The French government is expected to announce a reduction in the public deficit to less than 2 per cent of output and some tax cuts in its 2000 budget today, but says an income tax reduction will have to wait until 2001.
Full details of the 2000 budget will be presented at a cabinet meeting, but the government has already said it is based on the economy growing at around 2.8 per cent, up from between 2.2 and 2.5 per cent this year.
The delay in income tax cuts comes as the public is already having to come to terms with the fact that compulsory contributions will rise this year, although the government had said they would fall. It is now promising they will fall next year instead.
Prime Minister, Mr Lionel Jospin said the government remained committed to a "gradual" reduction in compulsory contributions, but admitted that they would in fact rise this year because of weaker economic growth than in 1997.
He also warned that future reductions would depend on "regular economic growth" coupled with control of social spending and contributions.
Recent economic figures have shown that the economy is picking up, with gross domestic product growth rising to 0.6 per cent in the second quarter from 0.4 per cent in the first three months. But Mr Jospin and his economy minister, Mr Dominique Strauss-Kahn, insist that, although the economy has weathered the fallout from the Asian and Russian crises, it is too early to reward the taxpayer with an income tax cut in case of further problems.
The advantage of an income tax cut in 2001 is that it might boost the socialist coalition's popularity in a pre-election year, but some coalition members warn that delaying a tax cut runs the danger of disillusioning people. The government insists that even without an income tax cut it will be offering "the biggest tax cut in 10 years" in 2000, slashing some 40 billion francs (€4.8 billion) off the nation's tax bill. Some Ffr15 billion of that had already been announced last year, allowing Ffr25 billion in new tax cuts, the bulk of them in the form of lower VAT on home improvements and repairs.
