The French government is set to increase welfare and pension payouts in 2024 to help households combat inflation, according to Finance Minister Bruno Le Maire during the presentation of the 2024 budget bill.

“The primary challenge is obviously to respond to the worst inflation crisis since the 1970s that is hitting developed countries without exception,” Le Maire stated.

“The second challenge is to bring down debt and reduce the deficit.”

The finance minister added that welfare payments would rise by 4.6% and pensions by 5.2% to convey higher inflation. In addition, income tax thresholds would also rise to avoid exacerbating the tax burden on households, Reuters reports.

Although these measures would cost €25 billion, inflation would bolster VAT tax by just €10 billion, the report adds. As it stands, inflation is running at around 5%.

In a bid to offset that cost, the government is planning to acquire €16 billion in savings from next year’s budget, €10 million of which will stem from gas and power price caps coming to an end.

In addition, the independent fiscal watchdog, Haut Conseil des Finances Publiques, stated that the plans to slash the public sector budget deficit from a forecast of 4.9% of GDP in 2023 to 4.4% in 2024 lacked ambition.

France’s government is planning to gradually lower the fiscal shortfall over the next few years until it declines below an EU ceiling of 3% in 2027, the Reuters report adds.

According to economist Olivier Redoules, the government is risking missing out on its targets if more effort isn’t made to rein in spending, particularly if growth falls short of the 2024 1.4% forecast.

“The risk is that there would need to be emergency taxes or indiscriminate spending cuts to meet the deficit targets,” he said.