For months François Fillon has been setting out what the first few months of his presidency would look like. Taking on the mantle of Thatcherism at a time when Britain itself has ditched that approach, the new favourite to be the 2017 presidential candidate of the French Right and centre aims to be France's own “Iron Man” and rapidly usher in his liberal economic revolution. As Fillon himself accepts, it is a strategy of “shock” - both technical and psychological.
It was back in March of this year that François Fillon, who is the favourite to beat Bordeaux mayor Alain Juppé in Sunday's primary run-off, set out details of his approach. The key is to act as quickly as possible he told a sympathetic audience at the Concorde Foundation, an economically liberal employers organisation with authoritarian tendencies. It seems to be one of the few lessons that Fillon has drawn from his five years as Nicolas Sarkozy's prime minister from 2007 to 2012. Apparently his government's error was not to have cranked up public debt by 600 billion euros in five years, to have let unemployment grow, to have had an ineffective and unfair fiscal policy that taxed the middle classes more and shielded the most wealthy, to have carried out state reforms that lacked good sense and to have saved the banking system after the financial crisis without having asked the banks for anything in return. “That's his record,” Fillon wrote in his book of policies entitled Faire ('To do'), referring to his former boss Nicolas Sarkozy. No, as far as Fillon is concerned, the main mistake was to have hesitated at the beginning of that presidency before introducing essential measures. He would not do that again.
So even before next May's presidential election – which listening to Fillon is a formality as the winner of the Right's primary is, according to him, certain to win the national election – the former prime minister plans to name the ten or perhaps fifteen “able” ministers who will form the new government. The aim is that they will arrive at their desks after the election with their reform plans already tucked in their pockets.
Then from July 1st 2017 – following the Parliamentary elections in June – the new economics and employment ministers will unleash a Blitzkrieg of policies, using all the means at their disposal to get the measures passed : government orders, presidential fast-tracking of legislation and procedures to force through legislation unamended. For two months Parliament would pass measures designed to enact his dramatic change (a video of the full speech in French can be seen here - below is an extract).
Fillon's plans include scrapping the 35-hour-working week and ending all legal limits on working hours apart from the 48-hour maximum allowed under European Union legislation, a move that would mark a return to laws adopted back in 1919. The current wealth tax would be abolished. The rules on taxation of capital would be reformed with a new flat-rate tax of 25%. The code governing workplace rules would be scaled down and devolved to company level. Unemployment benefit would be reformed with the amount received reducing over time, and the age of retirement would be put back to 65. On top of that there would be a programme of public spending cuts.
Thus in two months François Fillon plans to transform the country's economic, social and public framework. And to “prolong the tension”, as he has put it, Fillon says he would hold several referendums in September on other issues. Their sole aim, he says, would be to make social protest against his reforms “very difficult”. The referendums would be on the principle of whether workers in certain sectors should have the same social and pension rights as everyone else – seen as a ploy to end the so-called 'régimes spéciaux' enjoyed by some employees, for example rail workers – on merging administrative regions with départements or counties, and on reducing the number of Parliamentarians.
Of all the candidates on the Right, François Fillon is the most neo-liberal in his economic views, recycling ideas, plans and measures that have been doing the rounds of bosses' organisations and sections of the Right for up to 30 years. Officially the plan is to adopt supply-side economics to relaunch the French economy. The aim is to remove all hurdles from capital and free businesses from all constraints. For Fillon is still a fervent believer in the idea of trickle-down economics, a theory that is still so dear to neo-liberals. Despite the now well-documented damaging effects of this approach, such as an extreme concentration of wealth in the hands of a few and an unprecedented increase in inequalities, the former prime minister thinks that the complete liberalisation of capital can only but lead to everyone being better off and to full employment.
On top of the reductions in costs and regulations that will benefit businesses in his Blitzkrieg, François Fillon also plans to provide other help to companies. Not only does he want to cut corporation tax from its current 33.3% - though the current government wants to reduce it to 28% - to 25%, the former prime minister also wants to abolish a range of taxes paid by firms on their staff, such as taxes on transport and training. This would save French businesses a further 40 to 50 billion euros a year on top of the other reductions.
Policies for the well-off
Enlargement : Illustration 2
For it seems that the doctrine of neo-liberalism stops when it comes to businesses themselves. Indeed, under François Fillon's programme of reforms, French companies would be among the most state-aided in the world. The system of tax breaks known as the Crédit Competitivité Emploi des Entreprises (CICE), brought in under President François Hollande and which has created at most between 50,000 to 100,000 jobs at a cost of 11.3 billion euros (i.e. more than 100,000 euros per job) according to the government's own monitoring body, would be retained but simplified under Fillon. Research and development tax breaks, which are among the most costly for state coffers, will be extended. In fact, under Fillon's plans the state will even continue to pay the 40 billion euros a year it gives businesses to compensate for the very 35-hour-working week he plans to abolish.
The cost of all these new measures will have to be paid for by every household, including the poorest. So to help pay for the 40 billion euros in additional reductions in business costs François Fillon intends to raise the rate of value added tax (VAT or TVA in French) on the two higher bands of 10% and 20%. In his book Fillon spoke about a rise of 3.5% though he now seems to have reduced that figure and is now only talking about 2.5%. One extra percentage point on VAT brings in an extra 6.5 billion or so euros to the government. “It's Robin Hood in reverse: taking money from the poor to give to the rich!” objects centre-right politician Alain Madelin, himself an economic liberal who is backing Alain Juppé.
Indeed, many observers see Fillon's policies as massively favouring the well-off. At a time when all countries, plus the European Commission, are in the process of reining back from austerity policies, having seen the political, social and economic damage they cause, François Fillon seems, without explicitly stating so, to be proposing a policy of internal devaluation, something that has already been tried elsewhere in Europe.
On top of abolishing the 35-hour working week and putting up VAT, François Fillon is also advocating getting rid of automatic revaluations of the minimum wage and the end of automatic rises for some other workers. Also, higher pay for overtime would disappear as there would no longer be a fixed number of hours in a working week. Automatic career progression in public service jobs would also end under the former prime minister's plans.
However, Francis Fillon's plans to cut public spending go even further and he has made the shedding of 500,000 public sector jobs one of his flagship policies; at one time the planned number was 600,000. Even his opponents on the Right have judged these figures unrealistic. Such cuts would mean not replacing thousands of nurses, teachers, local civil servants, legal officials, court clerks, prison officers and police officers when they retire. Even if the working week is increased to 39 hours for public servants as planned by Fillon, that would still not cover the work of all the lost employees. In view of the major problems caused by the state reforms carried out when Fillon was prime minister, his new plans would risk seeing whole sections of the state administration and health system collapse.
In the name of economic rigour and the fight against the “benefit culture”, François Fillon is also looking at bringing in a single social benefit payment, the first step towards the universal minimum income favoured by the economist Milton Friedman. This single benefit would combine all the existing benefit payments (income support for the low-paid, working credits, minimum pensions, pension credits, single parent payments, disability payments, invalidity payments and housing benefits) and would be paid on an individual basis. Fillon has highlighted the administrative savings such a simplified scheme would bring. But he also sees it as a major way of saving money on the benefits themselves. Basically the payments could be levelled down to that of the current income support payment which is 535.17 euros a month for a single person and 802.79 euros for a couple with no children. For Fillon a key issue is that no one on benefits should get “more than those who work”.
Yet though he likes to portray himself as serious and rigorous in his approach, Fillon himself recognises that even all these austerity measures will not make up for the various financial reductions and discounts he plans to provide for businesses and on capital. So the man who as prime minister in 2007 said that “France is bankrupt” and who then presided over a 600 billion euro increase in debt while in office, is ready to rack up more debt if he makes it to the Elysée. “There will be an increase in debt linked to the tax measures over three years,” Fillon says. “Then it will begin to fall.”
However, there is a risk that this mixture of higher taxes, lower wages and benefits, and reduced public spending and services will end up causing the same economic effects that they have produced elsewhere in Europe. The expected psychological shock has every chance of being transformed into a shock of recession and unemployment, especially if the European Central Bank, the sole supporter of the European economy, abandons its current very generous monetary policy. In a country which has already been badly hit by the legacy of the financial crisis and mass unemployment, it could prove to be an explosive mix.
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- The French version of this article can be found here.
English version by Michael Streeter