PARIS (Reuters) – French ministers floated the possibility of petrol vouchers for low-income households on Monday, as President Emmanuel Macron’s government seeks to limit the damage from surging energy prices to his economic record six months from a presidential election.
The government has already scrambled in recent weeks to cap gas and electricity prices and increase handouts to help the poor pay winter heating bills as energy prices jumped worldwide on the strength of the post-pandemic economic recovery.
With economic growth set to top 6% this year as the COVID-19 crisis subsides, the economy had been viewed as Macron’s strong suit heading towards the April election, in which he is widely expected to seek a second five-year term.
But the price spike could hurt his record by eclipsing purchasing power gains during his presidency, which were fuelled largely by tax cuts.
Graphic: French household purchasing power growth , https://graphics.reuters.com/FRANCE-ECONOMY/ENERGY/egpbkmjanvq/chart.png
As petrol prices have steadily climbed in recent weeks, the government has faced growing pressure to cut taxes paid at the pump, which can amount to up to 60% of what drivers pay.
Finance Minister Bruno Le Maire said, however, that would not only be costly to public finances but would also amount to a subsidy for fossil fuels at a time when the government was trying to wean the economy off them.
“I prefer ‘petrol cheques’ to a lowering of taxes”, Finance Minister Bruno Le Maire told Europe 1 radio.
Environment Minister Barbara Pompili also made the case for petrol vouchers on France 2 TV, but added that it was a complex process to put in place.
With energy prices a big part of households’ budgets, tax on them can be a sensitive issue in France and were at the heart of waves of weekly demonstrations by protestors known as “Gilets Jaunes” due to the high-visibility yellow vests they wear.
Once again, squeezed purchasing power has become a top theme at recent Yellow Vest protests.
“There are mothers-of-two who have to chose between paying their energy bill and feeding their children,” one protestor told Reuters TV at a demo earlier this month. “Therein lies the problem: what’s left to live by after we’ve paid the energy bill?”
The Yellow Vest protests were triggered by a planned tax increase on fossil fuels in 2018, which set off some of the worst street violence seen in the French capital in decades.
After spiralling into a broader movement against Macron and elitism in general, the protests only slowly subsided as his government sought to boost households’ purchasing power with a 5 billion euro cut in income tax.
Thanks to those tax cuts and other measures, disposable income is set to have grown twice as fast under Macron’s presidency as under his predecessors Socialist Francois Hollande and conservative Nicolas Sarkozy, according to the Treasury’s annual economic and social report earlier this month.
Macron’s office acknowledges that what the numbers show does not necessarily accord with the public’s perception, with polls suggesting a majority of people think their purchasing power has been squeezed under his presidency.
Against that background the government capped retail gas prices this month until March, when it hopes the price spike will fade.
It also plans to cut a surcharge on electricity prices to limit a price increase to 4% in the first half of 2022, instead of the 12% that could otherwise have been expected.
Meanwhile, it has hiked the budget for vouchers that people on low income can use to cover their energy bills by 600 million euros.
(Reporting by Leigh Thomas and Benoit Van Overstraeten; Editing by Alex Richardson)