The process of decentralisation, which began in the 1980s, has steadily expanded the scope of local authorities’ powers and, consequently, their expenditure. Their financial situation, meanwhile, has gradually deteriorated, exacerbating inequalities between regions. Is the trajectory of local public finances still sustainable?
This question is at the heart of current debate, particularly since President Emmanuel Macron announced the abolition of the residential/local housing tax, highlighting the difficult balancing act involved in local authority budgets. Externalities, horizontal and vertical tax competition, budgetary discipline and equalisation mechanisms are all key factors in analysing the current situation in France. However, in an era of decentralisation – which entails granting greater autonomy to local authorities – local taxation alone is not sufficient to address the profound disparities between local authorities. It is now essential to implement more structural measures to address regional disparities.
