French Government Unveils Controversial and Challenged 2026 Budget Plan Under Prime Minister Lecornu
The French government's 2026 budget plan, presented by Prime Minister Sébastien Lecornu, introduces tax hikes and spending cuts but faces criticism from fiscal watchdogs over its economic assumptions and political uncertainty.
- • The 2026 budget includes increased taxes on high earners and companies alongside reductions in state spending and public sector jobs.
- • A new tax on patrimonial holdings aims to combat undistributed income tax avoidance.
- • Pensions and social benefits will be frozen and under-indexed to reduce social security deficits.
- • The Haut Conseil des finances publiques warns that optimistic economic assumptions make the budget plan fragile and uncertain.
Key details
On October 14, 2025, Prime Minister Sébastien Lecornu presented the French government's 2026 budget plan, featuring significant fiscal reforms against a backdrop of political turmoil and skepticism from financial oversight bodies. The budget proposes a reduction in state spending alongside measures to increase taxation on the wealthiest and businesses, while also seeking to curtail social security deficits through pension and employment reforms.
Lecornu's budget introduces a new tax on patrimonial holdings to combat tax evasion related to undistributed company income, inspired by similar measures in the US and Ireland. The budget excludes the previously debated Zucman tax but extends and modifies an existing additional tax on high incomes, targeting individuals earning over 250,000 euros and couples above 500,000 euros, aiming to generate roughly 6.5 billion euros. Additionally, a surtax on large companies’ profits will be extended but halved compared to 2025, expected to yield 4 billion euros. The government plans to reduce state employment by 3,119 jobs and to decrease the business value-added tax (CVAE), phasing it out by 2028 to support reindustrialization and smaller enterprises. Pensions and social benefits face a freeze in 2026, with subsequent under-indexation measures outlined to reduce the social security deficit from 23 billion euros in 2025 to approximately 17.5 billion euros in 2026 through health expenditure savings.
Reform efforts also target the cumulative employment-retirement system, introducing pension caps linked to employment income for retirees under 64 and partial pension reductions for those aged 64 to 67, aiming to save 200 million euros by 2027. However, the budget's feasibility is under intense scrutiny. The Haut Conseil des finances publiques (HCFP), led by Pierre Moscovici, labeled the plan "fragile," criticizing its optimistic growth assumptions and uncertain savings. The HCFP highlighted that the public deficit target of 4.7% of GDP might loosen to 5%, underscoring the scenario's hypothetical nature amid ongoing political instability. The political crisis, marked by Lecornu's recent resignation and reinstatement, has added complexity to the budget’s passage and potential amendments.
In summary, while Lecornu's 2026 budget aims to bolster fiscal consolidation through spending cuts and targeted taxation, its optimistic economic assumptions and political context have led to a reserved assessment by France’s key financial watchdogs, leaving uncertainty over its successful implementation and impact.