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French budget 2016 : the difficult control of public spending

note-ipp-21-budget-2016-pictIPP Policy Brief n°21

November 2015

Authors : Mahdi Ben Jelloul, Antoine Bozio, Sophie Cottet, Malka Guillot, Marion Monnet, Lucile Romanello

Contact: mahdi.benjelloul@ipp.eu, antoine.bozio@ipp.eu, lucile.romanello@ipp.eu


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Summary:

While the trend in public finances in France has remained basically coherent with what was predicted over the past few years, the focus is more and more on reducing expenditure in all areas of public administration. Until now, reductions have mainly targeted the expenditures of the central state while also requiring efforts from local authorities and social security. However, in the absence of a significant recovery, the government’s strategy of
containing expenditure will be difficult to sustain. Taxes went up significantly in the early years of this government’s term, in particular for the richest ten per cent. On the other hand, simplifications of the tax and benefits system have been very modest, and successive reforms of income tax for the first tax bracket seem to have been motivated above all by a desire to decrease the number of households this no longer makes sense.
Finally, in view of the challenge of controlling public spending, better information on expenditure changes in each area of public spending would be beneficial to democratic debate.

Key points:

  • Public finances have followed the trend announced at the beginning of this government’s term, consisting of an increase in taxes and social security contributions followed by a decrease in public spending.
  • The increase in taxes and social security contributions has been effective, and has mainly affected the wealthiest households.
  • The decrease in public spending as a proportion of GDP has been less than anticipated, delaying the balancing of public finances.
  • Governance of public finances and budget information lacks the transparency required for democratic debate.