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NATIONAL PACT FOR GROWTH, COMPETITIVENESS AND EMPLOYMENT
Ladies and gentlemen,
Today, with the presentation of the national pact for growth, competitiveness and employment, we’re taking a major and decisive step in pulling our country and its economy out of the crisis.
As soon as it took office, my government fully grasped the seriousness of the situation.
On 17 May, I referred to the Cour des Comptes [Audit Court or Auditor-General’s Department] the situation of our public finances, of whose deterioration everyone was aware. (…)
On 11 July I tasked Louis Gallois – a great industrialist and great servant of the state, a man of dialogue and conviction – with drawing up proposals to rebuild our competitiveness.
Our country’s situation calls for ambitious, bold decisions. (…)
Since May, under President Hollande’s impetus, we’ve been carrying out this ambitious action. (…)
The change of method and direction that the French people chose on 6 May has a meaning only if we get right to the heart of the problem: restarting the engine of the French economy.
That’s the goal of the national pact for growth, competitiveness and employment. It addresses a twofold ambition:
To finally give our great country a clear strategy in globalization.
To guarantee, through economic performance and not through deficits, the quality of our system of national solidarity. (…)
To fulfil this ambition, we needed an independent diagnosis.
I therefore asked Louis Gallois to prepare an uncompromising assessment of our national industry.
We have it today; it’s deeply critical of the past 10 years, but it enables us to put an end to sterile arguments at a time when we need to rally around a national responsibility: that of restoring economic performance. (…)
In recent weeks I’ve gathered the ministers together three times to prepare ambitious decisions, which were taken this morning. They reflect almost all M. Gallois’ recommendations. (…)
PRODUCTION COSTS/GLOBALIZATION STRATEGY
There’s a long way to go, because the French economy has fallen behind those of our European partners. (…)
France must act on all her production costs:
On labour costs, compared with our main European competitors, because the gap between France and Germany’s labour costs has increased.
On the cost of services to industry, which have also risen too quickly over the past 10 years. Let me remind you that services consumed by industry represent a cost comparable to the wage bill of industry itself.
Finally, we must act on investment and innovation in our companies. We must invest more in research and development so as to move upmarket, conquer new markets and regain our position of strength in global competition. (…)
This new model depends on moving our economy upmarket. This must be the key France’s globalization strategy.
So we must act on all the levers of competitiveness, with one priority: to restart the momentum of investment and job creation. It’s about giving back room for manoeuvre to our companies.
LABOUR COSTS/TAX CREDIT
To this end, the government has decided on an initial, massive, unprecedented measure: to lighten the burden of labour costs by €20 billion.
This lightening of the burden will be implemented over three years, amounting to €10 billion in the first year and another €5 billion in each of the following two years. So it’ll amount to €20 billion when fully in place.
It’ll involve salaries of between 1 and 2.5 times the minimum wage. This will mean an equivalent reduction of around 6% in labour costs.
It’ll take the form of a tax credit, the “Tax Credit for Competitiveness and Employment” (CICE), with an immediate impact on companies’ taxes in the 2013 fiscal year and, for those SMEs that request it, an impact on cash flow as early as next year.
This tax credit will have an impact on the whole chain of production in France, in industry, agriculture and services. And it’ll spur the big groups – whose success is the pride of France – to create and keep jobs in France.
Of this €20 billion, €10 billion will be financed by additional reductions in public spending and €10 billion by restructuring VAT and environmental tax rates.
PUBLIC SPENDING REDUCTIONS
It’s firstly by reducing public spending that we’ll finance the initial half of the effort.
France must engage in a national effort of structural reforms, in order to make sustainable savings while modernizing her public services in the interest of the French people. We must take inspiration from the reforms carried out by our European partners, particularly the Scandinavians, who have managed to carry out thorough reforms to strengthen their ambitious social systems, revitalize their economies and reduce unemployment.
These reforms will involve all state activity. (…)
These new spending reductions will bring their first results in 2014 and will total €10 billion in 2015, in line with the rising cost of the Tax Credit for Competitiveness and Employment. These savings will add to those already set out in our budgetary programme.
This effort is demanding. But it isn’t beyond us: €10 billion in savings is less than 1% of total public expenditure, which amounts to €1,100 billion; it’s 0.5% of national wealth, which stands at €2,000 billion.
VAT/ENVIRONMENTAL TAX ADJUSTMENTS
The second part of the measure will be financed by an adjustment to VAT and a new environmental tax, with no extra deductions for taxpayers in 2013.
The new environmental tax, as announced at the environmental conference, will be debated in the context of the energy transition and will take effect in 2016.
As for the change in VAT, it’ll take place on 1 January 2014. The government will in fact propose:
that the intermediate rate – which applies, among other things, to catering and housing refurbishment work – should be increased from 7% today to 10%;
and that the normal rate should be increased from 19.6% to 20%.
By contrast, the lower rate – which applies to staple products, particularly food – will be reduced from 5.5% today to 5%. This measure is aimed especially at modest households, which devote a large part of their budgets to food and energy. It’s a measure embodying social justice and support for consumption.
SOCIAL SECURITY FINANCING
This tax credit has no impact on the financing of social security. But as I’d announced, this morning I referred the matter to the Higher Council for Social Security Financing, comprising in particular employers’ and employees’ representatives, so that it can work on reforming this financing. (…)
FINANCING OF COMPANIES/EXPORTS/RED TAPE/EDUCATION AND TRAINING
Several concrete measures will guarantee SMEs and mid-caps access to the financing they need. This is the purpose of the €500 million that will quickly be put in place to help those facing cash-flow difficulties, and of the action we’ll be taking to ensure greater respect for payment deadlines. And we’ll help our innovative SMEs gain access to public procurement.
SMEs will also benefit from the €42 billion from the public investment bank [BPI], a major commitment of President Hollande. And banking reform, which will be presented at the Council of Ministers meeting on 16 December, will enable us to put finance more at the service of companies.
We also want to move our companies upmarket more quickly. This means encouraging innovation and specialization, which are key to restoring our trade balance. We’re going to create new instruments to support the financing of innovation, refocus the competitiveness clusters and encourage the use of digital technology.
We also want the French economic players to show greater “team spirit”. It’s what I call “producing together”. (…)
The government has set itself a goal: non-energy trade balance by 2017. We must support our companies more robustly in conquering markets abroad, and boost our country’s attractiveness for foreign investments that create jobs. Thanks to the BPI, tailored support at international level will be offered to 1,000 mid-caps and SMEs with promising growth prospects. And the public export finance mechanisms will be thoroughly updated.
The state must also facilitate entrepreneurship by simplifying the regulatory and fiscal environment. (…) In 2013 we’ll simplify five administrative procedures that are essential for companies. And over the course of the five-year term we’ll stabilize five fiscal mechanisms that are key to investment and the life of companies.
Finally, we must offer young people and employees training geared to employment and the future. (…) The pact contains several measures to this end, adding to the projects already embarked upon to overhaul education and vocational training. And we’ll increase the number of apprentices to 500,000. (…)
A pact is a mutual commitment. I expect everyone to shoulder their responsibilities. The government has today decided on an unprecedented measure to help put our economy back on a sound footing. This measure will require a long-term effort by the whole national community.
The financial margins for investing or recruiting that companies may have thanks to the tax credit must be used wisely and transparently. Works councils will have to be regularly informed about the use of the tax credit. A pact-monitoring committee bringing together the state, employers’ and employees’ representatives will be established to make regular joint assessments of whether the mechanism is working properly.
I also expect companies to set an example in terms of remuneration, fiscal responsibility and governance. In this regard, I’d like the two sides of industry to debate very soon the practicalities of including employees’ representatives on the boards of large companies.
I also call on the big groups to act more “collectively” within industry and in export, where the major companies must give more help to the smallest (…).
Finally, I’m expecting – and this is key to competitiveness – all employers’ and employees’ representatives to help bring to a successful conclusion the negotiations under way on safeguarding jobs. There’s no competitiveness without a solid, sustained dialogue between employers’ and employees’ representatives. (…)
This morning I asked all the ministers to direct their energy to implementing this pact. Very soon I’ll be meeting all the employers’ and employees’ representatives. Every six months, I’ll convene a meeting of the ministers concerned to take stock of how things are progressing on it, and I’ve asked Louis Gallois to lend me his support in following its implementation. He has agreed to this.
I call for a transformation enabling us to remain faithful to the Republic’s promise. The results we achieve will bolster our solidarity. That’s the new French model. It’s about combining competitiveness and solidarity, responsibility and dialogue, effort and justice.
France must regain her ranking as a major industrial power and the French must regain confidence in their and their children’s future.
The time for [taking] strong decisions has come.
This is what I and my government have just done this morning.