French Budget Aims for
Sustainable Growth

At Prime Minister François Fillon's request a seminar of the French Government was held on 31 July, 2007 to prepare the 2008 budget bill. This provided with an opportunity to present Fillon's ministers with a roadmap and to remind them of the priorities of a real "economic strategy".
The guiding principle of the 2008 budget is to lay the foundations for strong, healthy and sustainable growth. Strong growth will be brought about through "two key instruments: valuing and rewarding work". This is the aim of a bill on work, employment and purchasing power which will come into force in early October. The Government will inject 10 billion euros "to boost the French economy". Bringing down unemployment levels remains a Government priority, the target being to get unemployment down to 5.0 percent by 2012.
Healthy growth will be achieved by strengthening public finances which, in the opinion of the head of government, represents "the key to economic transformation". In 2008, public spending will be frozen in volume. Increased spending in the areas of research & higher learning, justice and education will be counterbalanced by "strictly controlled spending in other areas and a reduction in civil service staffing levels". The government objective is to replace only one civil servant for every two who retire, with some exceptions: two teachers in three will be replaced "to ensure the implementation of personalised academic achievement programmes [projets personnalisés de réussite éducative] and supervised homework programmes". 1,600 additional posts will be created within the prison system and staffing levels within higher education and research will be maintained.
Sustainable growth is centered around three goals: bringing about State reform through a review of public policy, reforming statutory charges and strengthening financial accounts via the introduction of medical charges, and reforming the retirement system. "By freeing up our economic potential and bringing back order into our public spending we will place growth and full employment at the heart of our national pact," the Prime Minister concluded.
Two schemes for innovative businesses
On 24 August, the Minister for Economy, Finance and Employment announced the reform of the research tax credit, as it will be laid down in the 2008 Finance Bill, as well as the creation of academic start up companies. The method for calculating the research tax credit will be simplified.
From now on, the calculation will be carried out solely with regard to the volume of expenditure. Companies will be eligible for 100 percent of their research expenditure.
The rate of the tax credit is 30 percent for R&D expenses up to €100 million and 5.0 percent beyond that. For businesses that are claiming this credit for the first time and for those which have not claimed it in the last five years, the rate is 50 percent. In total, €2.7 billion will be allocated to support businesses in their R&D projects.
The status of innovative start up company will be extended to academic start up companies. Small and medium sized businesses which are less than eight years old, which focus on a new activity and 15 percent of whose expenditure is dedicated to research are provided with numerous tax breaks as a result of the status of innovative start up company. The objective is to extend the benefits of this status to academic start up companies.
This is subject to the following conditions:
• At least 25 percent of the academic start up company must be directly managed or held by a student, by an individual who has been awarded a master's degree or doctorate in the last five years, or by an individual engaged in teaching or research activities;
• The activity of the company must focus in the main on promoting research work, where the conditions for the implementation of this work will be set down in an agreement between the company and the higher education establishment.