Budget of the French State

The budget of the French State fixes the receipts and the expenditure planned for the year. It is adopted each year, for the following year, by the Parliament (National Assembly and Sénat) on a proposal from the government. The reform of the public purses, engaged by the organic law n° 2001-692 of the 1 {{er}} August 2001 relating to the finance laws (in summary LOLF) has inter alia as an aim increasing the role of the Parliament in the definition of this budget. Before 2006, it is the ordinance n° 59-2 of the bearing January 2nd, 1959 organic law concerning to the finance laws which defines the structure and the methods of adoption of these texts.

History

The Old Mode

Under the Old Mode, the budget of the State was confused with the expenditure of the king (one speaks about the royal treasure ). The budget of the State and its financing were far from being uniformly distributed on the territory.

Initially, the unit of the kingdom did not prevent each province, each city, each corporation to have its own laws and habits, including in the budgetary and tax field. To the local particularisms preserved during inclusion in the kingdom had been added acquired privileges, often with perpetuity, in reward of actions (military or civil, even private) or even acquired subject to payment (impecunious kings having often sold exemptions, total or partial, taxes). This situation led to an astonishing tax exubérance, with a large variety of recipients of taxes (the king, one or more local lords, the governor of province, the commune, the church…), of mode of perception, plate, rate, conditions, exemptions, etc Among the taxes existing about everywhere on the territory, one can quote

the size, tax intended for the maintenance of the professional army of the king, to replace the military service
the Dîme, perceived by the Church
the Gabelle, a tax on salt -- as essential at the time as the gasoline nowadays --, very variable according to the provinces.
the Granting, kind of interior customs, commercial Royalty paid at the entry of the cities and provinces, or for the crossing of bridges, which will disappear in France only in 1943 (after, for example and for the little story, having pushed the guinguettes towards the Marne out of Paris).

In addition and in the field of the countable technique, until 1789, no account was held in an official way, which makes it possible to evaluate the receipts and the national expenditure. There had been some attempts well, but none had emerged. One spent " with the œil" and the incomes were not regular. Accountancy " partly double" was adopted besides only in 2001.

Under the Old Mode, the principal expenditures of the State are the expenditure of a military nature (naval construction, fortifications, equipment of the armies, etc), the expenditure of the court (which accounts for approximately 18% of the budget of monarchy in second half of the 18th century), the expenditure of charity, and the refunding of the debt, which weighs already very heavy with the Middle Ages, and which, the day before the French revolution, will represent a pit for 42% of the public revenue. Attention however: this sum includes also refundings of the capital of the subscribed loans, whereas the modern budget reveals only the payments of the interests; by comparison, France of 2007 refunds, capital and interest, approximately 50% of its receipts (70 Billion capital and 40 of interest, against less than 230 of receipt); for the moment without bankruptcy nor revolution. This is why, as of the time of the French revolution, one could say that Louis XVI had made a serious error by wanting to deal with rather banal financial problems by a political solution and tax, and that by doing this it had launched the machine which finally crushed it; but without effective countable system, the king did not know what it did.

In 1788, the public revenue (or rather king) rises to 471,6 million pounds distributed as follows:

direct taxes: 163 million books
indirect taxes: 219,3 million books
others: 89,3 million books (returned of the royal field, Lottery, etc)

But the king spends

for his army 173,3 million books,
for his court (pledges, pensions and house of the king) 89,8 million books
for his people also (the Highways Departments, charity, safety, etc) almost 110 million books.
and especially, the refunding of the debt (let us repeat it: capital and interest): 261,1 million books.

On the whole, the State will have withdrawn 633,1 million books. The deficit appears monstrous: 161,5 million books. However, let us recall that according to our modern standards, it is not a question of a deficit, but of a Financing need, and that from this point of view the situation of today is still worse.

After the French revolution

August 1st

The modern State

Article 14 of the Déclaration of the human rights and the citizen affirms the principle of the assent of the Nation to the tax: “all the citizens have the right to note by themselves or their representatives, the need for the public contribution, to agree it voluntarily, to follow employment of it, and to determine of it the share, the plate, covering and the duration”.

This provision is at the origin of the existence of the parliamentary institution. Indeed, the meeting of the General states in 1789 had as an aim the first question of the tax. The Finance law, which defines the budget of the State, includes/understands two parts: the first part is devoted to the receipts, the second describes the structure of the expenditure.

The Budget of the State is attached to the Ministère of the Budget, the Public accounts and the Public office.

Procedure of installation

The budgetary process begins with more than one year in advance. It is entirely under the control and the responsibility of the government, the Parliament having makes of it only one influence less than marginal (it will move only less one ten thousandths of the appropriations, compared to the governmental proposal)

Dimensioned receipts, it is the ministry for finances which with the upper hand. There are some political measurements well resulting from the other ministries (standard: tax credit for such or such expenditure of the private individuals), but it marginal and is in any event validated (or emptied its substance…) by the tax authorities. It fixes the supposed receipts of the official apparatus (supposed since they depend on the economic conjecture: benefit of the companies, consumption, growth, etc)

Dimensioned expenditure, put aside constraints and objectives which were " topés" as of the former budget of the year, the process starts officially with the sending of the " letters-plafond" : according to the general orientations fixed by the president of the Republic , fixed the Prime Minister with each minister his constraints.

But, quite front, the administration of the Budget already started to determine the technical parameters on which depend the mechanical evolutions (for example: the level of inflation, the value of the goods which will be sold, the effect of the career profile of the civil servant who increases their remuneration periodically, or the level of the retirements).

These negotiations were described like a " play of rôle" (sic dixunt MISTERS Lambert and Migaud), where all and sundry deploy treasures for rabotter insincerely or to defend the appropriations, without hesitating to be mistaken and lying themselves (by omission, because one in general will not give false informations). The principal ambition of the LOLF was besides to put an end to this bad comedy, in substituent with the obligation of défendrre the means, an obligation of concrete and measurable results. Is force to note that this result does not have (not yet?) summer reached.

Once the administration of the budget knows the receipts and concluded with each ministerial administration (possibly after a " arbitrage" Prime Minister), one obtains the " PLF" : Bill of Finance .

Each minister already distributed, at this stage, the variations of means between his services, more or less.

The bill of finance worked out by the government is then submitted to the Parliament (National Assembly and Senate) with the autumn, after the vote of the law of payment which relates to the expenditure of the former year. After discussion, the Members of Parliament vote the budget hardly rectified which takes the name of Finance law .

This law, as well as any other, is published in the Official journal. After this law, the government will be able to still proceed, without referring about it to the Parliament, adjustments relating to 2% of the appropriations, and it preserves the possibility of making pass a rectifying law almost constantly.

Receipts

Expenditure

The principal expenditures of the State in France were in 2006:

the State education (60 billion euros),
interests of the debt (40 billion euros),
the Defense (35,4 billion euros),
Research and Higher education (20 billion euros),
Safety and the Interior (18 billion euros),
Work (13,2 billion euros),
Solidarity (12,6 billion euros)
and Transport (9,4 billion euros).

The total expenditure of the State in 2006 rose to 266 billion euros, that is to say a deficit of approximately 45 billion euros. On 266 billion expenditure in 2006,118 billion, that is to say 45% were used to pay the government officials (professors, hospital staffs, Armée, police force, etc).

It should be noted that refundings of the capital of the debt to length and medium term are not entered as expenditure (they are variations of the assessment). For 2007, the level envisaged is of 71 Billion euros. Thus, capital and interest, the French state will pay approximately 110 billion euros, that is to say almost exactly what it will borrow.

Balance in the budget

Budget deficit

In France, since 1980, the budget of the State is each overdrawn year. These last years, the deficit was established in a fork between 35 and 45 billion euros. Recently, the bill of payment of the budget of the year 2006 presented in June 2007 gives a report on a budget deficit except countable regularization of 35,7 billion euros against 46,9 billion envisaged in initial finance law.

These recurring budget deficits result in an continuous increase of the national Debt of France, which reached, in March 2007 the amount of 1.221 billion euros (1 221.000.000 000 euros). As comparison, in 1980 the national debt was of 21% of the GDP, that is to say 589 billion francs or 90 billion euros (knowing that decentralization not being made yet, the state concentrated almost all the national debt then).

According to its European agreements, the public deficit must remain under the threshold of 3% of the GDP. The French public deficit was tiny room in 2006 for the 3rd consecutive year and is become again, for the first time since 2001, lower than 3% of the GDP, threshold fixed by the European Union. With at the end of 2006, it was of 2,5%.

Adoption of the budget: finance laws

Before its presentation with the Parliament, the budget makes the subject of debate tripartite between the Prime Minister, the minister in charge for the Budget, and the ministries known as “extravagant”. Letters of framing are sent by the Prime Minister to his colleagues, who determine the financial room for maneuver of each one. Each minister makes then proposals, and a second phase is devoted to the budget trade-offs.

The Parliament has then seventy days to adopt the budget. The project is initially filed in at the office of the National Assembly. The debates are prepared by the Committee of supply at which sit of the members of the various parties represented.

It follows then the procedure of the parliamentary shuttle, i.e. it passes from the one to the other assembly so that they come to a conclusion about a common text.

The assemblies have faculty to propose amendments, but they must remain within the financial framework fixed by the government (article 40 of the Constitution of 1958), i.e. they can propose no measurement likely to involve “either a reduction in the public resources, or the creation or the aggravation of a public office”. The singular on the word “load” indicates that the Parliament could not worsen a load by reducing another load simultaneously. Concretely, a public office within the meaning of this article corresponds to a budgetary mission. The Parliament can thus modify the distribution of the appropriations between two programs of the same mission provided that the entire amount does not increase.

The structure of the budget

history: from 1959 to 2005

Until the budget 2006, date of the coming into effect of the reform, the budget is adopted according to the structure of the finance law.

The first part “fixes the general terms of financial balance”: it authorizes the lifting of the tax, envisages the amount of the receipts, gathers various tax measurements and envisages the ceiling of the main categories of expenditure. It must be voted before the examination of the second part.

This one is devoted to the appropriations available to the various ministries. She is the subject of important debates within the assemblies, and of many amendments. Nevertheless, distinction between “voted measurements” and “measurements new” limit this debate. Indeed, only new measurements can make the subject of debate, and they account for only 5% of the entire amount.

Voted measurements (constant budget of the State), are the single vote object. Other measurements are voted by ministry and title, even by chapter.

In the event of persistent dissension between the National Assembly and the Senate, at the conclusion of the Joint industrial commission, the Gouvernement can decide to allot to the National Assembly the last mot. This case of figure occurred between 1981 and 1985, 1988 and 1992 and 1997 and 1999.

During the year, of the corrected finance laws can be voted, in order to adapt the budget to the conditions of exercise. Lastly, a posteriori, a law of payment gives a progress report on the real implementation of the budget.

Example: budget 2006

According to the Finance law 2006, voted in December 2005, 8 budget headings exceed ten billion euros for a total budget 344,2 M€.

The segmentation of the budget headings is by arbitrary nature. If for example one wanted to reveal the budget of larger teaching, it would be enough to gather Enseignement (59,7 M€) and Seeks/Higher education (20,5 M€) to make of it the first budget of France with more than 80 billion euros).

That being, according to the classification established by the State:

Refundings and reductions: 68,5 M€;
Teaching: 59,7 M€;
Financial liabilities of the state: 40,7 M€;
Defense: 36,2 M€;
Research/Higher education: 20,5 M€;
Safety: 16 M€;
Work and employment: 13,6 M€;
Solidarity: 12 M€.

One can notice that the most expensive station is refundings and reductions. It acts, inter alia, of tax exemptions. This amount is perceived in the tax and thus appears in the receipts. It is then redistributed by refunding and for this reason appears in the expenditure. The first expenditure of the budget is thus a simple countable dummy entry.

The third expenditure of the State (40,7 M€) corresponds mainly to the debt servicing of the State, i.e. the payment of the interests and the refunding of the capital generated by the debt (approximately 1.150 M€ is 64% of the GDP in 2006). This effective expenditure is of rising near to the deficit of the budget (difference between the expenditure and the receipts) which is of 36 M€ and which corresponds to the annual increase of the French national debt.

Source: Legifrance.gouv.fr; Finance law 2006 published with the Official journal.

Example: budget 2007

Expenditure 334,7 Md€, distributed according to:

Teaching and research: 80,3 Md€
Territorial collectivities: 49,5 Md€
Debts and financial liabilities: 40,9 Md€
Defense: 36,2 Md€
Work, employment and solidarity: 24,3 Md€
Safety and justice: 22 Md€
European Union: 18,7 Md€
Transport, city and housing: 15,9 Md€
Other missions: 46,9 Md€

Receipts 292,7 Md€

VAT: 133,5 Md€
Income tax: 57,1 Md€
Corporation tax: 46,1 Md€
Excise tax on the oil products: 18 Md€
Other revenues from taxes: 11,1 Md€
Other receipts: 26,9 Md€

Deficit of the State: 42 Md€

The LOLF: the reform of the budget of the State

The reform of the budget of the State has several objectives:

To rationalize the budget and to make it more readable while gathering the appropriations within missions being able to include/understand the activity of several Ministry S (ex: the policy of the City). In addition, the missions (or great public policies) are made up of programs. Within these programs the appropriations are known as fungible, i.e. the manager has a better room for maneuver to make pass the appropriations available of a project to another, where necessary.

Responsabiliser managers of public funds: Each mission is declined in programs, themselves declined in actions. Each action is associated with measurable objectives. The attack, or not, of these objectives will be the subject of an examination by the Parliament the following year.

To reinforce the transparency and to improve information of the Parliament: the role of this last is increased and the power of the committee of supplys is increased. In addition, the installation of objectives associated with each action enables him to better control the use of the public money.

Enfin, the Public accounts will be the subject of a recasting, in order to return it nearer to the accountancy of the private companies, in particular allowing a patrimonial approach of the accounts of the State, with the image of what was made before for the territorial collectivities.

The implementation of this reform is progressive. An additional budget, by program, was submitted in 2004 to the Parliament, which votes however still according to the ordinance of 1959. The first budget presented within the framework of the LOLF was the budget of 2006, presented in 2005.

The budgetary reform in progress is of a width such by its consequences on the whole of the Public action that some name it already budgetary revolution, and that its full application is not awaited before 2012.

Figures

The budget of the State represents in 2007:

268 billion euros of expenditure (clear expenditure of the general budget)
226 billion euros receipts

It thus results an estimated loss balance from it from 42 billion euros.

Principal the missions is, by decreasing order of amount (Payment appropriations, according to the finance bill for 2007, in d'€ million):

Let us recall that this budget recalls the expenditure of the general budget of the State: it does not include the welfare transfers, nor the expenditure of the European Union (especially important in the agricultural sector).

The operational budget of the National Assembly is of 483.259.306 € (2003), it includes 6.860.206 € operational appropriations for the Parliamentary chain.

In 2006,5,7 million income tax returns were carried out by Internet.

See too

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