The lack of transparency and complexity of transfers between organisations hinder a proper understanding of the funding of our public policies. However, the real issue is not to attribute the source of the public deficit to specific government departments, but to assess the extent to which the governance of our public finances effectively promotes accountability amongst stakeholders. Whilst the autonomous administration of local authorities is a constitutional principle, there is a low level of fiscal autonomy amongst our local authorities, exacerbated by cuts to local taxes and the delegation of public policies to the local level. Similarly, the universalisation and fiscalisation of social protection have led to an increased role for the State in determining social resources and expenditure. Finally, we discuss several options for strengthening the governance of our public finances.
Public finances: who is responsible for the public deficit?
The consolidation of public finances remains the key issue that currently shapes all public policy decisions. In this chapter, we analyse the various transfers between central government, local authorities and social security administrations, seeking to distinguish between those arising from central government actions carried out under delegation and those arising from balancing transfers.
Reference Budget Outlook – June 2026 – Chapter 1
Presentation
Key Results
- With a projected deficit of 5.0 per cent for 2026, public debt exceeding 115 per cent of GDP and interest rates having risen to historic levels, the effort required to stabilise the debt is considerable.
- The presentation of the general government balance portrays the central government as the main contributor to the public deficit. However, this presentation of the public accounts obscures significant financial transfers from the central government to local authorities and social security bodies.
- The presentation of these financial flows lacks clarity in terms of the public policy underpinning them. This hinders a comprehensive view of the alignment between the needs of the various public bodies and the resources allocated to them.
- By funding the powers transferred to local authorities through a share of national taxes, the State has undermined not only their autonomy but also its own capacity for action.
- The weakening, over recent decades, of the link between Social Security contributions and benefits calls for a re-examination of the scope of finance laws, with a return to the principles of transparency and accountability that justified the creation of a separate Social Security funding law.
