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The Viavoice - BPCE barometer survey of French consumer plans - October 2012

Taxation: France has reached its tolerance threshold

Austerity and tax hikes are weighing ever more on purchasing power and are less accepted by public opinion

Concerns about purchasing power have risen for the third month in a row, in a worrying development for both consumer spending and the government. 57% of French people now expect their purchasing power to deteriorate over the next three months. This figure is up four points from September and is 21 points higher than in May. This latest increase is worrying in more than one respect :

  • First, because these growing concerns, which can largely be attributed to tax rises, make the government's austerity plans less acceptable, and less accepted, by public opinion, which is becoming ever more hostile to austerity;
  • Second, because it comes in a period of low inflation: gas prices in particular, which are often seen as a key indicator of purchasing power, are stable and have even declined in the last few days. Any renewed increase in gas prices could further amplify current expectations in terms of purchasing power.

Tax rises are weighing more and more on households' purchasing power

The concerns over purchasing power recorded this month can largely be attributed to the increase in personal taxes (income tax, wealth tax, progressive capital gains tax). In May, just 25% of French people cited taxes as their biggest cause for concern, but this figure has since risen sharply, to 43% today - an 18-point increase (+6 since September).

Taxes now rival food (44%, -1) as the spending item that causes the most concern, ahead of gas prices (38%, -3). These growing concerns over tax are mainly voiced by well-off households :

  • Taxation tops the list of concerns for 58% of executives, 53% of merchants and business leaders and 51% of intermediate professionals;
  • In contrast, this figure falls to 43% among employees and 40% among blue-collar workers. Well-off households are also more likely to expect their purchasing power to deteriorate: 64% of executives envisage a decline in their purchasing power over the next three months, compared with 52% of employees and blue-collar workers.

Given these growing concerns, spending and savings plans are inevitably in decline, though these indicators have remained relatively stable and therefore suggest no increase in pessimism :

  • 37% (-1) of those interviewed envisage spending less over the next three months, versus 12% who intend to spend more (-1);
  • 34% (+1) are planning to put less money aside, compared with 10% (+1) who intend to save more;
  • Car purchase intentions have been stable since August, with 7% of respondents intending to buy a new car or change their current vehicle;

Austerity plans are becoming less acceptable

Another knock-on effect of the economic slowdown and austerity policies is that French people seem less willing to make an effort: a very large majority (62%) refuses to "lose a little spending power to help reduce public debt and the deficit". This figure has risen by 5 points against October 2011, following the Fillon government's first austerity plan. If we analyze this figure in more detail, two-thirds of blue-collar workers and employees (67%) are unwilling to relinquish any spending power. Consequently, only 35% of French people claim to be "willing to lose a little spending power to help reduce public debt and the deficit", a fall of 6 points compared with October 2011. These growing tensions and increasing uncertainties regarding austerity need to be put in perspective in terms of the current situation :

  • In economic terms, with a EUR 30 billion austerity package announced in September following on from previous plans implemented in 2011, and which could also be followed by additional measures if growth continues to falter: the accumulation of austerity measures, with no alternative for the time being, makes them less acceptable to public opinion;
  • In political terms, these measures come after the presidential election campaign raised hopes of an alternative to austerity, yet the new government is now presenting austerity as unavoidable. In this respect, trends in the economy and purchasing power in the months ahead are likely to be decisive for both household confidence and the acceptability and the extent of future reforms. France has now reached its tolerance threshold regarding tax pressure.