Press Release
24 September 2019
PUBLIC FINANCES AND ACCOUNTS
LOCAL GOVERNMENT FINANCES 2019
Part II - The financial position and management
of local authorities and their public institutions -
Implementation of new regions
The Cour des comptes of France now presents its annual report on local public
finances in two parts to improve the information given to Parliament. Part I, focusing
on the financial position in 2018, was published last June; part II is focused on the
situation in 2019 and beyond, as well as on an aspect of local public management –
this year, the figures for the implementation of new regions – based on inspections
carried out by regional and territorial Chambres des comptes of France.
Local authorities once again benefit from a favourable financial context in 2019: a
slight increase in State contributions and transfers is expected and local taxation
remains dynamic. While local authorities achieved their spending objectives in
2018, the contractual framework with the State continues to show weaknesses.
Implementation of new regions took place seamlessly. However, expected
efficiency gains are yet to be seen. On the contrary, the transition incurred
additional costs for merged regions. In the present favourable financial context,
regions must improve exercise of their responsibilities as the State reorganises
local offices of the central government.
Outlook for local public finances and their governance
Overall, financial contributions from the State are set to increase slightly in 2019, and
income from local taxes will increase to
€
2.7 billion as a result of economic growth and
flat-rate upgrading of cadastral rental values. The financial position of local authorities
should continue to improve until 2022.
While objectives for operating expenditure are achievable in 2019, there is a risk that
certain local authorities – particularly those who are not concerned by the contractual
framework – may slacken their efforts and as such, compromise their objectives for debt
reduction.
Meanwhile, the contractual framework requires greater transparency, particularly in terms
of methods used for the restatement of expenditure. The framework presents weaknesses,
such as the exclusion of operating expenditure from specific budgets, which are dynamic,
or the risk of a slow-down concerning cooperative approaches and the pooling of
resources between local authorities.
Lastly, prior assessment of the impact of decisions made by the State concerning local
authority finances must be improved.
New regions
Despite a reduced window for preparation, merging of regions as decided by the lawmaker
in early 2015 took effect on 1
st
January 2016. Regions created as a result took ownership
of their new jurisdiction without interruption to public services, particularly in the field of
transport and economic development.
However, this implementation and regrouping have prevented efficiency gains from being
achieved so far.
Regions were focused on complying with a stringent schedule and did not immediately
modify their coordination or means of intervention. Changes are nonetheless required in
order to rationalise and clarify public action at regional level, at a time when the State plans
to speed up the reform of local offices of the central government.
Merging of regions resulted in significant costs: as a result, indemnity expenditure
increased by almost 12% between 2017 and 2018 in merged regions, compared to just
over 6% in the other regions. Similarly, public policies were often standardised at the
highest level. Expected management savings are therefore yet to be seen.
Regions currently have substantial financial flexibility due to volatile yet dynamic economic
taxation, which has generally enabled them to invest and contain their indebtedness. This
is a key moment for clarifying, or even reinforcing, their responsibilities in the form of more
assertive discussions with the State and other categories of authorities.
The Cour has made nine recommendations with the aim of enhancing the clarity of public
action, improving assessment of the impact of decisions made by the State concerning
local authorities, improving the financial contractual framework, and rationalising the
distribution of responsibilities between the State and regions.
Read the report
PRESS CONTACTS:
Ted Marx
Communications Director
T
01 42 98 55 62
ted.marx@ccomptes.fr
Denis Gettliffe
Media Relations Manager
T
01 42 98 55 77
denis.gettliffe@ccomptes.fr
@Courdescomptes
ccomptes
Cour des comptes