Macron to tackle French social spending in next wave of reforms

Paris

FRENCH President Emmanuel Macron's government will tackle social spending in the next wave of its reforms, Prime Minister Edouard Philippe said, even though France will face a weaker growth outlook next year.

Mr Philippe said in an interview in Le Journal du Dimanche on Sunday that the government would press on with its reform drive in the face of record unpopularity after little more than a year in office.

Mr Macron has so far largely turned a deaf ear to criticism of his reforms, with detractors dubbing him the president of the rich after cuts in capital income during his first year in office which he said encouraged investment. His government has sold its pro-business reforms on promises they will boost growth and jobs, but Mr Philippe said growth would be weaker than expected next year.

Mr Philippe told Le Journal that the 2019 budget would be based on a growth forecast of 1.7 per cent, instead of the 1.9 per cent forecast in April. He acknowledged that was likely to weigh on the public budget deficit, which was already under pressure due to plans to make a payroll tax credit scheme permanent. "But that does not prevent us from sticking to our commitments on reducing taxes while reining in public spending and debt," he added.

The slower growth outlook raises the chances that when the government produces its 2019 budget at the end of September it may need to change its target for a public deficit of 2.3 per cent of economic output.

Mr Philippe said the government wanted to reduce spending in particular on what he described as ineffective policies like housing or subsidised jobs. He said housing allowances, family welfare benefits and pension payouts would increase only 0.3 per cent in 2019 and 2020. That is far less than the 1.5 per cent average inflation rate economists polled by Reuters expect next year and the 1.8 per cent expected in 2020. REUTERS