France’s newly re-appointed Prime Minister Sébastien Lecornu presented the draft 2026 budgets to his new cabinet this morning (October 14), hoping for quick approval to progress much-delayed debate on the two bills.
If both budgets – the general ‘Finance’ budget and separate Social Security version – receive the all-clear, they will be sent to the Assemblée nationale today for debate to begin.
It is extremely probable that the bills will be approved by Mr Lecornu’s new cabinet.
At least one weekend parliamentary session is now likely to be required to adhere to France’s 70-day deadline to debate the budget (ensuring it is in force before December 31) unless the bill is passed early. The government is eager to gain momentum and have the budget advancing.
The versions that are to be presented are identical to those sent to the High Council of Public Finances (Haut conseil des finances publiques) earlier this month, largely due to time constraints and the ongoing political crisis.
Separately, the Assemblée nationale Finance Committee will meet with the High Council tonight to discuss the budget.
Political tension and the threat of multiple motions of no confidence look to oust the prime minister meaning there is a real risk the bills will not pass. This would result in an unprecedented second year where France fails to pass a full budget.
Will budget be enough to convince MPs to work together?
The prime minister is due to outline his general policy plans (politique générale) for the coming months to the Assemblée nationale this afternoon.
Mr Lecornu has made passing a budget the main – perhaps only – aim of his second tenure, after a record-short stint of 27 days in office which saw him spectacularly resign and then reappointed within the space of a week.
After the right-wing Les Républicains officially announced their withdrawal from the governing coalition (this is despite several members being part of the new ‘Lecornu II’ cabinet), the government is desperately looking for support to pass the bill.
The prime minister is banking on a hope that the desire from MPs to avert a budgetary crisis will outweigh political rivalries and that he will gain a majority of votes from MPs across the left, centre, and right, to pass the texts.
However, hopes may be dashed by the withdrawal of Les Républicains, and the threat from the Socialist Party to table a vote of no confidence today if Mr Lecornu does not commit to overturning the controversial 2023 pension reform in his politique générale speech.
Two motions of no confidence have already been filed against him, from the far-right and the far-left, and are to be debated on Thursday at 09:00. If one obtains a majority backing (289 MPs), the government must immediately resign.
Mr Lecornu previously committed to not using the controversial article 49.3 parliamentary mechanism that allows certain bills such as the budget to be passed without a vote.
He says this will give MPs greater flexibility for discussion and to add or remove elements. This would make the final budget a more accurate representation of what the chamber wants, and in theory easier to pass without being forced through.
What will the budget contain?
The full budget has not yet been revealed publically, however several elements are widely reported to be included.
The bills are roughly based on the original belt-tightening plans presented by former Prime Minister François Bayrou this summer, which included measures such as abolishing two public holidays in a bid to save €44 billion overall.
Commitments to cost-cutting have been reduced, with the budget now looking to constrain France’s deficit to 5% of GDP next year (as opposed to Mr Bayrou’s 4.7%) to reduce the amount of cuts required.
The controversial plan to abolish two public holidays has been removed.
Measures reported to be included are:
A one-year extension to additional taxes levied on the highest earners in France
Partial renewal of extraordinary taxes on the profits of large companies. Around 400 companies with revenues of over €1 billion would be affected, and the tax raise is estimated to be around €4 billion
A tax on asset-holding companies (une taxe sur les holdings patrimoniales) to prevent assets being held in this way so as to avoid taxes
A tax on ‘all smoking products’ (thus including vapes)
A freeze on pensions and benefits in 2026, as well as a freeze on other public spending
Not indexing income tax bands to 2025 inflation (this will increase the amount households will pay)
An under-indexing of pension rises tied to inflation by -0.4 percentage points, starting in 2027
A removal of the 10% pension tax allowance for pensioners, to be replaced by a flat €2,000 allowance. This will increase the income of the most-modest retirees, but lead to a drop for those with higher income
A reduction to VAT exemption thresholds for self-employed commercial workers
Cutting at least 3,000 civil servant roles
All in all, the budget will look to slash France’s spending by around €30 billion.
The prime minister is attempting to find a fine line between committing to savings while gathering support from both left- and right-wing MPs.
It is worth noting that the prime minister’s office said that the budget is likely to change significantly due to the freedom MPs have to bring forward and strike down amendments.
Parties may also aim to bring in other elements, such as a new form of ‘wealth tax’ backed by the Socialists.
What happens if there is no budget?
To come into force for the coming year, the budget must be approved by MPs and Senators, studied by the Constitutional Council (Conseil constitutionnel) for at least eight days, and then promulgated by the president before December 31.
Last year, there was much doom-mongering around the potential of not passing a budget.
Senior politicians such as former Prime Minister Elisabeth Borne argued that without a budget, France would grind to a halt, with key elements of daily life such as carte Vitale health cards potentially failing to work.
The reality was less extreme, however, as France is immune to the style of ‘shutdowns’ currently being experienced in the US.
There are provisions within France’s political texts for budgets not being passed.
In short, parliament can vote on a special law to continue collecting taxes at the same rate as the previous year, and commit to the same spending (as long as it does not go above the expected amount of taxes collected) from the previous budget.
This is then re-voted each month until a new budget is passed.
In 2025, changes to the first motion of this kind allowed for re-evaluations of income tax bands, pension payouts, and other tied to inflation levels to be correctly calculated based on 2024’s statistics, preventing hundreds of thousands of households needing to pay additional tax.
A late and limited 2025 budget was then passed in February by then-Prime Minister François Bayrou.
If a budget is again not passed, similar measures could be taken.
However, the cost-saving elements of the budget, notably the commitment to a freeze on benefit payments, would be shelved, leading to an automatic inflation-based increase of around 1%.
So would any exceptional measures from previous budgets or decrees set to end this year.
For example, an exemption on social charges for tips is set to end on December 31, 2025.
It is likely to be included in the new budget, however if this is not passed then the rule will end, and even if later approved will throw early 2026 earnings for service-staff into chaos.
Such uncertainty would apply to many other measures, either annual or prolonged, that are set to end on December 31, 2025.
The impact of a January without a budget in place also affects ministries. Any new spending is frozen until a budget is passed, limiting not only scheduled wage increases in the sector but also halting the launch of new projects.
All in all, failure to have a budget in place by January 1, 2026 could impact France’s economy by up to €11 billion, increasing a further €1 billion each month it is not in place.
If no budget is passed throughout the year, it could see France’s debt reach a record high 6% of GDP before the end of 2026.
