French Prime Minister Sébastien Lecornu will present the 2027 draft budget to the cabinet on Thursday, targeting 54 billion euros in public spending cuts.
The proposals for the state and social security budgets mark the opening stage of a high-stakes legislative battle, with ministers attempting to restore public finances while avoiding immediate defeat in parliament. Executive officials aim to craft a reversible budget that a future administration could modify, balancing fiscal discipline against strong opposition from rival political parties.
The plan will be formally unveiled on Thursday, October 1 at a meeting of the Council of Ministers, the executive cabinet of the French government. Following cabinet approval, the bill will move to the National Assembly, the lower house of the French Parliament, where opposition groups have already threatened to block the legislation.
Pension cuts and tax allowance changes
French pensioners will bear a major share of the fiscal tightening, with the government planning to generate 5.5 billion euros from senior citizens. Minister of Labour Jean-Pierre Farandou detailed the plan on Wednesday, September 30 in an interview with the business publication Challenges.
Out of the total savings requested from retirees, 4.1 billion euros will be recovered by limiting annual pension increases. Farandou stated that only retirees earning less than 1,260 euros per month would receive pension increases aligned with inflation, while higher pensions would receive partial indexation or no increase at all.
Ministers are also considering a reduction in the tax allowance for retirees. Under current French tax rules, pensioners can deduct 10 percent of their income from taxable earnings, capped at a maximum of 4,439 euros per year. Lowering this ceiling would increase tax liabilities for wealthier households.
Healthcare savings and reduced reimbursements
Healthcare spending will face substantial cuts across multiple sectors, with Lecornu confirming plans to save approximately two billion euros by tightening rules on sick leave. The Prime Minister announced the sick leave target as part of broader efforts to curb health system expenditure.
Advisers at the Court of Audit, France's national financial audit institution, have proposed more radical adjustments to sick leave rules. These include extending the waiting period before state sick pay begins or introducing a mandatory unpaid waiting period that employers would be forbidden from covering, though ministers have not confirmed whether these measures will be adopted.
The government will directly reduce state coverage for specific medical costs starting in January, shifting expenses onto private complementary health insurers. State reimbursement rates for dentist appointments, dental care procedures, and medical devices will drop from 60 percent to 50 percent, while medical transport reimbursements will fall from 55 percent to 50 percent alongside increases in patient co-payments.
Ministry spending cuts and priority sectors
Lecornu emphasized that the primary share of cost reductions must come directly from central government departments. While several key ministries will see their budgets decrease, others will receive additional funding to support core policy priorities.
Departments responsible for sovereign state functions will receive budget increases, specifically the Ministry of Justice, the Ministry of the Interior, and the Ministry of the Armed Forces. Funding will also rise for the Ministry of Housing, the Ministry of Higher Education and Research, and the Ministry of Ecological Transition.
Conversely, other government entities face deep spending reductions. The Ministry of Labour will see its budget reduced by 2.5 billion euros, while various state agencies and public operators will face cuts to their financial allocations.
Activity bonus and low income support
Low-income workers also face potential reductions in purchasing power under the initial budget framework. Farandou confirmed on the television channel LCI that the activity bonus, a state financial supplement for low-wage employees, would not be adjusted for inflation in the initial draft.
A similar freeze on the activity bonus was proposed during the previous budget cycle. In that instance, negotiations between the executive and the Socialist Party resulted in a political compromise that restored inflation indexation for working households before final passage.
Taxes on sugary foods and commercial concessions
To supplement spending cuts, the government intends to generate extra revenue through selective tax increases, including a proposed tax on sugary foods. Minister of Commerce Serge Papin confirmed on LCI on Wednesday that a sugar tax was under active discussion by ministers.
Papin stated that while he generally opposed tax hikes, rising rates of obesity and diabetes made excessive sugar content an urgent public health concern. According to reporting by the French newspaper Les Échos, the tax would target processed food products containing sugar above a specified threshold, generating an estimated 200 million euros for the social security budget.
Infrastructure operators will also face higher tax burdens under the proposed budget. The executive plans to raise the tax rate on profits earned by motorway and airport concession holders to 12.2 percent, up from the 4.6 percent rate introduced in 2024. Officials promised to prevent motorway companies from passing the increase onto drivers through higher toll rates, with the tax expected to generate 800 million euros annually.
Income tax indexation and local council funding
In contrast to spending cuts elsewhere, household income tax brackets will be adjusted upwards in line with annual inflation. Executive officials estimated full-year inflation for 2026 at 2.1 percent and agreed to raise tax brackets accordingly.
The adjustment avoids a tax bracket freeze, known in France as an année blanche, which automatically pushes households into higher tax brackets during inflationary periods. Previous attempts to implement a tax freeze contributed to political instability and the downfall of former Prime Ministers Michel Barnier and François Bayrou.
France's regional departments will also be protected from fiscal tightening. In a letter sent to department presidents earlier in the week, Lecornu promised 1.5 billion euros in additional state support, guaranteeing that local authority revenues would outpace inflation.
Corporate surtax and business incentives
Large businesses will face a renewed levy on high profits, though at a lower level than in previous years. A temporary corporate surtax introduced during earlier budget crises will be extended for a third year, but its target yield will be reduced from 7.5 billion euros to 5 billion euros.
Key business incentives will remain protected under the executive proposal. The government confirmed that it would not alter the Research Tax Credit, which subsidizes corporate research and development, nor the Dutreil pact, a legal framework offering tax relief on the transfer of family-owned businesses.
Parliamentary approval and political opposition
The budget measures remain subject to extensive debate before taking effect, with opposition parties threatening to collapse the administration. Parliamentary critics warned that they would vote to censure the government if ministers refused to make concessions during upcoming legislative sessions.
To become law, the draft budget must pass through committee reviews and formally win majority votes in both the National Assembly and the Senate, the upper house of parliament.
If ministers lack a parliamentary majority, the government could invoke Article 49.3 of the French Constitution, a mechanism allowing legislation to pass without a vote unless an opposition motion of no confidence succeeds in removing the Prime Minister.
