OPINION: France been in denial for decades about its ‘magic money tree’ spending

With the announcement of an ‘explosion’ in France’s budget deficit, significant cuts to French state spending are inevitable – writes John Lichfield – but don’t expect them to pass without howls of protest.

All those things can now only be delivered by a big cut in other forms of state spending. Otherwise, the French deficit will swell to 5.7 percent of GDP this year and 5.9 percent in 2025.
If nothing is done, or not enough, the international ratings agencies, due to make provisional reports in April and May, will downgrade France’s s AA debt status. This could significantly increase the €55 billion yearly cost of servicing the country’s accumulated €3 trillion debt (110.6 percent of GDP).
The French state now takes in taxes 43.5 percent of GDP and spends the equivalent of 57.3 percent of GDP. No French government has balanced its books for precisely half a century. France has the worst deficit and debt record of any EU country, save Italy and Greece.
Without significant and painful corrective action, starting this year, France is heading for a humiliating debt crisis.
Whose fault is all this?
Everyone’s.
President Emmanuel Macron believes that growth should deal with deficits. He has never invested much personal or political capital in debt reduction. He wants to keep down taxes and to spend lots of money on his strategic aims – from education to defence to industrial revival.
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He has presided over two explosions of “all-that-it-takes” public spending in the last four years. The first kept the economy alive during the Covid shutdowns of 2020-1. The second cushioned the shock to consumers and businesses of energy inflation after the Russian invasion of Ukraine in 2022.
Although those probably justifiable splurges are now over, increased debt and service charges and remaining commitments have left state spending €120 billion higher.
But it’s not just the fault of Emmanuel Macron. The whole French political class has been in debt and deficit denial for half a century.
In power, the centre-left has often been more fiscally responsible than the centre-right. But the radical left-wing opposition now proposes increased taxation of the rich and “the bosses” as the sole and obvious solution. Fact: France already takes more in taxes than any other EU state except Denmark.
The centre-right opposition, energetic deficit-builders when they were in power in the 90’s and the “noughties”, sanctimoniously blame the “incompetence” of Macron. Fact: the centre-right refuses to support government initiatives to restrain spending such as pension reform.
Marine Le Pen mocks Macron as the discredited “Mozart of finance”, who has built a €900 billion “wall” of new debt. Fact: she wants to make pensions and other forms of welfare more generous. Her only suggested spending cuts are to suspend welfare payments to “immigrants”.
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The French people are also part of the problem (viz. my anecdote on medical transport). Many of them take a teenage, or Gilet Jaune, view of politics: the government should pay more but taxes should be lower (except for the rich and les patrons).
Bruno Le Maire, the long-serving finance minister, published a book recently calling for the finances of the French state – and especially the welfare state – to be torn down and reconstructed. Good luck with that, Bruno, as a manifesto for your presidential election campaign in 2027.
In the meantime, more modestly, Le Maire has already cut €10 billion from the 2024 budget and he is looking for ways of cutting another €10 billion this year and €50 billion over the next three years.
One of his targets is, guess what, “le transport médical des patients”.
In an interview with Le Monde this month, Le Maire said he believed in a “strong state” but not a “pompe à fric”. (Translation: bottomless money pit or magic money tree).
“Is it possible,” he asked. “To continue to spend €5.7 billion a year on moving patients around?”
Spending so much money on “secondary” considerations , he said, prevented proper investment in “priorities” such as hospitals or schools.
Other possible savings from the fringes of France’s €849 billion welfare budget (one third of national income) are being considered. I would also recommend that the French state dismantled parts of itself, such as the préfectures and sub-préfectures, scattered around France as ceremonial or bureaucratic outposts of Paris rule. No other country has anything like them.
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But “medical transport” is as good a symbol as any of the generosity or wastefulness of the French state. Modest attempts to reduce the cost – a €4 contribution per journey introduced this year – have already produced howls of outrage.
Moving patients around is the life blood (or pompe à fric) of 5,000 rural taxi companies. Any attempt significantly to reduce the nation’s taxi bill will be hysterically pilloried as an attack on a) the heath service b) old people and c) rural France.
And so it goes on.
I would like, in the circumstances, to thank Bruno Le Maire and the impoverished French state for paying most of the cost of my new hip.

#John Lichfield
#Opinion
#Politics

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Anonymous

2024/03/27 17:28

Such a weird flex. Even if we assume all these numbers from conservatives like Le Maire and Lichfield are accurate – the pompe à fric (is it bottomless pit or life blood?) of the “5000” rural taxi companies happen to pay taxes such that the “€5.7 billion” per year contributes back to tax revenue and is more like €3.42 billion, or roughly €0.14 per person per day.
Maybe if these conservatives really cared bout the deficit they would voluntarily pay the full cost of their own hip replacements. In the mean time, you are welcome.

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I left hospital recently after having a new right hip fitted (all seems to be going fine so far, thank you).
When I was due to leave the recovery clinic in Caen, the doctor offered to sign a prescription for a free ambulance or taxi back to my home in the Norman hills 35 kilometres away.
That’s very kind of you (or rather the French state), I said, but my wife is willing to collect me in our car. The doctor seemed surprised, even disappointed. If he was offering free transport on behalf of the French state, why should I make my wife drive 70 kilometres?
I note, therefore, with interest that one of the biggest percentage increases in spending in the French health service in recent years has been for “le transport médical des patients”.
It now costs the French state €5.7 billion a year, or €15.6 million a day, to take people to and from medical appointments or hospital visits. The bill has increased by 50 percent in a decade.
Please note, we are not talking about emergency ambulances. We are talking about a separate service, available on doctor’s prescription, free in many cases, partially paid by patients or their insurance in others, to ferry people to and from treatment or routine tests. It mostly benefits old people or those with long-term illnesses in rural areas but also applies in towns and cities.
READ ALSO How to claim free transport to medical appointments
It was announced on Tuesday that the French state deficit had exploded last year to 5.5 percent of GDP, rather than the predicted and promised 4.9 percent. The cause was not increased spending but a collapse in tax revenues in the last quarter of 2023 when the French economy – buoyant earlier in the year – was dragged down by the problems of China, Germany and elsewhere.
This is a serious problem – yet another – for President Emmanuel Macron who has promised a) no increase in taxes b) big new investment in schools, health and defence and c) to bring the French budget deficit within Eurozone limit of 3 percent of GDP by 2027.
All those things can now only be delivered by a big cut in other forms of state spending. Otherwise, the French deficit will swell to 5.7 percent of GDP this year and 5.9 percent in 2025.
If nothing is done, or not enough, the international ratings agencies, due to make provisional reports in April and May, will downgrade France’s s AA debt status. This could significantly increase the €55 billion yearly cost of servicing the country’s accumulated €3 trillion debt (110.6 percent of GDP).
The French state now takes in taxes 43.5 percent of GDP and spends the equivalent of 57.3 percent of GDP. No French government has balanced its books for precisely half a century. France has the worst deficit and debt record of any EU country, save Italy and Greece.
Without significant and painful corrective action, starting this year, France is heading for a humiliating debt crisis.
Whose fault is all this?
Everyone’s.
President Emmanuel Macron believes that growth should deal with deficits. He has never invested much personal or political capital in debt reduction. He wants to keep down taxes and to spend lots of money on his strategic aims – from education to defence to industrial revival.
He has presided over two explosions of “all-that-it-takes” public spending in the last four years. The first kept the economy alive during the Covid shutdowns of 2020-1. The second cushioned the shock to consumers and businesses of energy inflation after the Russian invasion of Ukraine in 2022.
Although those probably justifiable splurges are now over, increased debt and service charges and remaining commitments have left state spending €120 billion higher.
But it’s not just the fault of Emmanuel Macron. The whole French political class has been in debt and deficit denial for half a century.
In power, the centre-left has often been more fiscally responsible than the centre-right. But the radical left-wing opposition now proposes increased taxation of the rich and “the bosses” as the sole and obvious solution. Fact: France already takes more in taxes than any other EU state except Denmark.
The centre-right opposition, energetic deficit-builders when they were in power in the 90’s and the “noughties”, sanctimoniously blame the “incompetence” of Macron. Fact: the centre-right refuses to support government initiatives to restrain spending such as pension reform.
Marine Le Pen mocks Macron as the discredited “Mozart of finance”, who has built a €900 billion “wall” of new debt. Fact: she wants to make pensions and other forms of welfare more generous. Her only suggested spending cuts are to suspend welfare payments to “immigrants”.
The French people are also part of the problem (viz. my anecdote on medical transport). Many of them take a teenage, or Gilet Jaune, view of politics: the government should pay more but taxes should be lower (except for the rich and les patrons).
Bruno Le Maire, the long-serving finance minister, published a book recently calling for the finances of the French state – and especially the welfare state – to be torn down and reconstructed. Good luck with that, Bruno, as a manifesto for your presidential election campaign in 2027.
In the meantime, more modestly, Le Maire has already cut €10 billion from the 2024 budget and he is looking for ways of cutting another €10 billion this year and €50 billion over the next three years.
One of his targets is, guess what, “le transport médical des patients”.
In an interview with Le Monde this month, Le Maire said he believed in a “strong state” but not a “pompe à fric”. (Translation: bottomless money pit or magic money tree).
“Is it possible,” he asked. “To continue to spend €5.7 billion a year on moving patients around?”
Spending so much money on “secondary” considerations , he said, prevented proper investment in “priorities” such as hospitals or schools.
Other possible savings from the fringes of France’s €849 billion welfare budget (one third of national income) are being considered. I would also recommend that the French state dismantled parts of itself, such as the préfectures and sub-préfectures, scattered around France as ceremonial or bureaucratic outposts of Paris rule. No other country has anything like them.
But “medical transport” is as good a symbol as any of the generosity or wastefulness of the French state. Modest attempts to reduce the cost – a €4 contribution per journey introduced this year – have already produced howls of outrage.
Moving patients around is the life blood (or pompe à fric) of 5,000 rural taxi companies. Any attempt significantly to reduce the nation’s taxi bill will be hysterically pilloried as an attack on a) the heath service b) old people and c) rural France.
And so it goes on.
I would like, in the circumstances, to thank Bruno Le Maire and the impoverished French state for paying most of the cost of my new hip.

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