The document discusses France's medium-term budgetary framework. It outlines the history and legal framework, including the Stability and Growth Pact, constitutional amendments, and laws implementing EU fiscal rules. Budget monitoring involves multi-year programming laws and annual budgets. Expenditure is monitored for different public administrations to varying degrees. Fiscal surveillance is conducted by the Court of Auditors and High Council of Public Finance. The framework has strengthened monitoring over time but some expenditures remain weakly controlled. France's fiscal adjustments have focused more on revenues than expenditures reduction.

1. MEDIUM-TERM BUDGETARY
FRAMEWORK IN FRANCE

2. MEDIUM-TERM BUDGETARY FRAMEWORK
 I. HISTORY AND IMPLEMENTATION OF THE LEGAL FRAMEWORK
 II. CONCRETE BUDGET MONITORING BY ADMINISTRATION
 III. FISCAL SURVEILLANCE - the Court of Auditors and the HCFP
2
CONTENTS

3. I. HISTORY AND IMPLEMENTATION
OF THE LEGAL FRAMEWORK
MEDIUM-TERM BUDGETARY FRAMEWORK

4. HISTORY OF THE LEGAL FRAMEWORK
4
1997 2008 2012
SGP
Stability and
Growth Pact
French
CONSTITUTIONAL
AMENDMENT
 7 July 1997, Stability and Growth Pact
 Preventive rules: EU Member States agreed on regulations to enforce the
deficit and debt limits established by Maastricht. They set a national Medium-
Term Budgetary Objective (MTO) that « shall ensure the sustainability of public
finances or a rapid progress towards such sustainability ».
 Corrective rules: excessive budget deficits or excessive public debt levels
trigger the Excessive Deficit Procedure.
 Stability Programmes since 1999: once a year, each Member State provides a
medium-term analysis of its budgetary objectives (MTO, underlying economic
assumptions, policy measures to achieve the objectives,…)
evaluated by the EU.
TSCG
implemented in FR by
an ORGANIC LAW

5. 5
 July 2008 : French Constitutional Amendment
 Article 34 of the Constitution establishes Public Finance Programming Bills
giving medium-term guidelines for public finances.
 With this multiyear programming, Parliament votes a 3-year budget.
France already implemented 4 of them, in: 2009, 2010, 2012 and 2014.
 This 3-year budget set an expenditure ceiling by mission (= part of State
expenditure). There are 31 missions in the French State budget. These
ceilings are binding for the first year, and provide only general guidelines
for the others.
HISTORY OF THE LEGAL FRAMEWORK
1997 2008 2012
SGP
Stability and
Growth Pact
French
CONSTITUTIONAL
AMENDMENT
TSCG
implemented in FR by
an ORGANIC LAW

6. 6
 Nov 2011 : Directive on requirements for budgetary frameworks
 March 2012 : TSCG (Treaty on Stability, Coordination and Governance) imposes:
 An engagement towards the country-specific medium-term objective (MTO),
 An automatic correction mechanism with the creation of an independent fiscal
council to monitor the observance of the rules
 17 Dec. 2012 : French constitutional bylaw (implementation of the TSCG in
national law)
 Defining the content of Public Finance Programming Bills (including MTO and the
underlying economic forecasts).
 Creating the High Council of Public Finance (HCFP)
 assesses the consistency of MTO with French European commitments
 assesses the structural balance and macroeconomic forecasts for the Public Finance
Programming Bills and only macroeconomic forecasts for Stability Programmes.
HISTORY OF THE LEGAL FRAMEWORK
1997 2008 2012
SGP
Stability and
Growth Pact
French
CONSTITUTIONAL
AMENDMENT
TSCG
implemented in FR by
an ORGANIC LAW

7. IMPLEMENTATION IN FRANCE
7
Multiyear
programming
(Stability Programmes,
Public Finance
Programming Laws)
Breakdown into
annual bills
(Budget Act, Social
Security Financing Act)
Infra-annual budget
monitoring
 Stability Programmes:
 no compulsory Parliamentary debate
 Public Finance Programming Laws:
 voted by Parliament.
 Annual bills include:
 the annual Budget Act
 the Social Security Financing Act.
 Checking the observance of the rules during
the year.
Better national ownership
Weak national ownership

8. II. CONCRETE BUDGET MONITORING
BY ADMINISTRATION
MEDIUM-TERM BUDGETARY FRAMEWORK

9. THE CONTROL ON PUBLIC EXPENDITURE
VARIES AMONG ADMINISTRATIONS
 A decreasing monitoring power among administrations:
9
High
control
Weak
control
State budget & National Health
Insurance expenditure target
(ONDAM)
Central agencies expenditure
Local gov’ts expenditure
and other public expenditure
(unemployment benefit, supplementary
pensions…)
Other social benefits
(basic pensions system, family allocations)
 The HCFP checks the overall consistency of the public finance strategy.
 Expenditure targets are set in nominal terms in Public Finance Programming Laws

10. 22%
14%
14%
3%
19%
28%
THE EXPENDITURE MONITORING
A LIMITED SCOPE
10
Not monitored
State nominal rule
Agencies monitoring
(partial and complex)
Health Insurance
expenditure target
 Percentage of total public expenditure (1227 Bn€) well monitored : 56%*
Local Gov'ts rule
(not binding)
Predictable social expenses
(basic pensions system, family allocations)
277 Bn€
177 Bn€
170 Bn€
34 Bn€
229 Bn€
318 Bn€
* Approximate % given the blurred boundaries of monitored and unmonitored spending

11.  Two rules to monitor the State budget
 2002: a volume rule « zero real-term increase ». The overall State
budget should not grow faster than inflation.
 2011: a nominal rule « zero increase », covers the State budget
excluding interest on debt and contributions to the civil servants’
pensions.
 Scope of these rules gradually expands to have a broader
coverage of the central public administration expenditure.
 Since 2002, this dual rule is broadly respected.
 Other rules
 Ceiling for the number of civil servants
 Ceiling for tax expenditure (including a specific ceiling for tax credits)
11
STATE EXPENDITURE MONITORING

12. 12
TWO RULES TO MONITOR THE STATE BUDGET
206 Bn€
90 Bn€
State usual
expenditure
Interest and pensions (for
public servants)
71 Bn€ Transfers to local gov.
+ EU
5 Bn€ Part of allocated taxes
Volume
rule in
2015:
373 Bn€
* : newly allocated resources considered as a usual expenditures since 2008.
Nominal rule
in 2015:
282 Bn€

13. 13
PROGRESSIVE EXTENSION
OF THE RULE'S SCOPE
206 Bn€
90 Bn€
State usual
expenditures
Interest and pensions
71 Bn€ Transfers to local gov. + EU
5 Bn€ Part of allocated taxes
Volume
rule in
2015
1996
2008*
2012
In the perimeter of the
volume rule since :
* : newly allocated resources considered as a usual expenditures since 2008.

14. HEALTH CARE EXPENDITURE MONITORING
 ONDAM (National Health Insurance expenditure target)
 Created in 1997, this target is reset by Parliament every year within the
Social Security Financing Law.
 The ONDAM has helped control the evolution of health public insurance.
 Monitoring the observance of the ONDAM during the year
 Since 2005, an Alert Committee warns Parliament, the Gov't and the
National Health Insurance Fund if the level of National Health Insurance
spending proves to be unreasonable in comparison with the target voted.
 Regarding the medium-term budgetary framework, the Public Finance
Programming Bill builds a 3-year global financing plan for the Social Security.
14

15. COMPLIANCE WITH THE ONDAM SINCE 2010
15
Bubble size represents the magnitude of OVER SPENDING or UNDER SPENDING.
Source: Alert Committee of the Social Security, 2014.
EVOLUTION OF NATIONAL HEALTH INSURANCE EXP.
LEVEL OF EXPENDITURE RECORDED

16. CENTRAL GOV'T AGENCIES
16
MONITORING RULES APPLIED SINCE
Limitation of newly allocated taxes 2008
Ceiling for the number of employees 2009
Expenditure reduction objectives (not binding) 2011
Ceiling for allocated taxes to agencies (partial) 2012
Restriction on new debt (ban with few exceptions) 2012
A complex monitoring of central Gov't agencies (universities,
CNRS, INSERM...) due to the multiplicity of rules:

17. LOCAL GOV'TS EXPENDITURE
 Local Gov'ts have financial autonomy according to the Constitution.
However, they are supposed to contribute to the global consolidation
of public finances.
 State grants to local governments have been reduced (a fall of
3,7 Bn€ in 2015, in 2016 and again in 2017).
 Moreover, the Public Finance Programming Law for 2014-2019 of
December 2014 establishes a national target for the evolution of local
Gov'ts expenditure (in percentage of annual change).
 Target prepared by the central Gov't, transmitted to Parliament and
discussed with representatives of local Gov'ts.
 The target is not binding for local Gov'ts.
17

18. GROWING EXPENDITURE OF LOCAL
GOVERNMENTS
18

19. EXPENDITURE EVOLUTION OF DIFFERENT
COUNTRIES IN EUROPE
19
Source: Winter economic forecast,
European Commission

20. A DECREASING PACE OFPUBLIC
EXPENDITURES SINCE 2013
20
Mean
1997-2007
Mean
2008-2012
2013 2014 2015
Evolution
(nominal)
3,6% 3,1% 1,7% 1,0% 0,9%
Evolution
(real)
1,9% 1,9% 0,9% 0,4% -0,2%
Target
(nominal)
1,4% 1,1%
EVOLUTION OF PUBLIC EXPENDITURE
(without tax credits, in %, real exp. estimated with
GDP deflator)

21. FRENCH STRUCTURAL ADJUSTMENTS
A STRONG FOCUS ON RECEIPTS IN 2011-2013
21
4.2
2.9
6.2
3.5
3.1
4.9 5.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Euro area Germany Spain France Italy Netherlands UK
Structural effort on expenditures
Structural effort on receipts
Total structural effort
% of GDP
Source: Winter economic forecast,
European Commission
Structural adjustments 2010-2015

22. III. FISCAL SURVEILLANCE
The Court of Auditors and the HCFP
MEDIUM-TERM BUDGETARY FRAMEWORK

23. FISCAL SURVEILLANCE
The Court of Auditors
 The Court of Auditors
 An independent institution equidistant from Parliament and from the Gov't
which plays a major role for fiscal surveillance.
 A broad mission of analysis, control and advice:
 Analyzing the situation and outlook of public finances
 Checking compliance with fiscal rules (only ex post)
 Publishing opinions and recommendations on fiscal policy:
 Reports on the current situation and the outlook of public finances
(for central, local or Social Security administrations)
 Thematic public reports (for instance on exceptional expenditure, … to
ensure the correct, efficient and effective use of public funds)
23
COURT
GOVERNMENT PARLIAMENT

24. FISCAL SURVEILLANCE
The Court of Auditors
 Court of auditors : main actor of the Government control in
France, since constitutional bylaws of 2001 and 2005.
 Annual reports due to constitutional bylaws:
 Report on global public finance (once a year in June, updated in
January) :
 Covers all subjects connected to public finances, including an assessment on the
French targets for public deficit.
 Includes general subjects on public finances: public investments, expenditure
rules, benchmark with others countries, compliance with the European rules and
the Organic Law of 2012……
 Report on the state budget and central government agencies (May)
 Certification of the French state accounts and certification of the social
security accounts (May)
 + Report on social security administration (September)
24

25. FISCAL SURVEILLANCE
The High Council of Public Finance (HCFP)
 The HCFP, created by the Organic Law of December 2012:
 A new body associated with the Court of Auditors and chaired by the
Head of the Court. Independent from a legal perspective.
 Carries out tasks which could not be filled by the Court of Auditors
 The three axes of the missions of the HCFP:
 Examining the soundness of macroeconomic forecasts, MTO and
potential growth estimates on which draft finance texts are based
 Analyzing ex ante the consistency of public finance forecasts
 Identifying ex post “significant observed deviations” from the medium-
term budgetary objective. The HCFP plays a major role in triggering the
correction mechanism
25

26. FAILURE OF THE CORRECTION MECHANISM
IN 2014
26
Multi-year structural balance trajectory
Public Finance
Programming Bill 2012-2017.
Effective trajectory
2011-2013.
New trajectory
defined for 2014-2017.
Theoretical
corrective trajectory.
Significant gap
(1,3 pts)
The MTO is defined in level (% of GDP), not in variations.
=> Revision of the MTO in case of new estimation of the Output Gap…
% of GDP

27. CONCLUSION ON MEDIUM TERM
EXPENDITURE FRAMEWORK
 Instruments gradually improved
 by extending the scope of rules
 by strengthening monitoring of short term trends.
 But there is still a weak monitoring power of Gov’t on
certain components of public administrations :
 local authorities
 funds managed by social partners, …
 France made the choice of a very gradual slowing
down of expenditure with unambitious targets and
lesser effort than in other countries.
 So it will have to be maintained longer.
27

28. THANK YOU FOR YOUR ATTENTION

29. MORE INFORMATION AVAILABLE ON
WWW.HCFP.FR
HCFP
13, RUE CAMBON – 75001 PARIS
+33 (0) 1 42 95 55 98
CONTACT@HCFP.FR