for income and wealth tax will be frozen in 2012 and 2013, thus the tax-free allowance and thresholds for entry into higher rates will not rise.

Taxation at source
The fixed rate of the optional taxationat-source scheme (prélèvement forfaitaire libératoire) will rise from 19% to 24%. The rate on dividends will go from 19% to 21% on going to press.

State healthcare reimbursement costs
Targets for these are reduced, mainly by a lowering of medicine prices and radiologers’ and blood test labs’ fees.

Capital gains on sales of shares
A scheme to lower taxable capital gains on shares held long-term by a third per year from the sixth - meant to come in next year - has been axed.

The state retirement age will rise to 62 by 2017 instead of 2018, fully affecting people born from 1955, not 1956.

Jour de carence
Public sector staff who are ill will have one day without state sickness benefit.

Tax breaks and loans
Various cuts are expected in the niches fiscales (ways to invest so as to lower tax), including removing the Scellier scheme from the end of 2012 (this relates to lower income tax for investing in buy-to-let). The first-time buyers’ interest-free loan will be for the purchase of new-build only from 2012.

Corporation tax
An increase of 5% in 2012 and 2013 on tax on companies with a turnover of €250 million or more.

…and to show ‘solidarity’
Government running expenses will be cut by a further €500 million, for example by selling off buildings. The president’s and ministers’ pay will be frozen “until the public finances are balanced”. A ceiling for reimbursement of electoral campaign costs will be lowered by 5%.

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