An unprecedented situation, an unprecedented response. Faced with runaway inflation after the post-Covid-19 economic recovery, then in the wake of the war in Ukraine, the executive implemented massive measures to prevent French bills from soaring: the shield tariff, which freezes gas prices and caps electricity prices at 4% – before an increase contained to 15% in 2023 – and discounts at the pump until the end of the year. Was this answer the most appropriate in view of income inequalities, but also of the different lifestyles and consumption patterns of the French? Should the mechanisms for combating the energy shock have been designed differently to preserve household purchasing power and growth?
It is to answer these questions that the Institute of Public Policy (IPP), an independent research body, has chosen to focus its annual budget study on the energy shock, which was to be made public on Thursday 17 November and that The world was able to consult. The researchers’ first conclusion: despite its staggering cost to public finances (more than 110 billion between 2021 and 2023, including exceptional energy vouchers), the tariff shield was the least bad solution to the crisis.
By limiting the increase in energy prices, it has helped to keep inflation – in the calculation of which energy plays a major role – at less than 6.5%. In his absence, “the annual inflation rate would have been 7.5% in 2022 and 6.4% in 2023”, notes the study. In doing so, the system has made it possible to limit the negative shock on economic activity, generating additional GDP growth of 1.7 points for 2022, the researchers estimate. The shield also allowed“avoid an inflationary spiral effect, with current inflation fueling future inflation, which itself presents more risks of spreading to other sectors”explains Antoine Bozio, the director of the IPP.
“Strong disparities”
On the other hand, indexing wages to inflation, as was the case in France before 1983 and as claimed by the left, would penalize employment and would not significantly reduce inequalities in the face of the crisis, the study indicates. “Indexation does not cut inflation, it fuels it”believes Mr. Bozio, referring to the famous price-wage loop.
However, the shield is not free of limitations. It is thus struggling to support some of the populations most affected by the energy and fuel boom. Admittedly, the energy shock affects low-income households more strongly, due to the greater weight of energy expenditure in their budget: the surge in energy prices weighed 5.8% on the level of life of the poorest 20% of French people, against only 3.1% for that of the wealthiest 20%, calculated the PPI. “But there are strong disparities within each income level, depending on where they live, the mode of transport used and the type of housing”, summarizes Mr. Bozio. Thus, the surge in energy prices weighs to the tune of 1 percentage point more, on average, on the standard of living of residents outside urban areas, or in urban areas of less than 500,000 inhabitants, than on that from the rest of the population.
You have 43.36% of this article left to read. The following is for subscribers only.