PRESS RELEASE
22 July 2024
Finance and public accounts
LOCAL PUBLIC FINANCES 2024
The Court of Auditors publishes its annual report on the financial situation of local
authorities, based on an examination of their accounts for 2023. After a very favourable
2022, the year 2023 was marked by an overall deterioration in the financial situation of local
authorities and by a divergence in the financial situations of the three main categories of
local authorities. On the whole, municipalities and inter-municipal structures continued to
enjoy a good financial situation. By contrast, the financial situation of the regions worsened
and that of the departments deteriorated. A less favourable financial situation than
expected and the absence of a mechanism to implement the objectives of the 2023-2027
public finance programming act make it uncertain whether local authorities will be able to
contribute to the recovery of public finances.
In 2023, local authorities faced significant financing requirements due to an acceleration in
expenditure and a slowdown in revenue
Local authority operating revenues (€252bn) slowed (+3.4 % compared with +5.2 % in 2022 on
a like-for-like basis). After several years of accelerated growth, the downturn in the property
market caused revenues from transfer taxes to fall back to their 2020 level (-€4.5bn, or -
22.1 %). After growing faster than GDP (+9.2 % in 2022), VAT revenues increased only slightly
in 2023 (+1.9 %) due to changes in the economic environment and a negative adjustment in
2022. Conversely, revenues from property tax on built real estate rose sharply (+9.9 %), due to
the indexation of bases for residential property to inflation and rate increases by some
municipalities.
Local authority operating expenditure (€212.2bn) accelerated (+6.1 % compared with +5
% in
2022 on a like-for-like basis). Inflation (+4.9 % after +5.2 % in 2022) again had a significant
impact, both direct and indirect, on their expenditure: higher prices for goods and services
(water, energy, heating and food), indexation of social benefits, higher interest charges on
financial debt and higher remuneration (index point increase of 1.5 % on 1 July 2023, after
3.5 % on 1 July 2022 in particular). The increase in staff costs also reflects the growing use of
contract staff, whose remuneration on average exceeds that of civil servants.
As a result, gross savings (the balance of operating revenue and expenditure), the main source
of investment revenue for local authorities, fell (-€3.9bn, or -8.9
%). However, they once again
increased their investment (€72.8bn, i.e. +6.6
% after +6.8 % in 2022).
As expenditure increased much more than revenue, local authorities generated a significant
financing requirement in 2023 (-€5.5bn in national accounts), after a surplus in 2022 (+€3bn).
However, local authorities are still in a healthy financial situation. They can only borrow to
finance capital expenditure (and not operating expenditure or loan repayments). In 2023, their
financial debt (€187.6bn) continued to fall in relation to GDP (to 6.7 %). This is all the more
limited as local authorities still have a high level of cash (€55.3bn), albeit at a lower level in
2023.
Different financial situations for the three main categories of local authority
In 2023, local authorities and inter-municipal structures as a whole continued to enjoy a healthy
financial situation. Their operating expenditure increased significantly (+6 %), but so did their
operating revenue (+5.8 %), driven by higher revenues from property tax, household waste
collection tax and residence tax on secondary residences. The rise in gross savings (+€1.2 billion)
enabled the regions to finance their capital expenditure (+7.9 %) without increasing their debt.
The financial situation of the regions worsened. Operating revenue rose only slightly (+2.9 %)
due to the slower growth in VAT revenues, which make up more than half of this total.
Operating expenditure accelerated (+5.2 %). Gross savings fell slightly (-€0.4bn). However, the
regions maintained their level of investment by drawing on their cash reserves, which are now
at a low level.
The financial situation of the departments deteriorated. Operating revenues fell (-1.1 % on a
like-for-like basis) due to the fall in transfer taxes and the sluggishness of VAT. Given the
acceleration in operating expenditure (+6.5 %), the departments' gross savings fell by almost
40 % (-€4.7bn). Nevertheless, the departments increased their investment by drawing on their
substantial cash reserves.
An uncertain contribution by local authorities to the recovery of public finances
The 2023-2027 public finance programming act forecasts that local authorities will generate a
large surplus in 2027 (0.5 % of GDP), thanks to a reduction in the volume of their operating
expenditure (-0.5 % per year between 2024 and 2027) and a reduction in their investment
expenditure (in 2026 and 2027). The 2024 stability programme confirms this objective.
However, the increase in the borrowing requirement and the dynamic nature of local authority
spending in 2023 mean that the prospect of a significant surplus is remote.
An additional difficulty is that the programming act makes no provision for ensuring that local
authorities achieve the targets it sets for them.
Read the report
PRESS CONTACTS:
Julie Poissier
Communications Director
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+33 (0)6 87 36 52 21
julie.poissier@ccomptes.fr
Sarah Gay
Press Relations Officer
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+33 (0)6 50 86 91 83
sarah.gay@ccomptes.fr
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