Continue to support the French, while saving money. The government announced on Tuesday July 18 that regulated electricity prices will increase by 10% from August 1, confirming the gradual end of the tariff shield put in place to modulate the very sharp rise in the cost of energy on French bills.
Indispensable to households to prevent the bill from skyrocketing, the tariff shield put in place for two winters in France is also a very costly device for the State. The various estimates suggest a cost of 31 to 34 billion euros in 2023. While the government is seeking to make significant savings for its 2024 budget, this tariff shield was already in the hot seat.
The French Minister of the Economy, Bruno Le Maire, announced in April that he would put an end to the tariff shield. “As soon as we have to save money, we must in particular get out of the specific mechanisms that we put in place during the inflation crisis”. This means “that we will have to gradually get out of the tariff shield on energy prices”, by 2024, had subsequently confirmed the Minister Delegate for Public Accounts Gabriel Attal.
Adapt the device
A note from the Economic Analysis Council (CAE), attached to the Prime Minister’s office, and published last week, underlined the “colossal” budgetary cost of the measure and pointed to its “insufficient targeting”. Economists therefore recommended reducing subsidies for the wealthiest 20%, or even simply stopping this measure for these households. This adaptation of the device would allow “budgetary savings of 5 billion to 6 billion euros”, according to the economist Xavier Ragot, one of the three authors of this note.
Noting a slight inflection in the rise in the cost of electricity, the government is taking advantage of it. “Gas prices are also on a downward trend, this has an effect on the cost of electricity. We are in a phase of returning to normal after the energy crisis that we experienced, even if the prices remain high”, explain the services. A return to normal already observed on gas prices, and which led to the end of the specific aid system for this energy source on July 1.
14 billion euros in savings
The tariff shield was initially due to end at the end of 2023. The government had finally chosen to maintain that on electricity until the beginning of 2025. “The end of the tariff shield on gas has already made it possible to save money, electricity should make it possible to do more, but the stakes in terms of the population concerned and image are not quite the same and the political will to support electricity is perhaps a little stronger “, notes Benoît Wintergest, energy and price director of the broker Opéra Energie. The reduction in the tariff shield for electricity and gas will thus allow savings of nearly 14 billion euros in the 2024 budget.