This presentation was made by Delphine MORETTI, GOV-BUD, OECD, at the 39th Annual SBO meeting held in Jerusalem on 6-7 June 2018.

1. BUDGETING IN FRANCE
Delphine Moretti
Senior Policy Analyst
Budgeting and Public Expenditure Division
Public Governance Directorate

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To Begin…
• Expenditure has been growing
steadily since the 1960s,
resulting in the highest public
spending in the OECD.
• Social Security spending
increased the most during the
last three decades.
France: General government expenditures
Sub-sectors in % of general government expenditures, 1979-2017
OECD: General government expenditures
% of GDP, 2016

3. • France’s budgetary framework remained almost unchanged from the 1950s to the late
1990s.
• Two main waves of reforms to modernise an outdated framework and address
challenges with high public spending:
– 1996-2001: new Budget Organic Law for enhancing transparency and
accountability, adopted under the impulse of Parliament;
– 2009-2012: new budgetary tools for enhancing fiscal responsibility, developed
under the impulse of the Ministry of Finance and codified ex post.
• The new Government’s reform plan gives room for a new wave of innovations.
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To Begin…

4. 1. Medium Term Perspective in Budgeting
2. Top-Down Budgeting
3. Budget Formulation (State and other levels of government)
4. Budget Presentation
5. Budget Execution
6. Year-End Reporting
7. Parliament’s Role and External Oversight
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Agenda

5. • Since 2008, LPFF bundles MT forecasts
prepared by each general government
sector and shows how they will contribute
to achieving the medium-term fiscal
objective laid out in the Stability
Programme of the same year.
• Fiscal targets are set at aggregated level
(e.g. State’s Missions).
• Out-years are not binding (except for the
State Y+2 target) , but are recognised by
all stakeholders as “opening positions” for
following years’ budgets.
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Medium-Term Perspective in Budgeting
Laws on the Programming of Public Finances
Stability Programme
Law on the Programming of Public
Finances
State Triennial Budget
Public Agencies’ Triennial Budgets
Social Security Financing Act
Ministry of Finance’s Estimates

6. • Expenditure rules operationalise LPPF
fiscal targets for each sector of general
government.
• The State Discretionary Spending Rule’s is
generally complied with. Institutional and
economic coverage was progressively
extended to discourage opportunistic
changes in the distribution of spending.
• Reinforced monitoring and enforcement
mechanisms have improved compliance
with the health care spending cap.
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Top-Down Budgeting
Expenditure Rules and Spending Caps
The State (and its
public agencies)
Discretionary
Expenditure Rule
(created 1996)
Total Spending Cap
(created 2018)
Social Security
Health Care
Spending Cap
(created 1997)
Local
Government
Local Government
Spending Cap
(created 2014)
General Government Expenditure Rules
and Spending Caps

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Budget Formulation (1/2)
The State
• For the State, the budget is prepared under the lead of the Directorate of the
Budget:
– Framework provided by LPPF and expenditure rules;
– Bilateral negotiations on resource allocation between the Directorate of the
Budget and LMs, with PM arbitrations;
– Rolling State’s triennial budget updated annually.
• In 2017, first attempt at conveying a governmental seminar at the outlay of the
budget preparation to foster collective commitment to fiscal targets and
decision-making on priorities.

8. • Separate budgetary frameworks
for agencies and Social Security
with strong monitoring by the
Directorate of the Budget in
practice (“budgetary watchdog”).
• Complex financial relationships
with the State, incl. significant use
of earmarked taxes.
• Resources allocated to certain
public policies show in different
budgets, generating a need for ex
post aggregation.
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Budget Formulation (2/2)
Agencies and Social Security
Ministry of Finance
Ministry of Social
Affairs
Directorate of Social Security
Joint Formulation of the Social Security
Financing Act
Supervise
Commission for the Accounts of Social Security
Advise
Directorate of the Budget
Collaborate

9. • For the State, three-tier structure: mission
(ministry/public policy); programme
(directorate/management); action
(unit/implementation).
• For each Mission, detailed information on
resources (commitments and cash),
performance (objectives and indicators) and
related tax expenditures.
• Budget presentation for public agencies and
Social Security progressively harmonised
with the State.
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Budget Presentation
Programme and Performance Budgeting
30 Ministries 850 Chapters
30 Missions
120
Programmes
100
Objectives &
Indicators
400
Objectives &
800
Indicators
1959 Ordinance
2001 Organic Budget Law (LOLF)
Y-1 appropriations
Additional appropriations
Level of Parliamentary
vote

10. • Full autonomy of public managers on nature of their spending, subject to a
ceiling on wages.
• Multi-year commitment authorisations, with commitment control considered the
main safeguard against over spending by line ministries.
• Reporting of all financial operations from commitment to payment in a
centralised IT system operated by the Directorate of the Budget.
• Appropriations freezed in a precautionary reserve to handle new
priorities/emergencies.
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Budget Execution
Managerial Autonomy & Budgetary Control

11. • Since 2006, two sets of accounts published at year-end: budgetary accounts
(commitments and cash outlays, as well as performance results) and accrual financial
statements.
• Almost constant effort towards simplified/more legible information, using feedback
from various stakeholders (incl. annual survey of Parliamentarians):
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Year-End Reporting
Commitment, cash, accrual and performance data
Performance Information Accrual Data
-30% of indicators “Bridges” with budgetary accounts
KPI dashboard
On going: Hackathon, cost accounting, evolution of performance indicators, etc.
Citizens Financial Statements

12. • Parliamentary powers have been “rationalised”: transfer of appropriations between
programme within a given Mission is possible, but no increase of total spending.
• Parliament focus has been historically on the State Budget Act approval, rather than
scrutiny of results.
• External control by the Court of Accounts and IFI on all main budget documents, incl.:
– “Review” of the credibility of macroeconomic forecasts;
– Report on the Situation and Outlook of Public Finances;
– “Review” of budget execution financial and performance results;
– Audit of accrual financial statements.
• Clear positive effects, e.g. reliability of macroeconomic forecasts increased and
qualifications on accounts sharply decreased.
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Parliament’s Role and External Oversight

13. • The French budgetary framework is robust and consistent with OECD
Recommendations on Budgetary Governance.
• Outcomes of reforms are good and the move to top-down budgeting is
well established, but general government fiscal targets have been missed
by significant margins until 2017.
• The OECD report identifies priority areas for reform that would help
achieving fiscal consolidation plans of the new Government, with
experiences of OECD countries in these areas being discussed with the
Directorate of the Budget.
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To Conclude…

14. • Priority areas for reforms identified by the OECD include:
• Increasing the credibility of medium-term plans by accommodating fiscal
space;
• Measuring systematically and disclosing fiscal risks and fiscal sustainability
challenges;
• Setting more detailed parameters for subsequent years’ budget preparation
ahead of the formulation of the Law on the Programming for Public Finances;
• Addressing the fragmentation of the budgetary framework.
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To Conclude…

15. THANK YOU FOR YOUR ATTENTION
http://www.oecd.org/gov/budgeting/
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