THE CENTRAL
GOVERNMENT
BUDGET IN 2015
Results and Management
Summary
May 2016
g
AVERTISSEMENT
This summary is intended to aid in understanding and using the-
report prepared by the Cour des comptes.
Only the report is legally binding on the Cour des comptes.
The response of the Ministry of Finance and Public Accounts and
the Minister of State for the Budget appear after the report.
Summary
Summary of report on the central governement budget in 2015
The Cour des Comptes’ constitutional mission
to the Government and Parliament
. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Introduction
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1
The
budget
deficit
narrowed
only
marginally
in
2015
and remains high
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
2
The deceleration in the growth of debt is related mainly
to issuance policy
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3
Revenue close to forecasts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4
Expenditure control is partial and its results remain tenuous . . .17
5
20 years of expenditure rules: an assessment
. . . . . . . . . . . . . . . . .21
6
Assessing
management:
reliability,
performance
and sustainability
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Conclusions and recommendations
. . . . . . . . . . . . . . . . . . . . . . . . . . .
29
3
The Cour des Comptes’ constitutional
mission to the Government
and Parliament
Summary of report on the central governement budget in 2015
5
In accordance with Article 46 of the Constitutional Bylaw on Budget Acts of 1
August 2001 (LOLF), and following the end of the financial year and the closing of its
accounts, the government has until 1 June of the following financial year to table a
budget review bill. This reviews budgetary operations and closes the accounts for the
financial year just ended. It is presented with the central government’s general
financial statements, a management report and annual performance reports
related to each of the government budget missions.
In the context of Cour des Comptes’ mission to assist the Government and
Parliament described in Article 47-2 of the Constitution, Article 58-4 of the LOLF
requires the “filing of a report in conjunction with the filing of the budget review
bill, relating to the previous fiscal year's outturn and the associated accounts,
which, in particular, analyses the utilisation of appropriations by mission and by
programme.”
The report on the central government budget in 2015 fits into the Parliament’s
examination of the budget review bill. It aims to help assess the results of the
financial year and the quality of budgetary management. It is complemented
with 58 memos analysing the management of each of the general budget’s missions
and each of the special accounts, three analyses of revenue-gathering (tax and
non-tax, and tax expenditure), together with two analyses of levies on receipts for
local authorities and the European Union. These memos are available in full on
the Cour des Comptes website (www.ccomptes.fr).
The Cour des Comptes is also submitting a follow-up to the recommendations it
made in central government budget management reports for 2013 and 2014.
The budget deficit narrowed only marginally in 2015 and remains high. In
contrast with preceding years, revenue was close to forecasts. But expenditure
control is still partial and its results remain tenuous.
Introduction
Summary of report on the central governement budget in 2015
7
The central government’s budget deficit was €70.5 billion in 2015, representing
almost three months’ net expenditure on the general budget. This expenditure
totalled €296.5 billion, compared with revenue of €224.3 billion. The deficit was
greater than net receipts from income tax (€69.3 billion) and expenditure on
school education (€66.4 billion).
Comparisons between the budget deficit and selected revenue
and expenditure items in 2015
Summary of report on the central governement budget in 2015
9
1
The budget deficit narrowed
only marginally in 2015
and remains high
A smaller than expected deficit
The budget deficit was €3.9 billion
smaller in 2015 than forecast in the
Initial Budget Act.
The improvement in the deficit relative
to
forecast
stemmed
from
the
following:
- higher than expected general budget
revenue
(excluding
cost-sharing
contributions
and
allocation
of
proceeds), by €2.5 billion;
- a €1.8 billion improvement in the
balance of subsidiary budgets and
special accounts.
Net tax receipts close to forecasts and
savings on managing the European
Union’s share of receipts largely
explain the overshoot relative to the
initial revenue estimate.
General budget expenditure was
€0.4 billion higher than forecast. The
reintegration of military investment
costs originally intended for a special
account increased expenditure by
€1.6 billion; this was offset by €2.2 billion
in savings on debt service costs. Other
expenses were a billion euros higher
than projected in the Initial Budget
Act.
Net receipts, Initial Budget Act – outturn
(€m)
Net expenditure, Initial Budget
Act – outturn (€m)
Sources: Cour des Comptes, National Budget Office
The deficit was €4 billion smaller than
the 2015 target written into the
2014-19 multiannual Public Finance
Planning Act (€74.5 billion). The
preceding
2012-17
programme
legislation provided for a €33.9 billion
deficit in 2015, however.
The new multiannual Public Finance
Planning Act does not aim to recover
ground lost in 2013 and 2014 in
terms of consolidating the central
government’s finances. But it maintains
Summary of report on the central governement budget in 2015
10
Multiannual comparisons hampered
by ‘Investing for the Future’
programmes
Launched in 2010 and 2014, two
‘Investing for the Future’ programmes
are under way: PIA 1 (€34.6 billion) and
PIA 2 (€12 billion). These programmes
are managed by third parties. In contrast
with the budgetary expenditure, which is
booked by the central government in its
entirety in the year the programme is
launched, the managers’ actual draw-
downs are spread over ten years (PIA 1)
and 15 years (PIA 2). This booking
method derogates from the annual
principle and artificially increased the
budget deficits in 2010 and 2014.
A persistently high deficit
The budget deficit continues to represent
almost three months of expenditure
under the general budget.
It finances the entirety of the policy of
reducing the tax burden on business.
The budget deficit narrowed only marginally
in 2015 and remains high
a deficit reduction rate comparable
to that envisaged in the preceding
programme, starting from a higher
level.
Comparison between the two multiannual
2012-17 and 2014-19 trajectories
(€bn)
Adjusted budget deficit (€bn)
Sources: Cour des Comptes, Public Finance
Planning Act
Sources: Cour des Comptes, National Budget Office
Excluding exceptional items,
limited improvement relative
to 2014
The actual budget deficit in 2015
(€70.5 billion)
was
€15.1
billion
smaller than in 2014 (€85.6 billion).
This change is not significant, however,
as
multiannual
comparisons
are
affected by exceptional expenditure
in 2014. The Cour des Comptes shows
the annual change in the budget
deficit after adjusting for exceptional
expenses such as the payment to the
European Stability Mechanism in
2014 and Investing for the Future
programmes.
-120,0
-100,0
-80,0
-60,0
-40,0
-20,0
0,0
2010
2011
2012
2013
2014
2015
Following adjustment, the central
government budget deficit in 2015
(€74 billion) was similar to that for
2014 (€74.3 billion).
Summary of report on the central governement budget in 2015
11
2
The deceleration
in the growth
of debt is related mainly
to issuance policy
High borrowing requirements
despite buybacks
The central government’s borrowing
requirement was €189.1 billion in
2015, up €10 billion on 2014
because
of the highest redemptions since 2008.
Central government borrowing
requirement (€bn)
Central government debt (% of GDP)
Sources: Cour des comptes, AFT
Sources: Cour des comptes, INSEE
In recent years, the government has
sought to smooth the increase in
redemptions by issuing more than
necessary to cover the current year’s
requirements and to fund the buyback
of securities maturing one or two years
later.
Buybacks in 2013 and 2014
reduced the central government’s
borrowing requirement by €38 billion
in 2015.
This policy was maintained in 2015 to
limit increases in redemptions in 2016
and 2017. Medium- and long-term debt
issuance totalled an unprecedented
€220 billion in 2015.
Increases in debt temporarily
slowed by issuance policy
The central government’s marketable
debt
rose
further
in
2015,
to
€1,576 billion.
It represents over three
quarters of general government debt
(€2,097 billion).
10
20
30
40
50
60
70
80
1980
1985
1990
1995
2000
2005
2010
2015
Central
government
debt
rose
€48 billion in 2015, far less than in
preceding years.
The smaller increase
in debt in 2015 mainly reflects the
government’s issuance policy.
The government can issue new bonds
(‘benchmark’ issues) or bonds with
exactly the same terms as those already
issued
(‘tapping’
existing
issues).
Existing issues carry fixed interest rates
(‘coupons’) that may diverge from current
market yields: when it taps existing issues,
the government receives a premium (if
current yields are lower than the coupon)
or a discount (if they are higher).
The deceleration in the growth
of debt is related mainly to issuance policy
Summary of report on the central governement budget in 2015
12
low interest rates. Central government
debt increased by €700 billion between
2005 and 2015, but debt service costs
rose by just €3 billion over the same
period.
A change in market conditions
would represent a serious threat to
the deficit in the medium term.
A 1%
increase
in
interest
rates
would
increase debt service costs by €2.1 billion
in the first year and by €16.5 billion over
ten years.
Only a small part of additional
debt is used to fund investment
Net of redemptions and buybacks,
issuance of medium- and long-term
debt totalled €93 billion. Only 12%
was used to fund investment.
A continuing deterioration
in the long-term sustainability
of central government finances
At the end of 2015, the central
government’s net financial position
was a negative €1,115 billion, or the
equivalent of around four years’
recurrent receipts.
Sources: Cour des comptes, DGFiP
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
2008
format
2010
2009
format
2010
2010
2011
2012
2013
2014
2015
Number of years’ tax revenue
to cover the central government’s
net financial position
An example of a tap
of an existing issue
On 5 February 2015, the government
issued 10-year debt by tapping an
existing bond that was originally
issued as 31-year debt in 1994 with a
6% coupon. The interest rate obtained
at auction was 0.62% rather than 6%;
this meant that for each billion euros
issued, the government received a
€538 million premium immediately and
will pay a €60 million coupon each year
for ten years.
In 2015, taps of existing bonds
represented a significant part of
total issuance. Given very low market
interest rates, the central government
received substantial issue premiums
(€22.7 billion) that it used to buy back
short-term debt. Without this policy,
the increase in debt in 2015 would
have been close to the deficit, i.e.
around €70 billion. This issuance
policy effectively postpones increases
in debt at the price of higher interest
expense in budgets in future years. In
general and national accounting terms,
however, premiums and discounts are
spread over the whole life of the bond
and interest is therefore identical.
Falling debt service costs
despite higher outstandings
Despite the rise in outstanding
debt, the central government’s debt
service costs have continued to fall
against a backdrop of exceptionally
Summary of report on the central governement budget in 2015
13
3
Revenue close
to forecasts
Net tax receipts (€280.1 billion)
were close to the forecasts in the
Initial Budget Act (+€1 billion)
The gap between forecast and outturn
for central government net tax
receipts was very narrow
in 2015
compared with the three preceding
years, when receipts were much smaller
than initial forecasts.
Sources: Cour des Comptes, National Budget Office
Change in net tax receipts
between the Initial Budget Act
and outturn in 2015 (€bn)
This result is explained largely by
conservative forecasts of economic
growth
and
the
spontaneous
increase (at unchanged legislation)
of tax receipts.
In 2015, the spontaneous
increase was less than €0.1 billion
from the forecast in the Initial
Budget Act; it was well below initial
forecasts in 2012 (by €10.6 billion), in
2013 (by €11.6 billion) and in 2014
(by €9 billion). The spontaneous
increase in tax receipts stemmed
partly from high returns from the tax
inspection service, with €3.6 billion
raised from companies issued with
recovery notices compared with
€2.1 billion in 2014.
The value of improved tax recovery
in 2015 compared with 2014 was
€1.9 billion.
New
tax
measures
generated
€0.8 billion
less
than
forecast,
however. This can be attributed
mainly to the greater than expected
increase in the cost of the CICE tax
credit, which reduced tax receipts
by an additional €2 billion,
along
with measures adopted during the year
such as the allocation of €0.6 billion in
Summary of report on the central governement budget in 2015
14
Revenue close to forecasts
VAT to the social security system to
cover the central government’s debt to
it. These measures were partly offset
by positive items that will not recur in
2016: a corporation tax settlement by
EDF relating to previous years, a lower
cost of EU litigation than that provided
for in the Initial Budget Act, and a high
return from a change in the deadlines
for inheritance tax settlement.
Tax receipts were €5.8 billion
higher than in 2014
243,6
269,9
276,9
272,9
272,3
265,1
214,3
237,0
255,0
268,4
284,0
274,3
280,1
150
170
190
210
230
250
270
290
310
Change in net tax receipts
at current scope, 2003-15 (€bn)
Source: National Budget Office
Most of this increase came from
the spontaneous change in tax
receipts (up €4.7 billion).
This was
the first positive change (+1.7%)
since 2011. The elasticity of tax receipts
with respect to GDP – calculated as the
ratio
between
the
spontaneous
increase in tax receipts and growth in
nominal GDP – was +0.9 in 2015, which
although less than 1 (considered to
be the long-term average) was
significantly higher than that in the
three preceding years.
Among the main tax measures, the
cost of the CICE tax credit rose again
in 2015, by €5.4 billion relative to
2014.
Income tax was also reformed to
incorporate a new break for low-income
taxable households (-€1.5 billion), which
replaced a flat-rate tax reduction
adopted in 2014.
On the other hand, central government
VAT receipts increased by €2 billion,
partly because of a carryover effect of
the 2014 hikes and partly because of a
change in the financial relationship
between central government and the
social security system as a result of the
Responsibility and Solidarity Pact. As
far as corporation tax is concerned,
measures such as the reduction in
the exceptional surtax raised its yield
by €1.5 billion. Corporation tax
receipts
also
benefited
from
a
€1.4 billion payment from EDF relating
to previous years
All in all,
the various legislative
changes and exceptional events
affecting tax receipts in 2015 had a
positive
overall
impact
worth
€1.1 billion.
Non-tax receipts also close
to Initial Budget Act forecasts
Central government non-tax revenue
totalled €14.4 billion in 2015, slightly
more than forecast in the Initial
Budget Act (€14.2 billion) and in 2014
(€13.9 billion).
The overshoot in non-tax revenue
stemmed largely from very high fines
imposed
by
the
Competition
Authority (€1.6 billion, compared with
the €0.2 billion forecast in the Initial
Budget Act).
Revenue close to forecasts
Estimates of tax expenditure
in 2014 and 2015 published
in the 2016 Budget Bill
Source: 2016 Budget Bill, Ways and Means Annex
(book II)
NB: in the latest figures submitted to the Cour
des Comptes, CICE estimates are adjusted
upwards for 2014 (€6.6 billion) and downwards
for 2015 (€12 billion).
On the other hand, the central government
did not receive any payment from the
credit insurer Coface, which financed
the compensation to Russia for the
cancellation of a sale of
Mistral
warships.
And a €2 billion dividend due from EDF
was paid only partly in cash (€1.1 billion),
with the balance paid in shares in the
company (€0.9 billion).
Levies on receipts were €4.5 billion
smaller than in 2014 and €1.2 billion
lower than forecast in the Initial
Budget Act
Levies on receipts to the benefit of
local
authorities
(€50.5
billion)
declined €3.9 billion in 2015,
in line
with a government savings plan that
provides for an €11 billion cut in
levies on receipts and budgetary
transfers to local authorities between
2015 and 2017 (following an initial
€1.5 billion reduction in 2014).
Other transfers to local authorities
rose further to €52.3 billion in 2015,
including a €1.7 billion increase in
transfers corresponding to devolved
responsibilities. This included a rise in
transfer tax (€1.4 billion) and allocations
of TICPE energy consumption tax
receipts to the regions to finance
apprenticeships and professional training.
Total central government transfers to
local authorities and their groupings
declined €0.5 billion relative to 2014,
to €102.8 billion.
Levies on receipts for the EU (€19.7 billion)
were €0.6 billion lower than in 2014 and
€1 billion lower than provided for in the
Initial Budget Act.
Better control of tax expenditure
is indispensable
Tax expenditure is estimated at
€84.4 billion in 2015,
according to
figures given in the 2016 Budget Bill.
This amount is €2.4 billion higher than
that published a year earlier in the
2015 Budget Bill (€81.9 billion). The
increase stems exclusively from the
reassessment of the cost of the CICE
tax credit, with the total of other tax
expenditure remaining unchanged.
Total tax expenditure increased by
€6 billion between 2014 and 2015,
reflecting higher expenditure on the
CICE tax credit.
Summary of report on the central governement budget in 2015
15
Summary of report on the central governement budget in 2015
16
Revenue close to forecasts
The increased cost of the CICE tax
credit reflected the rise in its rate
from
4% to 6%, additional claims
from companies and faster processing
of these claims by the administration.
The ceilings for tax expenditure
and tax credits set in the 2014-19
multiannual
Public
Finance
Planning programme were breached
in 2015.
They were €80.6 billion and
€24.7 billion, respectively in 2015. Tax
expenditure totalled €83.2 billion (with
unchanged calculation methodology
relative to the 2013 Budget Bill) and
tax credits €27.1 billion. No steps were
taken to correct this situation.
The authorities have attempted to
strengthen control over tax expenditure
by organising tax conferences since
2013. The joint discussion of budgetary
credits and tax expenditure is aimed
at consistency between these two
instruments of public policy and,
with an eye to rationalisation, should
result in the abolition of certain tax
expenditure items. This approach is
positive in principle but, as in earlier
years, produced limited results in
2015. Ministerial involvement is not
always sufficient and the process
generates few proposals to amend or
abolish tax expenditure items.
Better results from tax conferences
would require clarification of the
relationship between tax expenditure
and public policy objectives and an
assessment of the efficiency of tax
expenditure. Substantial progress
needs to be made on both counts.
Summary of report on the central governement budget in 2015
17
4
Expenditure control
is partial and its results
remain tenuous
General
budget
expenditure
close to the Initial Budget Act,
despite
major
adjustments
during the year
During the year, three anticipatory
decrees, a cancellation decree and an
supplementary Budget act have altered
the allocation of appropriations. Taking
carryovers into account, appropriations
under the general budget (excluding
tax credits and rebates) were €3 billion
higher than forecast in the Initial
Budget Act.
Excluding exceptionals, and at
constant scope, expenditure
was greater than in 2014
At current scope, general budget net
expenditure decreased by €2.7 billion.
This multiannual comparison has little
significance, however.
2014 was affected by payments to the
managers of the second Investing for
the Future programme and a capital
contribution to the European Stability
Mechanism. Offsetting these factors, the
Initial Budget Act for 2015 incorporates
changes of scope that will increase
central government expenditure by
€7.9 billion. They include a €7.6 billion
supplementary expenditure to the
central government connected with
the Responsibility and Solidarity Pact.
After adjustments, expenditure in
2015 was up €2.6 billion, or 0.9%.
General budget appropriations
and cancellations excluding tax credits
and rebates (€5bn)
Source: Cour des comptes
Expenditure
(€296.5
billion)
exceeded the Initial Budget Act by
only €0.4 billion,
thanks partly to
the setting of end-of-year targets.
General budget expenditure excluding
exceptional items, constant scope
Source: Cour des comptes
Summary of report on the central governement budget in 2015
18
Expenditure rules were relaxed
and circumvented at the end
of the period
Initially set at €282.6 billion, the
expenditure rule excluding debt
service and pension costs was
tightened at the time of the stability
programme then lifted to €284 billion
at year-end to take account of such
factors as the transfer to the general
budget of military investment spending
initially allocated to a special account.
Expenditure control is partial
and its results remain tenuous
Source: Cour des comptes
Expenditure within the scope of the
revised rule totalled €283.9 billion,
according to the government. The Cour
des Comptes notes that circumventions
of the budgetary charter represent
€3 billion.
They include the earmarking
of receipts in the place of budgetary
appropriations to finance transport
infrastructure
(€1.1
billion),
the
redemption of social security debt
(€0.6 billion) and sums granted to
regional governments in the context
of the reform of apprenticeships and
professional training (€0.5 billion).
Revisions to the expenditure rule excluding debt service costs and pensions
during the period
19
Expenditure control is partial
and its results remain tenuous
Summary of report on the central governement budget in 2015
Central government transfers to local
authorities and to public agencies
have virtually stabilised after years of
rapid growth. But
efforts within the
central government’s own budget
are limited
.
Personnel spending has risen for the
second year in a row.
Breakdown of general budget
expenditure by type
Source: Cour des comptes
Payroll costs excluding contributions
to special account pensions (€bn)
Source: Cour des comptes
Poorly defined ‘savings’, limited
and mainly non-recurrent in 2016
The ‘savings’ stated in the 2015
finance bill in respect to the central
government
and
public
agencies
(excluding Investing for the Future
programmes) amount to €7.3 billion,
but are calculated using a 2014 base
higher than recorded expenditure of
€2.1 billion and a trend increase in
personnel spending overestimated by
€1 billion.
Note also that expenditure
was €2.5 billion higher than in the
Initial Budget Act. In the opinion of the
Cour des Comptes, ‘savings’ attributed
to the central government and public
service operators in 2015 amounted
to just €1.7 billion
. 60% correspond to
drawdowns on public agencies working
capital that cannot recur in 2016.
Mixed trends, depending on the
type of spending
Personnel and operating expenditure,
including debt service costs and subsidies
to public service operators, still represent
more than 70% of general budget net
expenditure
Trends are mixed across the various
spending categories.
Summary of report on the central governement budget in 2015
20
Expenditure control is partial
and its results remain tenuous
Security mission appropriations
and expenditure at constant scope,
excluding contribution to special
account pensions (€bn)
Justice mission appropriations
and expenditure, excluding contribution
to special account pensions (€bn)
Source: Cour des comptes
A limited impact of the first
anti-terrorism plan on 2015
outturn
The government has considered its
justice and security missions as
priorities since 2012 and they have
therefore been protected from job and
budget cuts. It is difficult to measure
the
impact
of
these
additional
resources.
These
missions
benefited
from
additional appropriations (€218 million)
after the January 2015 attacks, which
were meant mainly to finance additional
personnel.
These
appropriations
exceeded requirements, as recruitment
materialised only late in the year.
The
impact of the first anti-terrorism plan
on 2015 expenditure was limited.
Employment, actual (2012-14)
and planned (2015-16)
Source: Cour des comptes
The central government has created
public sector jobs for the first time
since 2002.
Operating and investment expenses
have also risen sharply.
Summary of report on the central governement budget in 2015
21
5
20 years of expenditure rules:
an assessment
In 1996, France decided to adopt a
government
spending
constraint
known as the expenditure rule.
Widespread use of expenditure
rules in Europe
17 EU countries have implemented
budget rules covering all or part of
their public expenditure.
International
organisations encourage such rules,
backed by statistical analyses. But they
do not produce a very significant
decrease
in
public
expenditure
automatically and all on their own.
That depends above all on structural
reforms.
A gradual extension
and diversification
of the functions
of the rule in France
Between 1996 and 2007, the rule
covered general budget expenditure,
including debt service costs and
pensions, but not expenditure under
special accounts or subsidiary budgets.
In 2008, the rule was extended to
levies on receipts.
In 2011, a twin-level rule was introduced.
The first (a ‘volume’ rule) corresponds to
all expenditure included in the rule as
defined up to that point. The second (a
‘value’ rule) excludes interest costs and
government pensions.
In 2012, the expenditure rule was
extended to receipts from certain taxes
and levies earmarked to agencies
separate from the government, with
an upper limit.
The purpose of the rule has changed
over time.
Starting as an internal
management tool, it has become a
means of expressing the government’s
budgetary
strategy,
approved
by
Parliament within the multiannual
Public Finance Planning Pprogramme
Act since 2009.
Scope of central government expenditure
rules in the 2015 Initial Budget Act
Source: Cour des comptes
Source : Cour des comptes – données INSEE
Summary of report on the central governement budget in 2015
22
20 years of expenditure rules: an assessment
A real downturn in expenditure
but limited by repeated circum-
vention of the budgetary charter
Since 1996, the targets imposed by
the central government expenditure
rule have become increasingly rigorous.
Expenditure rules since 1996
Sources: Cour des Comptes, Budget Bill
Budgetary central government and central government expenditure growth
Sources: Cour des comptes, INSEE
Growth
in
central
government
expenditure (i.e. budgetary central
government plus other bodies) has
slowed since the expenditure rule
was introduced,
from an annual
average of around 1.3% in 1986-95
to 0.9% in 1996-2007 and 0.4%
since 2008.
Rule / Volume rule since 2011 (with data labels)
Value rule (since 2011)
Single rule
Twin-level rule
Summary of report on the central governement budget in 2015
23
20 years of expenditure rules: an assessment
Possible scope for the management rule
and the overall rule
Source: Cour des comptes, DGFiP
Central government expenditure as
shown in national accounts has risen
faster than expenditure rule targets.
This reflects changes in scope and
accounting but also
the circumvention
of the budgetary charter.
The need for a clearer distinction
between an overall expenditure
rule and a management rule
In order to clarify and stabilise the
scope of the rules, the Cour des
Comptes suggests using the current
two-level distinction to define
a
management
rule for spending that
can be controlled by the administration
on an annual basis and
an overall
,
broader rule more directly consistent
with the general objectives of public
finance.
Transparent, in-year
monitoring
The Cour des Comptes also recom-
mends that the Government publishes
regular forecasts through the year of
expenditure outturns within the scope
of each of the two rules.
Summary of report on the central governement budget in 2015
25
6
Assessing management:
reliability, performance
and sustainability
Uneven implementation
of the principles
of budgetary law
According to the unity principle, a
single document, the Budget Act,
should cover all central government
revenue and expenditure.
The
implementation
of
the
Responsibility and Solidarity Pact has
resulted in clearer financial relations
between the central government and
the social security system. Moreover,
as of 2016 the central government
budget includes costs met until 2015
by the CSPE extra-budgetary tax
contribution to the public service
charge for electricity.
Numerous non-budget items persist,
however, taking the form of the allocation
of tax receipts to ‘transparent public
agencies’ (such as the solidarity fund in
the context of unemployment benefit)
or to unincorporated funds (such as the
fund for the prevention of major natural
disasters). Their management does not
offer any advantage relative to the
management
under
the
central
government budget.
The
principles
of
accuracy
and
annuality
require
that
payment
appropriations are budgeted in line
with expenditure requirements in
the coming year.
Progress was made in budgeting
personnel expenses in 2015, but the
under-budgeting of other expenditure
items remains high (at least €2.2 billion),
notably in defence, agriculture, food
and rural affairs and solidarity, social
inclusion and cohesion.
The principle of universality applied
to the central government budget
prohibits the direct earmarking of a
particular receipt to a particular
expenditure and the offsetting of a
receipt by an expenditure
There are many exceptions to this
principle (cost-sharing contributions,
income earmarking, subsidiary budgets
and special accounts, appropriation
reinstatements). They are governed by
rules that the authorities tend to
interpret liberally.
Summary of report on the central governement budget in 2015
26
Assessing management:
reliability, performance and sustainability
The Cour des Comptes has identified
allocations of expenditure inconsistent
with the purposes of a subsidiary budget
or special accounts or cost-sharing
contributions.
The number and amount of exceptional
appropriation reinstatements (i.e. not
attributed to the original programme
giving rise to the expense) have risen
sharply in the context of reallocations
between Investing for the Future
initiatives. The magnitude of these
reallocations underlines the shortco-
mings already mentioned by the Cour
des Comptes in the extra-budgetary
way these expenses are managed.
A still limited contribution
from the performance approach
to identifying savings
Performance indicators improved again
in 2015.
The number of programme
indicators was reduced, while more
strategic
transversal
indicators
enabling comparisons between certain
programmes and mission indicators
were
introduced.
Government
departments have also developed
operational indicators on which their
management control is based.
The cost accounting shown in budget
documents is still too overarching a
tool to be used by departmental
managers to direct their activities. The
Cour des Comptes repeats the recom-
mendation it made in its February
2016 public report on general govern-
ment accounting that most of the
resources used for this task be reallo-
cated to the cost accounting of
government
departments.
This
should be developed more systemati-
cally, using general accounting tools
where appropriate.
Spending reviews are still not good
enough.
They should be a means of
assessing public spending, with an
explicit objective of documenting the
structural savings needed to meet the
required multiannual trajectory of
public finances. The first spending
reviews were carried out in 2015, a
year earlier than planned. For the
central government, the Budget
Office has highlighted €267 million
in savings in 2016 as a result of
these assessments. But this amount
represents
only
1.4%
of
the
€19.3 billion in savings envisaged from
the central administration between
2015 and 2017.
Medium-term pressure
on the multiannual trajectory
of public finances
Accrued expenses payable and
unbilled expenses – i.e. short-term
debts resulting from goods and
services provided by the supplier
and not yet paid for by the
government – were €10.3 billion,
or €978 million less than in the
preceding year.
The medium-term risks are greater.
On the revenue side, the CICE tax
credit has resulted in the accumulation
of outstanding
refunds
and tax
deductions by companies in respect
of their corporation tax. Meeting the
rising cost of the Responsibility and
Summary of report on the central governement budget in 2015
27
Assessing management:
reliability, performance and sustainability
Solidarity Pact is another long-term
commitment. On the expenditure side,
major legal commitments were made
in 2015 in respect of such matters as
the support fund for local authorities
with toxic loans , the national high-speed
broadband plan and major weapons
programmes.
On top of these commitments yet
to be paid for, decisions over the
central government recruitment, its
wage policy and the new military
planning legislation will have major
consequences for 2017-19 financial
planning.
0
10
20
30
40
50
60
70
80
90
100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Unpaid commitments, general budget
(€bn)
Source : Cour des comptes
Authorised employment ceilings, central
government and public service operators
Source: Cour des comptes
29
Summary of report on the central governement budget in 2015
Conclusions
et recommendations
A more favourable environment in terms of economic growth and exceptionally
low interest rates must not lead to the abandonment of efforts to manage
central government spending more rigorously.
The central government will have to make structural savings if is to finance its
priority policies and deal with an inevitable increase in debt service costs in the
future. Such savings are not clearly apparent in the 2015 budget outturn.
The economic and financial situation should be used to implement the reforms
needed to consolidate central government finances in a durable manner. This
involves explicit choices based on an assessment of expenditure efficiency.
Recommendation n° 1 :
include a
breakdown of the structural and
cyclical budget balances for the
central government and by general
government
sub-sector
in
the
introductory section of the Initial
Budget Act and the Budget Review
Act (renewed recommendation).
Recommendation
n° 2 :
in
a
document
appended
to
the
Budget Bill, explain the receipts
forecasting process and method
for the main taxes (reformulated
recommendation).
Recommendation n° 3 :
in the ways
and means document appended to
the Budget Bill, provide in-depth
analyses of gaps between forecasts
and outturns of tax receipts (renewed
recommendation).
Recommendation n° 4 :
change the
income
and
expenditure
table
shown in Budget Acts by deducting
only credits and rebates relating to
central government taxes from
gross
central
government
tax
receipts
to
determine
net
tax
receipts (renewed recommendation).
Recommendation n° 5 :
provide an
exhaustive
assessment
of
tax
expenditure between now and 2019
(reformulated recommendation).
Recommendation n° 6 :
supplement
the PAP and RAP budgetary docu-
ments (projected annual performance
and annual performance reports) with
the categorisation of tax expenditures
in accordance with the objectives of
the programme to which they belong
(renewed recommendation).
Recommendation n° 7 :
in similar
fashion to the budgetary charter,
which applies to expenditure subject
to rules, provide precise guidance for
the definition and alteration of the
scope of tax expenditure and tax
credits subject to the multiannual
public finance programme ceiling
(‘tax expenditure and tax credit
assessment
charter’)
(new
recommendation).
Conclusions et recommendations
Recommendation n° 8 :
introduce
in-year arrangements to monitor
the rule, with the publication of
forecast outturn three times during
the period (Stability Programme
submission, budget policy debate
and presentation of the Budget Bill
for
the
following
year)
(new
recommendation).
Recommendation n° 9 :
adjust the
scope
of
annually
controllable
expenditure under the management
rule (the former ‘value’ rule) in the
next multiannual Public Finance
Planning programme by removing
the levy on receipts for the EU and
including local tax credits and
rebates, Investing for the Future
payments, special account spending
(excluding pensions and financial
transactions), all taxes allocated to
general government units excluding
local authorities and their groupings
and
social
security,
without
adjustment for central government
drawdowns of these institutions’
working
capital
(new
recommendation).
Recommendation n° 10 :
adjust the
scope of the overall rule (the former
‘volume’ rule) in the next multiannual
Public Finance Planning programme
by including,
over
and
above
management rule items, debt service
costs, budgetary central government
and public agencies contributions to
special
account
pensions,
central
government tax credits and the EU
levy on receipts (new recommendation).
Summary of report on the central governement budget in 2015
30