Bringing the public deficit under control was clearly stated as one of François Hollande’s priorities during his 2012 presidential campaign. He planned to bring the public deficit below the 3 per cent mark by 2013, and then to achieve a balanced budget by 2017. However, the actual deficit has turned out to be higher than these forecasts, partly because the deficit-reduction strategy was based on growth assumptions that did not materialise. Whilst the recovery of public finances has been slower than anticipated, the various measures adopted during the 2012–2017 period nevertheless contributed significantly to reducing the deficit, with the bulk of the reduction occurring in the first two years of the five-year term, accompanied by substantial increases in compulsory levies. However, the measures relating to compulsory levies were not intended solely to reduce the deficit. Reductions in compulsory levies were also introduced to promote employment and competitiveness, as well as to benefit the Environment. Measures relating to public expenditure, on the other hand, are much more difficult to trace, and the sums involved are far more modest. Finally, the fall in government expenditure is largely attributable to a reduction in the debt burden.
Review of the 2012–2017 five-year term: public finances
This note examines the major trends in public finances throughout the 2012–2017 term of office, before focusing more specifically on the significance and scale of measures relating to revenue and expenditure to explain the observed trajectory.
Reference IPP Policy Brief No. 27
Presentation
Key Results
- The deficit-reduction strategy during François Hollande’s five-year term relied largely on growth assumptions that did not materialise. This accounts for half of the gap between the projected trajectory and the actual deficit.
- The reduction in the public deficit observed between 2012 and 2017 stemmed mainly from the rise in compulsory levies at the start of the term of office. However, 36 per cent of this increase in tax revenue is attributable to measures taken during Nicolas Sarkozy’s five-year term.
- The fall in central government expenditure is largely attributable to a reduction in the debt service burden over the period 2012–2017.
- The various budgetary documents, which reflect the shared governance of public expenditure between the government and the various social security bodies, do not allow for a detailed analysis of trends in the different components of public expenditure. This lack of transparency argues in favour of an overhaul of public finance governance.
