Describe the main characteristics of the budgetary process (cycle, actors, instruments, etc.) in France.
In several instances in this Report, the term “financial Acts” is used to refer more generally to a diversity of instruments.
The French Parliament (both the National Assembly and the Senate) adopts annually Budget Acts and Social Security Financing Acts (SSFAs), which are submitted in autumn, either by the Government (“projet de loi”) or by Members of Parliament (“propositions de loi”).
Accounting Acts (“lois de règlement”) present the yearly results of public accounts.
Programming Acts (“lois de programmation des finances publiques”) set out multiannual guidelines for public finances – including both SSFAs, Budget Acts and amending Acts – with a view to steer budgetary balance. The Programming Acts do not have a higher status than the other financial Acts in the hierarchy of norms, and are therefore not binding on them. Moreover, a Programming Act can be replaced by a new one before the end of its initially allocated period.
Finally, special “Article 45 Acts” (in reference to article 45 of the LOLF) can be adopted in exceptional cases where no budget has been adopted within the time limits, under precise conditions.
Under article 34 of the Constitution, Budget Acts “shall determine the revenue and expenditure of the State in the conditions and with the reservations provided for by an Institutional Act” (“loi organique”). This Institutional Act is the Organic Law on Budget Acts (Loi organique n° 2001-692 du 1 août 2001 relative aux lois de finances, also called LOLF) .
Article 34 of the Constitution also states that “Social Security Financing Acts shall lay down the general conditions for the financial equilibrium thereof, and taking into account forecasted revenue, shall determine expenditure targets under the conditions and with the reservations provided for by an Institutional Act”. This Institutional Act is the Organic Law on Social Security Financing Acts (Loi organique n° 2005-881 du 2 août 2005 relative aux lois de financement de la sécurité sociale).
The same article of the Constitution provides that “Programming Acts shall determine the objectives of the action of the State. The multiannual guidelines for public finances shall be established by Programming Acts. They shall be part of the objective of balanced accounts for public administrations”.
The much debated Organic Law on the Programming and Governance of Public Finances (Loi organique n° 2012-1403 du 17 décembre 2012 relative à la programmation et à la gouvernance des finances publiques) redefines the function of Programming Acts and aims at fulfilling the requirements of the Fiscal Compact as interpreted by the Constitutional Council (see also section IX on the Fiscal Compact), as well as parts of the requirements of the Six-Pack (see also section VII on the Six-Pack).
Budget Acts and SSFAs are to be adopted after one reading by both Houses of the Parliament, after submission by the Prime Minister or by members of Parliament, within constraining time limits. The Committee in charge of examining Budget Acts in both the National Assembly and in the Senate is the Finance Committee. The Committee in charge of examining SSFAs in both Houses is traditionally the Social Affairs Committee, advised by the Finance Committee. The vote of the project is undertaken by each of the Houses, starting with the National Assembly. If one reading is not enough for an agreement on the proposal in the same terms by both Houses, a conciliation process in the form of a “joint committee” (“commission mixte paritaire”) is set in motion to reach an agreement.
For ordinary laws, joint committees are formed only after two readings in both Chambers fail to produce an identical text. The financial procedure is therefore similar to the “accelerated procedure” available for ordinary laws, as it reduces to one the number of readings in each House before resorting to joint committees.
Under article 47 of the Constitution: “Parliament shall pass Finance Bills in the manner provided for by an Institutional Act.
Should the National Assembly fail to reach a decision on first reading within forty days following the tabling of a Bill, the Government shall refer the Bill to the Senate, which shall make its decision known within fifteen days. The procedure set out in article 45 shall then apply.
Should Parliament fail to reach a decision within seventy days, the provisions of the Bill may be brought into force by Ordinance.
Should the Finance Bill setting out revenue and expenditure for a financial year not be tabled in time for promulgation before the beginning of that year, the Government shall as a matter of urgency ask Parliament for authorization to collect taxes and shall make available by decree the funds needed to meet commitments already voted for.
The time limits set by this article shall be suspended when Parliament is not in session.”
Under article 47-1 of the Constitution: “Parliament shall pass Social Security Financing Bills in the manner provided by an Institutional Act.
Should the National Assembly fail to reach a decision on first reading within twenty days of the tabling of a Bill, the Government shall refer the Bill to the Senate, which shall make its decision known within fifteen days. The procedure set out in article 45 shall then apply.
Should Parliament fail to reach a decision within fifty days, the provisions of the Bill may be implemented by Ordinance.
The time limits set by this article shall be suspended when Parliament is not in session and, as regards each House, during the weeks when it has decided not to sit in accordance with the second paragraph of article 28.”
The Parliament may propose Acts or amend proposals of Acts. However, article 40 of the Constitution constrains this power by forbidding that an amendment either increases public spending or leads to a diminution of public resources: “Private Members’ Bills and amendments introduced by Members of Parliament shall not be admissible where their enactment would result in either a diminution of public revenue or the creation or increase of any public expenditure.” This interdiction has become more flexible since the approval of the Organic Law on Budget Acts in 2001 since it allows for Parliament to increase public expenditure of one program as long as it equally diminishes the expenditure of another program pertaining to the same mission.
The Organic Law on the Programming and Governance of Public Finances:
This Organic Law does not so much impact directly on Budget Acts or SSFAs but rather on Programming Acts, which are now to integrate in French law the requirements of budgetary balance laid down in the Fiscal Compact (in particular, setting Medium Term Objectives, defining a Reduction Deficit Trajectory, in a multiannual perspective) and parts of the requirements of the Six-Pack.
However, Budget Acts, SSFAs, their amending Acts, and Accounting Acts have also undergone changes under the Organic Law, which was accompanied with changes in the LOLF. Additional elements of information are now required of Budget Acts concerning their impact on and the evolution of structural and real budgetary balance. Modes of calculation for such information are also required, as well as an explicit consistency between the calculations and targets included in the financial acts over time, as well as with the calculations and targets set out in their multiannual objectives.
The Organic Law also creates a High Council of Public Finance (HCPF), another requirement of the Fiscal Compact. The HCPF assesses the macroeconomic forecasts projected by the Government in financial acts. It evaluates the compliance of the objectives of budgetary balance set out in financial acts with the objectives of budgetary balance (Medium Term Objectives and Reduction Deficit Trajectory) laid out in the Programming Acts in a multiannual perspective. The coherence of the budgetary objectives and of the modes of calculation used throughout the financial acts is also scrutinized.
The HCPF’s assessment of the proposals of financial acts takes place before the proposal is transmitted to the Council of State and to the Parliament, so that it is joined to the proposals of Acts submitted to them. The HCPF also examines the government projections stated in the Stability Programs, before they are sent to the Council of the EU and to the European Commission.
Importantly, the HCPF is key to the Correction Mechanism established with the Fiscal Compact, requiring the Government to give justifications and to lay down correction measures for significant gaps (0,5% or 0,25% of GDP) identified by the HCPF between budgetary results and the multiannual orientations defined in the Programming Acts.
Main other instruments for budget scrutiny:
The provisions presented above strengthen already existing principles of budgetary balance. Thus, Article 34 of the Constitution already provided that “(…) Social Security Financing Acts shall lay down the general conditions for the financial equilibrium thereof (…)”. Moreover, the “multiannual guidelines for public finances“, which are to be “established by Programming Acts”, “shall be part of the objective of balanced accounts for public administrations”. However, these provisions have been analyzed as setting objectives rather than obligations, and generally as lacking constraining force.
The Court of Auditors (Cour des Comptes) is composed of independent magistrates. The tasks of the Court of Auditors are defined in article 47-2 of the Constitution:
“The Cour des Comptes shall assist Parliament in monitoring Government action. It shall assist Parliament and the Government in monitoring the implementation of Finance Acts [=Budget Acts] and Social Security Financing Acts, as well as in assessing public policies. By means of its public reports, it shall contribute to informing citizens.
The accounts of public administrations shall be lawful and faithful. They shall provide a true and fair view of the result of the management, assets and financial situation of the said public administrations.”
Over the past years, the public reports issued by the Court of Auditors increasingly insisted on reducing public deficit.
The Parliament has set up its own procedures, in each of the Houses – and in relation with their Finance Committees – dedicated to the examination of public accounts and the evaluation of the projects of financial Acts.
The government is committed under the Stability and Growth Pact to issue periodically National Reform Programs and Stability and Coordination Programs, monitored at European level. One important development brought by the European Semester is that the government and Parliament sought, as soon as 2010, to modify the budgetary calendar in order to allow the Parliament to take a stance on the Stability Programs before their transmission to the Commission. This reform was supposed to be made constitutional in the failed attempt at Constitutional revision in 2011; however, this practice seems to have been put in place anyway.
How has the budgetary process changed since the beginning of the financial/Eurozone crisis?
See also question II.1.
The two main changes came arguably from the adoption of an Organic Law on the Programming and Governance of Public Finances (“the Organic law”), on the one hand, and of the European Semester, on the other hand (see also question II.1). The Organic law provided for the creation of a new institution, the High Council of Public Finance, which started producing opinions on the economic forecasts and assessments made by the government in its financial Acts. It should be noted that the government has already started to refer publicly to the works of HCPF to add credibility to its economic assessments.
Information of the Parliament (and beyond) was thus reinforced, also because new elements of information on economic forecasts and assessments had to be included in or associated to the financial acts proposed by the government.
Programming Acts were given new functions, the most important of which pertained to setting multiannual objectives of budgetary balance within the meaning of the Fiscal compact.
However, the Constitutional Council has not shown yet if these new elements would dramatically change its review of financial acts, in particular on the basis of the principle of faithfulness (see question IX.7). This could partly be explained by the fact that no Programming Act has yet been adopted after the creation of the High Council of Public Finance. Hence, it has not yet had the opportunity to provide an assessment on such law that could eventually be used by the Constitutional Council when assessing the respect of the principle of faithfulness. A new Programming Act will be adopted in Autumn 2014 and will be subject to such control for the first time.
The European Semester has accentuated the monitoring of France’s budgetary and economic policies. One of its effects was to allow for Parliament to be transmitted the Stability Programs before they be sent to the European Commission (see section VII on the Six Pack).
What institutional changes are brought about by the changes in the budgetary process, e.g. relating to competences of parliament, government, the judiciary and independent advisory bodies?
See also question II.1
Overall, one may arguably consider that information and involvement of the Parliament increased compared to the pre-crisis era. The Organic Law on the Programming and Governance of Public Finances (“the Organic law”), in particular, obliges the government to include more information on its economic forecasts and assessments when a financial Act is proposed to Parliament.
However, in other respects it is unclear if the powers of Parliament have not been reduced in budgetary matters, compared to the ones of the government. Parliament has several times only ratified or voted decisions engaging the guarantee of the State for considerable amounts of money, often already promised by the government in European and intergovernmental fora. Under the pressure of the crisis, these votes and ratifications were arguably difficult to deny. The Parliament also enjoyed a very limited role in the negotiation of the instruments benefiting from these guarantees, and in the use made by it once the guarantee was voted.
The Constitutional Council declines to review French law on the basis of the international commitments of the State, and authorized that the Fiscal Compact be ratified without amendment of the constitution. The main route for constitutional review of Budget Acts, already tried twice by the political opposition in Parliament, appears to rely on the principle of faithfulness of public accounts – which never led until now to declaring a financial act unconstitutional. In this way, the government and Parliament keep a margin of maneuver in budgetary matters in respect with the Constitutional Council.
The Court of Auditors (Cour des Comptes) assists the Parliament in the scrutiny of public accounts, and issues independent assessments of the state of France’s economy and budget. It is now shouldered by the High Council of Public Finance, whose assessments determine the triggering of the correction mechanism (see also question II.1).
Change of time-line
How has the time-line of the budgetary cycle changed as a result of the implementation of Euro-crisis law?
See questions II.1 and II.3.
What other information is relevant with regard to France and changes to the budgetary process?