The French Budgetary Process [Reprint 2019 ed.] 9780520316614

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T H E FRENCH BUDGETARY PROCESS

The French Budgetary Process by

GUY LORD

UNIVERSITY OF CALIFORNIA PRESS B E R K E L E Y , LOS A N G E L E S , L O N D O N

University of California Press Berkeley and Los Angeles, California University of California Press, Ltd. London, England Copyright © 1973, by T h e Regents of the University of California Library of Congress Catalog Card Number: 70-186113 ISBN: 0-520-02196-7 Printed in the United States of America

To my wife

CONTENTS

The Development of Financial Procedure

1

T h e Revolutionary Period (1789-1814); From the Restoration to the Third Republic (1814^1871); T h e Third and Fourth Republics (1871—1958); T h e Reforms of 1959

The Constitutional and Financial Framework

16

Description; Structure and Scope of the Budget; Final and Temporary Transactions; T h e Capital Budget; Continuing Items and New Measures; T h e Annual Framework

Stages and Actors

35

Preparation of the Budget; Discussion and Vote by Parlement; T h e Spending Ministries; T h e Minister; T h e Ministerial Cabinet; T h e Ministry of Finances; T h e Minister of Finances T h e President and the Prime Minister; Government and Parlement

Attitudes and Strategies

120

Field Services Versus the National Capital; Division Versus Division; Internal Conflicts in the Ministry of Finances; T h e Budget Division; T h e Spending Ministries; Civil Servants and Ministers; Civil Servants and Parlement; Ministers and the Budget; Ministers and Parlement

Conclusion

188 Formalism; Incrementalism; Conflicts and Arbitration; T h e Fifth Republic and the Budgetary Process vii

Contents

Appendixes

1. 2. 3. 4. 5. 6. 7. 8.

Expenditure of the French Government, 1913-1968 Calendar of Budgeting in 1966 (Detailed Preparation) Calendar of Budgeting in 1966 (Global Preparation) Setup and Membership of a Typical Interministerial Budgetary Meeting Cabinet of Prime Minister Pompidou, January 1966 General Secretariat of the President of the Republic, September 1967 T h e Agenda of a Parliamentary Committee Votes on the First Reading of the 1966 and 1967 Budgets

193 194 156 197 198 199 200 201

Selected Bibliography

203

Index

209

PREFACE

I

N FRANCE, the budgetary process has recently attracted far less attention than the national planning machinery, 1 and, with a few notable exceptions, students of politics have shown little interest in it. 2 The budget is still the preserve of a few experts in the faculties of law, and their research is chiefly concerned with the legal aspects of the process and pays little attention to its administrative and political implications. Some have argued that with the development of a sophisticated planning machinery the budgetary process has lost most of its importance as a process for making crucial economic and political decisions.3 Although it is true that the existence of the National Plan has far-reaching and complex repercussions on budgetary policy—some of which are mentioned in this 1 Under the Fourth Republic the budget was the object of much discussion, but mainly from the point of view of parliamentary control. We find a different pattern in the United States, where in recent years the federal government's budgetary process has been the object of several interesting studies, such as: A Wildavsky, The Politics of the Budgetary Process; Richard F. Fenno, The Power of the Purse: Appropriations Politics in Congress; Ira Sharkansky, The Politics of Taxing and Spending; Charles E. Lindblom "Decision-Making in Taxation and Expenditure." 2 T h e best introductions to French budgeting are Jean Rivoli, Le Budget de l'Etat, and J . M. Cotteret and C. Emeri, Le Budget de l'Etat. For an interesting and stimulating approach to French public finances, see P. Lalumière, Les Finances Publiques. 3 For example, see, P. Bauchet, Economic Planning: The French Experiment; A. Barrère, "La Recherche de compatibilité entre les décisons du budget et les recommandations du Plan," Reflets et perspectives de la vie économique 4 (March 1965): 99-114; and S. Wickham, "L'Etat, serviteur du Plan," Le Monde, 27-28 February 1966.

ix

X

Preface

b o o k — i t remains that in France the plan is not a substitute for the budget. 4 Indeed, from the point of view of the government, the budget is still the main, and in many cases the only, channel for the enactment of policies at the governmental and parliamentary levels. T h e plan's objectives can be achieved only if the policies of the annual budgets are in accord with them. In 1968, the central government's spending in France amounted to 150,688 million francs. T h i s represents 25.6 percent of the gross national product. 5 Hence, when the budget is prepared and discussed, participants are conscious that much is still at stake. T h e aim of the book is to describe the French budgetary process as it operates today, and how economic and financial decisions are made within the framework of that process. W h o intervenes, when, and for what purpose? T h e budgetary process needs to be approached as an administrative and governmental decision-making process, rather than a purely legislative or accounting one. I do not neglect the latter aspects, but I believe that in France, as in many other countries, budgeting is more concerned with the question of how to make the right economic and financial decisions than with the question of whether public funds are spent according to appropriations. Hence, my approach differs from that of most French writers, who start with the assumption—legally correct—that the budget is decided in Parlement and then conclude, comparing the Fourth and the Fifth Republics, that Parlement has less decisionmaking power under the fifth than under the previous republic. As a result, they neglect the administrative and governmental parts of the process, which are now, as in most countries, the crucial ones.® I do not pretend to be in a position to unveil every decision in the administrative and governmental stages, for this is largely an internal process. But, mainly because civil servants and members of Parlement have shown great understanding for my research, I hope to have been able to make some inroads into it. In some cases I * J . Meynaud, Planification et politique (Lausanne, 1963), pp. 101-103. For Meynaud, the budget has a new and more important role in a planned economy. 5 On the basis of a CNP of 574.3 billion francs. For data, see Le Budget de 1968, by the Ministère de l'Economie et des Finances. « Even a book as remarkable as P. Amselek's Le Budget de l'Etat sous la V' République devotes less than ten pages out of seven hundred to government and administration.

Preface

xi

have had to rely on a limited amount of information, so some interpretations may well appear tentative. But, as G. Devaux, a former head of the budget division and the author of a revealing book on the French financial administration, has remarked: "I run the risk of being accused of interpreting history. But I think that the most important historical mistakes are made by those who refuse to interpret history." 7 The research on which this study is based was carried out during the first decade of the Fifth Republic, but as far as possible it takes account of the changes that followed the departure of General de Gaulle. No attempt has been made to deal with the PPB system (Rationalisation des choix budgétaires) which has recently been introduced in a few ministries. These budgetary techniques may affect some aspects of the budgetary process as presented in this volume, but, so far, they are in operation only in a limited number of agencies, mainly concerning defence. Budgeting is a traditional function of the state. It has given rise to well-entrenched rules and habits. The progressive evolution and transformation of the budgetary process, as well as the impact of the reforms of the Fifth Republic, can only be understood in their historical context. Budgeting takes place within a legal and constitutional framework, for, unlike planning, the budgetary process is traditionally a formal process. For example, decisions must be made within precise constitutional time limits and must be expressed in well-defined words and figures. These rules are known to civil servants, legislators, and interest groups, and their skillful use may put some participants in a better position than others to influence decisions. Moreover, some of these rules (such as annuality and balancing of the budget) are the objects of much controversy and political discussion. Occasionally, I deal with some of these questions, for they deepen an understanding not only of the budgetary process, but also of French politics. The process, itself, consists of the annual exercise of drafting and voting the budget. It is therefore necessary to follow the budget through its various stages, from the first tentative projections to the final version as approved by Parlement, and to describe the nature 1 La Comptabilité

publique,

p. 237.

xii

Preface

and functions of the various bodies which intervene in the m a k i n g of the budget during its elaboration and vote. Many jurists and economists tend to forget that budgetary decisions are answers to central political questions—who gets what, when, and how. However, when the budget is prepared and discussed, participants in the process fight hard, either to get the funds they need for the initiation and continuation of policies they are interested in, or, like the Ministry of Finances, to maintain their control over government activities. T o see how the process looks from the inside, I have interviewed more than sixty participants in the budgetary process—officers of spending ministries, members of the staffs of various divisions in the Ministry of Finances (particularly in the budget division and the cabinet of the Minister of Finances), officers of the Planning Commission, advisers in the offices of the Prime Minister and the President, parliamentary staff, and members of P a r l e m e n t — t o discover their aims, attitudes, and strategies. I have been provided with interesting data in the division of the budget, in the cabinet of the Minister of Finances, and in the parliamentary committees, some of which is used here. Finally, since budgeting is an annual process, there is something to be learned from the study of a particular budget. In this respect, some of the results of an analysis of the administrative, governmental, and parliamentary progress of the 1967 budget are used throughout the text, for they show how the system works on a particular budget and illustrate several aspects of my presentation. I hope, therefore, to have shown how the French budgetary process actually works as an exercise in executive and administrative decision-making, how the institutions of the Fifth Republic really function in this central matter of government, and how it looks to those actively engaged in the process.

ACKNOWLEDGMENTS

M

of gratitude is to Philip Williams and David Goldey. Without their help, encouragement, and friendship this book would never have seen the light. I am also grateful to the Warden and Fellows of Nuffield College, Oxford, for continuous support. T h e Warden of Nuffield followed every step in the development of this work. I am very grateful to him. I am also obliged to the late Jean Touchard and his colleagues of the Fondation Nationale des Sciences Politiques for their help when I was doing my research in Paris. This volume owes much to their comments, as well as to their keen interest in this research. In this regard I would particularly like to thank M Gournay and the members of his graduate seminar. I gratefully thank A. Wildavky, R. A. McLarty, Robert Metcalfe, and Guy Bourassa for helpful remarks on the whole or parts of the manuscript. Jacques Levesque and my colleagues of the Université du Québec were also very pleasant and encouraging comrades in the process of writing the final version. In the course of this research I received various financial aids from T h e Canada Council, the Ministry of Education of Quebec, and Nuffield College. Y GREATEST DEBT

I had particularly indispensable and generous cooperation from many members of Parlement and French civil servants. Their anonymity must be preserved, but without their help much of this book could not have been written at all. I also wish to thank Mr. W. J. McClung and Miss Judith Quinn xiii

xiv

Acknowledgments

of the University of California Press for their help throughout the publication of this book. Naturally, I alone am responsible for the opinions expressed in the book and for the errors it may contain.

ABBREVIATIONS

CD Centre Démocratique C N P F Conseil National du Patronat Français DATAR Délégation à l'Aménagement du Territoire et à l'Action Rurale ENA Ecole Nationale d'Administration FDES Fonds de Développement Economique et Social FGDS Fédération de la Gauche Démocratique et Socialiste INSEE Institut National de Statistiques et d'Etudes Economiques j o Journal Officiel, Débats de l'Assemblée Nationale j o , S E N A T E Journal Officiel, Débats du Sénat MRP Mouvement Républicain Populaire OECD Organization of Economic Cooperation and Development ORTF Office de Radiodiffusion-Télévision Française PSU Parti Socialiste Unifié RDP Revue du Droit Public et de la Science politique RFSP Revue Française de Science Politique RI Républicains Indépendants UDR Union des Démocrates pour la République UNR Union pour la Nouvelle République

xv

I

THE DEVELOPMENT OF FINANCIAL PROCEDURE

I

the very nature of the political system is a subject of continuing political controversy. Few democracies have shown such a strong tendency to swing from authoritarian to republican or parliamentary political regimes, or vice versa, over relatively short periods of time. T h i s institutional instability has affected the budgetary process in many ways. For one thing, it has hindered the gradual development and improvement of a well-integrated system of budgetary rules. In France, these rules have been unstable and always likely to be changed in periods of political crisis. For another, the shifts in the balance of power usually have resulted in sharp modifications of the roles of the various actors involved in the budgetary process, thus making the process less stable and less effective than similar processes elsewhere. T h e development of financial procedure in France varies in many ways from the British model. First, Parlement was established much later in France. Parliamentary control of public finances appeared with the Revolution of 178g. Second, the financial procedure (except for its administrative aspect) did not develop in a continuous and gradual process. It varied sharply, according to the authoritarian or republican nature of each political regime. Third, the lack of a well-entrenched parliamentary tradition and the continuous fear of the executive has meant that Parlement has b e e n — and is still today—in search of its proper role in financial matters. Should Parlement have the right to initiate expenditure and raise taxes, or should it confine its role to the a posteriori and audit N FRANCE

i

2

The French Budgetary

Process

control of public spending? T h e difference between these two roles is important, for in the first case Parlement is the chief initiator of public policy, while in the second case it is mainly concerned with controlling whether public funds are spent according to the rules of public accounting. During the authoritarian regimes, Parlement, starting nearly from scratch, struggled to establish rules which would enable it to keep a more or less distant watch on the financial activities of the executive. On the other hand, during republican regimes Parlement aimed at assuring its total supremacy over the executive by stressing the predominance of its role in the elaboration of policy and in the initiation of expenditure. During these republican periods, Parlement showed little concern for a stringent control of public expenditure, thus putting the executive in the difficult position of having to use (and, in fact, erode) its power in order to restrain the assembly's propensity to spend. 1 Ultimately this role was assumed by the bureaucracy which, on the occasion of the Napoleonic administrative reforms, established its own internal system of administrative and judicial control of public spending. Parlement never resented the loss of the power to exercise this form of control of finances. On the contrary, when strong executives tried to offset Parlement's discontent at the loss of its right to initiate expenditure by increasing its powers to audit and control the spending of money, most members of Parlement considered this new function laid upon them with distrust. 2 In that respect, there are striking similarities between the statements of the comte d'Argout, Minister of Finances under the Restoration, and those of the Fifth Republic's ministers of finances, in which the importance of a posteriori control is stressed. 3 1 For the Fourth Republic, see P. M. Williams, Crisis and Compromise: Politics in the Fourth Republic. 2 Even Gaullist deputies like M Guena find nothing particularly interesting in these functions: "We no longer are at the time of Baron Louis. T h e control of the budget does not consist any more in chasing the expensive function of the embassies' gentlemen ushers among the budgetary articles, the main preoccupation of the members of Parlement in 1831. Now the budgetary control consists of the acceptance or rejection of the main political options included in the budget under discussion." Le Monde, 10 December 1963. 3 For example, in 1836, during a debate on the Public Appropriations Accounts Bill, the comte d'Argout showed the importance of that bill by comparing it to the

The Development of Financial Procedure

3

T h e trends I have just mentioned continuously underlay the adoption of a clear financial procedure in France and hindered the development of a clear set of rules, because each type of system (authoritarian or republican) tended to establish its own rules and principles. However, little by little, rules were established which gradually came to be considered by every regime, whether authoritarian or republican, as the basic principles of financial orthodoxy (les principes classiques, as they are often called in France).4 These rules evolved under the authoritarian regimes of the nineteenth century in a process of parliamentary pressure on the executive similar to the earlier British model. T h e y were accepted as unchallengeable in the early years of the T h i r d Republic. Then, the wars and new political and economic factors led to the gradual distortion of the system under the T h i r d and the Fourth Republics (the period often called the période anarchique).5 T h e need for reform was strongly felt by the end of the Fourth Republic. In 1956 an important reform was carried out, which was completed in 1958 and 1959 in the constitution of the Fifth Republic.

THE

REVOLUTIONARY

PERIOD

(1789-1814)

In the early fourteenth century there was much similarity between the French and British financial systems. In both countries, meetings of representatives of the taxpayers were called by the kings, who then requested their consent to the raising of taxes. But, while in England parliaments succeeded in obtaining "the right of being the sole grantors of taxes, and thus forged a weapon, the skilful use of which in the course of time converted the humble right of petitioning the King into a control over legislation," in the seventeenth century, 6 in France, the états généraux were not summoned after 1614, and until 1789 taxes were raised by the kings without the consent of the taxpayers. T h e struggle for popular consent to taxes,

Finance Bill: "It is a law as solemn, as important and, I would say, even more important than the Finance Bill." Quoted in Léon Bertrand, Le Contrôle parlementaire des finances publiques, p. 13. 4 See M . D u v e r g e r , Finances Publiques. 5 P. Amselek, Le Budget de l'Etat sous la F« République, 8 L o r d C a m p i o n , An Introduction

to the Procedure

p. 36.

of the House of Commons, p . 3.

4

The French Budgetary Process

instead of taking place as in England between the parliament and the king, took place between the disgruntled and sometimes desperate taxpayers and the king's administrators. When in 1789 the king was forced again to call the états généraux, their basic request was to establish their right to consent annually to the raising of taxes. From then on, the principle that "no taxes can be levied without the consent of the nation" became the fundamental principle of French budgetary procedure. T h e principle was acknowledged by all subsequent constitutions and was followed, except in the case of some budgets under the First and Second Empires. On the expenditure side, however, the Assembly of 1789 was not sure that the right to authorize the levy of taxes implied the right to control the spending of that money by the king and his ministers. T h e executive would not even discuss the question, thus making impossible a determination of rules which could govern the relations between the executive and the Assembly in this vital sector. Hence, the Assembly asserted its rights over public expenditure by limiting the powers of the king and the functions of the executive in this area.7 A committee (comité de trésorerie) was set u p and made responsible for the authorization of commitments and for the payment of public money, and the accounts were kept by an accounting bureau which was directly answerable to the Assembly. In 1791, twenty-one permanent parliamentary committees were established to assume the overall control of the administrative agencies. There were no ministers to interfere between the committees and the administration. T h e executive function had been absorbed by the Assembly, and all financial powers were assigned to the legislature: article 1 of the constitution of 1791 "delegated to the Legislature the exclusive r i g h t . . . (1) to establish public expenditure; (2) to levy taxes, to determine their nature, their amount and method of collection; (3) to proceed to the sharing out of the direct contribution among the departments of the Realm, to control the spending of public funds and to see to it that accounts are rendered." 8 1 As pointed out by Roederer, a member of the Finance Committee (in the debates of 20 November 1790): " T h e unanimous wish of France has decided on the question —public expenses must be put out of the executive's reach. T h e basic principles would be hurt if one would leave to the government the administration of the public finances." Quoted in René Stourm, Le Budget, p. 43. 8 On this, see P. Delvolvé and H. Lesguillons, Le Contrôle parlementaire sur la politique économique et budgétaire, p. 139.

The Development of Financial Procedure

5

This article was included in the constitution of 1793 and of Year I I I (1795) but was, in its turn, contested when Napoleon established the First Empire (1804). The Assembly (corps législatif) then lost its right to propose public expenditure or to supervise government spending. The budget was prepared by the imperial administration, implemented by the bureaucracy, and controlled by administrative (the Inspection Générale des Finances) and judicial (Cour des Comptes) bodies instituted by the emperor. In a period of less than twenty years the pendulum had swung from one extreme to another, from the complete supremacy of the legislature over finance to the complete supremacy of the executive. No effective rules of parliamentary financial procedure had been evolved concerning expenditures—which is extremely important when one considers the state of development achieved in this field in Great Britain at that time. However, the balance sheet had some positive aspects: Parlement's right to consent to the levy of taxes had been recognized, and the administration, borrowing from both the ancien régime and the revolutionary period, had established its own institutions to enable it to check the legality and propriety of its financial activities.

F R O M T H E RESTORATION TO T H E T H I R D R E P U B L I C

(1814-1871)

The period from 1814 to 1871, except for the brief interlude of the Second Republic (1848-1852), was characterized by the existence of strong executives and weak assemblies (the Restoration, the July Monarchy, and the Second Empire). Parlement's rights in financial matters were confined to the authorization of taxes. It could not propose expenditure and was even deprived of the right to scrutinize government spending. All powers in this field belonged to the executive. The situation was nearly identical to that of 1789, except that in both the executive and the Assembly there were some people who thought that, while preserving the executive's rights in financial matters, it was possible and desirable to have some sort of parliamentary control of the government's financial activities. So, gradually, rules of financial procedure were evolved, public accounting was improved, and members of Parlement, who on the whole supported the executive, devoted a good deal of their time to the scrutiny of the estimates and of the Appro-

6

The French Budgetary Process

priations Accounts Bills—in fact, the Appropriations Accounts Bills were never so much discussed and analyzed as they were under the Restoration. 9 T h e process under the Restoration was quite similar to the early British model, with Parlement struggling to establish rules of accounting which would enable it to supervise the executive in its handling of public money (the vote by chapter, the inclusion of all public expenditure in the budget, and the Appropriations Accounts Bills). T h e system evolved during the Restoration was swept away when Parlement assumed overall responsibility for the government of the country in 1848, but it was progressively reestablished by a reluctant executive at the end of the Second Empire. In fact, the Second Empire very much improved the accounting system, but Parlement was not really involved in the process of improvement as it had been in the Restoration. T h e most important reforms of the accounts were made by decree (the whole financial system was codified in 1862) and served administrative much more than parliamentary purposes.

THE

T H I R D AND F O U R T H R E P U B L I C S

(1871-1958)

T h e reforms, however, made a lasting impact on French public finance and were adopted as basic financial rules by the Third and Fourth Republics and still form the basis of the present-day system. They consisted of the following principles: 1. T h e budget had to be authorized by Parlement every year (le principe de l'annualité budgétaire). This principle meant, first, that only Parlement could authorize the levy of taxes and the spending of public money and, second, that the authorization had to be renewed every year. T h e appropriations were annual, and the accounts were kept on a yearly basis (the accounts, however, were closed only when all the financial transactions covered by the financial act had been completed—often, many years later). Parlements could thus exercise a regular check on expenditure. 2. There had to be a single set of budgetary accounts prepared according to the same rules and covering all government resources and expenditure (le principe de l'unité budgétaire). T h e principle 9 See Stourm, Le Budget, p. 228, where he says that the Restoration was "the creator of financial order."

The Development of Financial Procedure

7

meant that Parlement was opposed to the establishment of extraordinary budgets or of special government accounts which would escape parliamentary control or make it too complex. All government expenditure had to appear in a single document, to enable Parlement to have a clear and global idea of what the government's intentions were for the coming financial year. 3. Each financial transaction had to be identified (gross accounting), and all revenues had to flow into a single account (a kind of consolidated fund) and not be earmarked for the financing of particular items of expenditure (le principe de l'universalité budgétaire). This principle meant two things. First, it implied a gross accounting system, as opposed to a net accounting system, and, second, it prevented the assignment of receipts to the payment of particular items of expenditure. In the past, the revenue departments had been allowed to deduct the costs of tax collection and then pay the remainder into the treasury without revealing the arithmetic of the process. Napoleon and, later on, the Assembly forced the revenue departments to submit a full (gross) account of their financial activities. Before that, earmarking of receipts had been used frequently by the executive to make sure that projects (very often connected with wars) in which it had particular interest would get sufficient financing. Parlement resented this procedure because it privileged certain kinds of expenditure at the expense of others, and also because it enabled the executive to set up within the ordinary budget special relationships between certain kinds of receipts and certain kinds of expenditure. 4. The budgetary authorization had to be detailed and specific (le principe de la spécialité budgétaire). With the growing influence of Parlement, the budgetary votes became more and more specific. The vote by chapter had been introduced in 1831. Abolished in 1852, it was reintroduced in 1869 and adopted by the Third Republic (article 30 of the law of 19 September 1871: " T h e budget is voted on by chapter."). In the breakdown of government expenditure, the chapter was one of the most detailed units, but less detailed than the paragraph and the article. It was never clearly defined. Both the law of 29 January 1831 and the decree of 31 May 1862 gave the same rather meaningless definition: "Each chapter deals with activities of the same kind only." In fact, members of Parlement did not attach much importance to the definition of the

The French Budgetary Process

8

chapter. What mattered to them was the political significance of an increasingly more detailed vote: "Once the principle of classifying expenditure has been adopted, the title under which expenditure is classified matters little," said a member of Parlement in 1831 of the law of 29 January 1 8 3 1 . 1 0 T h e number of chapters remained quite stable; there were 338 in 1847, 362 in 1852, 388 in 1877, and 482 in 1882. But it was to increase sharply later on, when the Assembly shifted to the republican tradition of giving greater financial power to the legislature and less to the executive. In 1883, for example, some deputies wanted to vote on the budget paragraph by paragraph (there were 3,000 paragraphs in the budget). 11 T h e government opposed the proposal but agreed to increase the number of chapters from 482 to 637, a rise of 156. From then on, the number of chapters kept increasing. 5. T h e budget had to be balanced (le principe de l'équilibre budgétaire). T h e French Parlements of the nineteenth century could not conceive of a budget which did not balance revenues and expenditure, except in the most extraordinary circumstances (wars, for example). One of the main reasons why they insisted on a clear and meaningful presentation of the budget was because they wanted to be in a position to appreciate exactly how much the government was spending. They assumed that the government, like a private person, could not spend more than it earned without becoming bankrupt. Hence, they evolved a rule whereby expenditure was always voted first, before taxes, so that, when the vote on taxes was taking place, Parlement could proceed with the readjustments needed to balance the budget in accordance with the modifications brought about during the discussion of the estimated expenditure. T h i s rule was called l'antériorité des dépenses sur les recettes.12 Supplementary estimates, because they often caused budgetary deficits, were not popular in Parlement. Parlement insisted that supplementary estimates should either be avoided or be accompanied by the 10 Ibid,., p. 292. 11 Ibid., p. 293. 12 Nowadays, Parlement votes on revenues first, thus setting that cannot be exceeded at a later stage when it votes on the on the revenues before expenditure is conceived as a way to ment will not increase expenditure to the point where it budget.

up the financial limits expenditure. T h e vote make sure that Parlewould unbalance the

The Development

of Financial

Procedure

9

levy of sufficient revenues to meet their cost (budgets rectificatifs). Parlements reflected the ideas of the period. T h e y were chiefly concerned with keeping taxes as low as possible and therefore were opposed to large government spending and unhealthy deficits. 13 T h i s set of rules constituted the core of the financial system which was agreed upon by both the Assembly and the executive. M a n y of the members of Parlement in the early days of the T h i r d Republic had fought hard for the establishment and enforcement of these rules by a reluctant executive. N o w , for the first time, the system could be fully applied. T h e war of 1871, the indemnity which had to be paid to the Germans, and the setting u p of a new regime strengthened the need for sound public finance. T h i s " G o l d e n A g e " of fiscal responsibility, however, did not last for long, and after W o r l d W a r s I and II the system came under pressure as a result of political and economic changes. First of these changes was the inflow of republican and radical deputies which changed the attitude of Parlement towards finance. T h e five basic principles were not directly challenged, but they were used by the members for purposes which did not have much to do with strict parliamentary financial and audit control. Members of Parlement became less concerned with keeping the increasing government spending under control and more eager to benefit from it. 14 T h e y assumed a greater role in the initiation of public expenditure and expanded the role of the Parlement in financial matters at the expense of the executive, transforming the budgetary debates into the main occasion for the Parlement to assert its rights over the executive and to seek electorally rewarding increases in the estimates. T a x e s sometimes had to be increased to meet the cost of this added expenditure, but, since direct taxation was almost nonexist13 R . Stourm made this typical comment in the preface of his book: " T h e amount of public expenditure, already frightfully high in 1889, 1891, 1896, 1900, 1906 and 1908, has increased even further during these last years. T h e Finance Bill for 1913, not including the inevitable increases, the expenses for Morocco and other similar disjunctions, reaches the astronomical amount of 4,664 millions! T h i s is in excess of even the most pessimistic forecasts. Everyone is worried, but in vain, the Minister of Finances, the Committee on the Budget, speakers, journalists and, without doubt, the whole country whose manifestations, however, remain insufficient." Le Budget, p. v. l* G. Devaux, La Comptabilité publique, p. 185. See also A. Tardieu, La Réforme de l'Etat, pp. 60 ff., where he claims that there was always a majority on the left in favor of higher spending. B u t right-wing politicians did it themselves.

JO

The French Budgetary

Process

ent, its impact on the taxpayers was hidden. Moreover, party discipline was loose, and deputies were not inhibited about putting forward parochial proposals. Parliamentary committees became allpowerful. T h e finance committee, as pointed out by Léon Say, three times minister of finances in the early days of the T h i r d Republic, "wants to take the place of the administration and prepare the budget as it stands and control it. The chairman of the finance committee has become, in a way, the First Lord of the Treasury and instituted, to serve under him, a certain number of Secretaries of State. The enemies of a ministerial power have seen at once the advantage that they could derive from this new institution" (quoted in R. Stourm, Le Budget. 5th ed. Paris, 1906, p. 285). The Finance Bills were not only scrutinized by the finance committee, but they were, so to speak, remade according to that committee's wishes and then submitted to the Assembly for discussion and vote. T h e committee's text formed the basis of the parliamentary debates. It was accompanied by a series of reports (eight in 1871 and thirty in 1913) aimed more at increasing the reputation of the rapporteur and improving his chances of becoming minister than at controlling expenditure. 15 Another aftereffect of the world wars was that the executive was weak and unstable. Governments depended on coalitions in the Assembly and therefore could be brought down easily. Thus, they never lasted for long—rarely long enough to look after the implementation of the budgets they had prepared. W h e n the Appropriations Accounts Bills and the report of the court which controls public accounts (Cour des Comptes) of one government were submitted to Parlement, they aroused little interest, because Parlement was usually faced with a new government which disclaimed any responsibility for its predecessor's mischiefs. This engendered a sense of financial irresponsibility on the executive side, and the debates on the Appropriations Accounts Bills, which had been so important under the Restoration, no longer interested legislators. Parlements spent more and more time discussing and modifying the estimates, and governments eroded their support in trying to force their 15 R. Stourm said of M. Félix Faure's report on the estimates of the Ministry of Commerce in 1888 that "it constituted an encyclopedia which honored its author" and that many reports were "long historical and theoretical treaties," which dealt only at the end, in a few pages, with the chapters of the budget. Le Budget, p. 281.

The Development of Financial Procedure

n

budgets through the Assembly. Governments were at the mercy of the Assembly, which at least once a year could render them powerless by delaying or refusing to vote on the budget. Furthermore, the Minister of Finances held no commanding position within the executive and thus could not successfully oppose attempts to disrupt the financial system there. His functions with regard to the preparation of the budget were defined as follows in the decree of 31 May 1862: "Each year, the various ministries prepare their own estimates. T h e Minister of Finances centralizes the departmental estimates and completes the general budget of the State by adding the revenues." He had no authority over his colleagues and did not scrutinize their proposals. As the decree said, he merely "centralized" them. If he felt that the estimates were too high, he could ask his colleagues to cut some of their estimates. But he could not enforce such cuts, and ministers of finances often complained that their requests for smaller estimates had not been heeded by the ministers.16 They often tried to get the support of the cabinet, but an agreement reached in cabinet was not always honored. In presenting the budget for 1894 to the Assembly, the Minister of Finances pointed out that all ministers had agreed on the need to cut their estimates and that several of them had carried out the agreement ("Tous les ministres sont entrés dans mes vues . . . plusieurs y sont parvenus").1'1 Because of his lack of authority, the Minister of Finances could not always propose to Parlement a budget which represented the government's financial policy in a single and unchallengeable block. T h e minister, himself, did not fully agree with the document he had to put through Parlement. Members of Parlement were aware of this and therefore tried to exercise at their level—particularly in the finance committee—the elaboration of the government's economic policy. T h e budget was modified and priorities were redistributed in a way which the Minister of Finances had little control over. As a result, the Minister of Finances 16 Ibid., p. 68. IT Ibid. T h e budget speech of 29 March 1901 contained the following phrase: "Finally, the Post Office . . . has an indispensable need, I am told, of an additional credit of 6 millions" (my italics). T h e authority of the Chancellor of the Exchequer in the British cabinet was much stronger; see A. T . Peacock and J . Wiseman, "The Past and Future of Public Spending," p. 19.

The French Budgetary Process

12

was in the unenviable situation of having to present to Parlement a budget he did not approve and of implementing a budget which often was very far from the one he had had in mind. However, his control over the implementation of the budget (the spending of money) was much greater, and he could at that level reestablish the balance in his favor. N o public money could be disbursed without the approval of public accountants, thus giving him an overall control over commitments. In the early days these public accountants were chiefly concerned with the regularity of public spending, but they gradually paid more and more attention to the efficiency of public spending. T h e fourth factor which showed the inadequacy of the classical system was economic. Indeed, after World Wars I and II, the amount of public spending increased sharply. 18 T h e government had to intervene more and more in the control of the economy. As a result, the budget, no longer a clear and simple account of government revenues and expenditures, became a complex financial and economic document which could not always fit into the traditional budgetary straightjacket. However, instead of trying to improve the traditional system to meet the new situation, members of Parlement, ministers, and civil servants tended to defend the old orthodoxy, which many of them assumed was essential to the maintenance of their authority in financial matters. Nevertheless, the forces of change could not be resisted, and a series of exceptional practices were evolved to meet the current situation. So, while people were affirming the value of the old system, a much more flexible system was being developed by Parlement and the administration to meet new political and economic problems. But the old system was so deeply entrenched that even nowadays the courses given in public finance at the Faculty of Law begin with the statement of the basic principles outlined above and then show how the present system meets or rejects those basic rules, instead of presenti s Public expenditure from 1868 to 1920 including ordinary, extraordinary, and special accounts (in millions of francs): 1868

1873

1883

1893

1903

1913

1920

1,903

2^874

3,733

3,451

3,597

5,067

58,116

Data between 1868 and 1913 from Annual Reports, and 1920 from Special Statement of Ministry of Finances quoted in H. E. Fisk, French Public Finances, p. 182. See appendix 1 for data from 1913 to 1968.

The Development of Financial Procedure

13

ing the new financial system as a coherent set of rules which can no longer be considered to be exceptions to fundamental financial laws. 19 T h e budgetary rules were honored more in breach than in observance under the T h i r d Republic. Instead of changing this situation, the Fourth Republic only added to the disarray of French public finance. T h e deputies kept the right to propose expenditure, the number of budgetary votes (chapters) reached a peak of from four to five thousand, the budget was hardly ever voted on time, and the extrabudgetary sector (such as nationalized industries and special administrative budgets) attained alarming proportions. 20 A committee for budgetary reform was set up by Parlement in 1947, but its reports came late (in 1949 and 1952) and were never followed up. 21 In 1954 Parlement delegated to Edgar Faure's government its constitutional task of regulating the presentation of the budget, and Faure's ideas, formulated in 1951, inspired the Organic Decree of 19 J u n e 1956, which was enacted by Guy Mollet's cabinet. 22 These reforms aimed at putting an end to the deviate budgetary practices of the T h i r d and Fourth Republics and at instituting a system which would take the growth of public finance into account without totally rejecting the classical rules which had formed the core of the budgetary system. At least in theory, they could have achieved a more efficient control of public expenditure and given to the government, with the exclusive right to propose expenditure, all the necessary powers to set up and implement a clearly defined budgetary policy. However, because these reforms were not accompanied by a corresponding reform of the political system, one may wonder if they could have achieved any significant result by themselves, anyway. 23 18 L. Trotabas, Finances Publiques; M. Duverger, Finances Publiques; and to some extent Amselek, Le Budget; and even G. Pallez, a high civil servant who teaches at the Institut d'Etudes Politiques de Paris, "Finances Publiques." 20 Williams, Crisis, chapter 19; H. George, Le Droit d'initiative parlementaire en matière financière depuis la Constitution de 1946 and G. Devaux, La Comptabilité publique, pp. 191 fi. 21 This committee was composed of budgetary experts, civil servants and professors and chaired by the contrôleur général de l'Armé, Robert Jacomet. For report, see La Réforme budgétaire, Vol. 1: Projet élaboré par la commission présidée par M. le contrôleur général Jacomet (Paris, 1954). 22 Williams, Crisis, p. 268. 23 Ibid., p. 269, where he shows that the Organic Decree of 1956 did not guarantee an easy passage for the budget of M Mollet.

The French Budgetary Process T H E R E F O R M S OF

1959

24

T h e reforms of 1959 took place in a totally different context. T h e Fourth Republic had collapsed, and the new Constitution proposed by General de Gaulle had been adopted. T h e interest of these reforms did not consist so much in what they added to or removed from the previous reforms (the Organic Law of 1959 reproduced the main measures of the Organic Decree of 1956), but in that they followed and complemented in budgetary matters a deep modification of the political system. In the constitution of 1958 the powers of Parlement were drastically cut: the deputies lost the right to propose expenditure, the committee system was reorganized, and strict limits were imposed on the time Parlement could take to vote on the budget. T h e powers of the executive, on the other hand, were increased, and an arsenal of procedural and institutional measures strengthened its position during the debates and votes on the budget. T h e Organic Law of January 1959, prepared by a group of civil servants and issued by the government under the unlimited legislative powers it enjoyed in the transitional period of 1959 (like the other organic laws, it was never submitted to Parlement), 25 completed the reform of the political system, which had been undertaken in 1958, by strengthening the financial powers of the government at the expense of Parlement. T h e authors of the Organic Law were also concerned with the reorganization of the budgetary accounts. They aimed at adapting the budget to the conditions of a planned economy and at making Parlement, as well as the public, aware of the role played by the budget in this enlarged framework. T h e stress under the Organic Law is always on the economic role of the budget and on its contribution to the overall balance of the economy. T h e annual estimates 24 Ordonnance No 59-2 du 2 janvier 1959 portant sur la loi organique relative aux lots de finances, hereafter referred to as the Organic Law of January 1959, or Organic Law. 25 Some members of Parlement protested strongly against this disregard for Parlement. As pointed out by René Pleven, "When there were no urgency and no need justifying such action, the government established unilaterally and by ordinance the way according to which one of the fundamental prerogatives of Parlement would be exercised. This, in my opinion, is a real misuse of power against which we are left without appeal by the Constitution." J. O., 1959-1960, p. 2328. See also A. Chandernagor, Un Parlement pour quoi faire?, p. 89.

The Development

of Financial

Procedure

15

are no longer presented agency by agency, but in larger economic categories, which makes it easier to see the relationship between the Finance Bill and the policies pursued by the government in various fields. T h e government's long-term investment programs are embodied in the budgetary framework and given not only a multiannual but also a geographical dimension. T h e budget is presented and analyzed as a document of policy, with the stress on the new measures and the changes implied by them. It is compared with the previous budgets and linked with the National Economic Plan, which aims at coordinating the overall economic policy for a period of five years. Yet—and this also was very important in the minds of the authors of the 1959 reforms—the budget remains the basic instrument for the detailed and day-to-day control of public expenditure, and Parlement, through its committees and by way of the appropriations accounts bills, is able to control the spending of money. This, of course, is the model. In practice it does not always work exactly as intended.

2

THE CONSTITUTIONAL AND FINANCIAL FRAMEWORK

T

of the authors of the 1959 reform was to put order into the system which had prevailed in France during the previous two republics, by reaffirming and streamlining some basic budgetary rules. What is the budget? What functions does it perform? What sector of the government's activities does it cover? As is well known, the French approach to administrative and governmental change is legalistic.1 Indeed, Frenchmen have a tendency to think that political problems can be foreseen and their remedies prescribed in lengthy and rigid documents and, therefore, that future behavior is to be governed by the decisions made by the drafters of the basic laws.2 The 1959 reform is a good example of this tendency, for in proposing a new constitutional framework for the elaboration, the vote, and the execution of the budgetary policy, its authors thought that they were putting an end to the mischiefs of the last republic and establishing different patterns of behavior. HE FIRST T A S K

1 As pointed out by M. Crozier, "Change can take place only when the sum of errors and misadaptations is so considerable that it threatens, if not the survival, at least the equilibrium of the whole system. Therefore, change takes the form of a crisis which shakes the whole system, but preserves its principle and its rigidity." La Société bloquée, p. 96. 2 For an interesting discussion of this approach, see Jean Blondel, ed., Comparative Government (London, 1969), p. xx.

16

The Constitutional

and Financial Framework

77

DESCRIPTION

According to the Organic Law of 1959, the Finance Bill "determines the nature, the amount, and the assignment of the revenues and expenses of the State on the basis of certain economic and financial assumptions. T h e Finance Bill forms a whole in which revenues and expenditure are put in relation with one another. It authorizes, for a period of one year, the collection of revenues and the spending of the monies raised for purposes established in the Bill." 3 Here it differs from the national plans and other economic laws (the program laws). Indeed, the latter types do not authorize the spending of public funds. T h e y have no obligatory value, and money can be applied to their implementation only within the limits of appropriations included in the Finance Bill. In the past, certain capital expenditure, often very popular, was authorized outside the budgetary framework, sometimes even before Parlement had had the time to authorize the raising of the necessary revenues. T h e Organic Law puts an end to these practices by instituting the Finance Bill as the only channel for the financing of these programs out of public monies. T h e Finance Bill, itself, is a very simple document. It is a synthesis, a summary, of the government's financial and economic activities. In 1967, for example, the Finance Bill contained sixty-three articles: twenty-one dealing with revenue, and forty-two with expenditure. Each article is accompanied by an explanatory statement, and a certain n u m b e r of these articles refer to detailed tables (états annexes législatifs). T h e s e tables are not purely informative. T h e y have legal weight because they are voted on with the articles. For example, article 24, paragraph 1, of the 1967 budget was concerned with the vote of 19,141,470,000 francs authorizing new capital expenditure for the civil ministries, while a related table showed the allocation of this amount by project and compared the 1966 and 1967 budgets, as well. T h e Finance Bill, a document of 3 In France, the Finance Bill (loi de finances) deals with both taxes and expenditure. This book, however, is concerned mainly with its expenditure side. T h e definition given here is that of the Organic Law and is not presented as an economic definition. Unless otherwise specified, references included in the text refer to the Organic Law of January 1959.

i8

The French Budgetary Process

250 pages (about 40 pages in the Journal Officiel), forms the basis of the parliamentary debate. When submitted to the National Assembly, the Finance Bill is accompanied by a series of appendixes, which fulfill three functions. First, they explain the main economic assumptions behind the government's proposals (in the Financial and Economic Report). Second, they give details on the government's expenditure programs (in the explanatory appendixes). And third, they deal with particular aspects of the government's budgetary policy (in the general appendixes). At the moment, there are about 140 appendixes, which form the basis of the information provided to members of Parlement on the occasion of the budgetary debates. During the Fourth Republic, individual budgetary bills proliferated until in 1953, for example, when the budget was formed of thirty-three different bills. 4 Now the Finance Bill forms a whole. It can be modified by the introduction of revised Finance Bills, but these have to be related to the calculations of the main Finance Bill. Finally, the results of the main Finance Bill and of the revised ones are pulled together in a single Appropriations Accounts Bill. This document, recapitulating all the government's receipts and disbursements for the financial year, is also submitted to the Assembly for examination and approval. 5 Under the new system, only strictly financial and economic measures and measures concerned with the control of public expenditure can be included in the Finance Bills. 6 T h i s excludes adjonctions or cavaliers budgétaires (riders, in the United States), by means of which government and members of Parlement used to take advantage of the numerous financial bills to put forward proposals which otherwise would never have been introduced. 7 Finally, as is the case in every industrialized country (it is clearly * H. George, Le Droit d'initiative parlementaire en matière financière depuis la Constitution de 1946, p. 26. s On the Appropriations Accounts Bills, see Léo Hamon and Jacques Vaudiaux, "Loi de Règlement définitif du budget," Revue du Droit Public, 83 (SeptemberOctober 1967): 893-940. 6 In fact, the government often includes such measures in the Finance Bills. The transfer of the Paris Halles to Rungis, for example, was dealt with in a revised budgetary bill despite the opposition of the legislation committee and of several deputies. ]. O., 1 December 1966, pp. 5127 ff. t George, Le Droit, pp. 42, 43.

The Constitutional

and Financial

Framework

/p

stated in the O r g a n i c Law), the b u d g e t plays a crucial role in dem a n d management. T h i s role of the b u d g e t is e x p l a i n e d in the Financial and E c o n o m i c R e p o r t . T h i s report, based on the economic accounts attached to it, is divided in two: 8 the first part deals w i t h the economic and financial situation of the current year and with the policy f o l l o w e d by the g o v e r n m e n t ; the second part deals with the government's economic assumptions and forecasts for the c o m i n g year and shows the relationship b e t w e e n these and the budget. T h i s presentation, introduced in 1956, enables Parlement to evaluate the government's economic and financial policy for the c o m i n g year in comparison w i t h the trends of the current year and the forecasts for the f o l l o w i n g year. T h e Financial and E c o n o m i c R e p o r t is a c c o m p a n i e d — i n fact, s u p p o r t e d — b y t w o series of reports prepared b y the national acc o u n t i n g and forecasting agencies [National Institute of Statistic and Economic Studies ( I N S E E ) , and the forecasting division and the public accounts division of the Ministry of Finances] a n d examined by the C o m m i s s i o n on N a t i o n a l Accounts. 9 T h e first report, entitled " R e p o r t on the Accounts of the N a t i o n for the Y e a r 1965," presents the national accounts for the last f u l l y completed year at the time the b u d g e t is submitted (in the case of the 1967 budget, it was 1965). T h e second report, entitled " T h e Forecasting Accounts of the N a t i o n for 1966 and the M a i n E c o n o m i c Assumptions for 1967," presents a forecast of the economic accounts for the current year (1966), based on the statistics already made available in early September, together w i t h forecasts of their likely e v o l u t i o n d u r i n g the c o m i n g year (1967), assuming that Parlement w i l l vote the measures included in the budget. T h i s report is prepared by the forecasting division in close collaboration w i t h the b u d g e t division.

STRUCTURE AND SCOPE OF THE

BUDGET

T h e purpose of any b u d g e t is to propose and to gain legislative approval for the government's

financial

plans. T h e financial opera-

tions of governments can be classified as follows: 8 For more details on this whole question, see Amselek, Le Budget la Ve République, pp. 158-185. » See below, pp. 62-64.

de l'Etat

sous

20

The French Budgetary Process EXPENDITURE

REVENUES

Goods and services Direct taxes Transfers to persons Indirect taxes General Investment income Social insurance Social insurance and pension Interest on debt contributions Subsidies Transfer payments from other Transfers to other levels of govlevels of government ernment (e.g. to local authorities, nationalized industries) Budget surplus or deficit W e will examine how the French Finance Bill and budgetary framework treat each of these areas, particularly the expenditures.

The Budgetary

Accounts

T h e Finance Bill is divided into three sets of accounts: the general budget, the annexed budgets, and the special Treasury accounts. A l l the government's revenues and expenditures must fall into one of these three sets. Moreover, the first two correspond to the final financial transactions included in the budget, while the majority of the special Treasury accounts represent temporary financial transactions (loans and advances). The General

Budget

T h e general budget includes the estimates for goods and services for all the civil and defence ministries. T h e budgetary process is still organized around the ministry, despite an attempt by the authors of the 1959 reform to reduce the role of the ministry in the budgetary framework. T h e Finance Bill, itself, classifies expenditure not by ministry but, first, by type of account (general, annexed, special), second, by financial category (current, capital, loans), and, third, by title. For example, current expenditure is divided into four titles: T i t l e 1, D e b t Interest and T a x Refunds; T i t l e 2, Parlement and President of the R e p u b l i c ; T i t l e 3, Salaries, General Administrative Expenses, and such; and T i t l e 4, Current Grants for Economic, Social, and Cultural Purposes. It was assumed that the new presentation w o u l d h e l p members of Parlement to broaden

The Constitutional and Financial Framework

21

their approach to the budget so that, instead of seeing in it the mere collection of individual ministries' estimates, they would see its overall financial and economic role. In fact, despite these intentions, the ministry has remained the most important budgetary unit for the purpose of administrative and parliamentary control. The detailed preparation of the estimates is still organized around the ministry, and the detailed presentation of the estimates (the departmental booklet) made by the ministry remains the focus of the budgetary debates. Finally, under the ministry, and for purely audit purposes, the chapter includes the appropriations which are of the same nature or have the same object. Chapter 3 1 - 0 1 of the 1966 estimates of the Ministry of Agriculture, for example, included all the appropriations concerning the salaries of the staff of the central administration of that ministry. This chapter did not include expenditure for a different purpose. Chapter 3 1 - 0 1 is, thus, specialized according to the Organic Law, and the money must be spent and accounted for in accordance with the amount and the object of the chapter. The Annexed

Budget

The annexed budgets are designed to take into account the special conditions applying to the administration of certain governmental agencies which are of a more or less industrial and commercial character, but which have not been granted the autonomous status of nationalized industries. 10 These agencies have their own budgets; they keep their own receipts and use them for their own expenditures. But any surplus must be paid into the general budget, and, as a counterpart, any deficit is met by a grant from the general budget. The annexed budgets are included in the Finance Bill and are voted on by Parlement. They are subject to the general budgetary and accounting rules, although some of these rules have been made more flexible in this case, to take into account the industrial and commercial character of some of the annexed budgets (on these rules, see articles 18, 20, 21, and 22 of the Organic Law). The main annexed budgets include those of the Post Office and Telecommunication Department (with a budget of more than 10 billion 10 T h e French word service is translated as agency.

22

The French Budgetary Process

francs in 1967) and social assistance to farmers (with 5.5 billion francs in 1967). In 1967, the total expenditure of the annexed budgets amounted to 17,239 million francs and those of the general budget to 116,979 million. These two amounts cannot be added, however, because part of the expenditure of the general budget consists of grants to the annexed budgets.

The Special Treasury

Accounts

T h e special treasury accounts include those transactions which are of a temporary nature. 11 T h e main ones consist of various commercial accounts, accounts of dealings with foreign governments, loans and advances accounts, and special-assignment accounts. In 1966, for example, there were thirteen loan accounts. T h e two most important ones were concerned with the government's low-cost housing program and the Fund for Economic and Social Development (FDES). T h e latter fund deals with the allocation and reimbursement of loans for the implementation of the National Plan and of various programs for productivity, conversion, and decentralization of the industry. Altogether, the loans accounts amounted to more than 5,000 million in 1966. T h e use of special treasury accounts was an old habit of the T h i r d and Fourth Republics, when numerous special accounts were opened outside the budget, in order to remove unpopular or excessive expenditure which could hardly have been covered by taxes from parliamentary control. It also enabled the government to hide the major part of the budgetary deficit. 12 In 1956 and in 1959, at least two-thirds of these accounts were suppressed, and the remaining were submitted to strict budgetary and parliamentary control. T h e agencies concerned with these accounts now must prepare their own estimates and justify 11 For more detailed analysis of the mechanism of the special treasury accounts, see de Voguë, "Finances Publiques"; G. Devaux, La Comptabilité publique, pp. 125140; G. Pallez, "Finances Publiques," pp. 123-129; M. Duverger, Finances Publiques, pp. 176, 264, 266; and Amselek, Le Budget, pp. 84-98. 12 In 1947 there were an average of 400 special accounts, whose overall transactions amounted to approximately 500,000 million old francs. For an interesting description of the anarchic situation of the treasury accounts at the beginning of the Fourth Republic, see G. Devaux, La Comptabilité publique, pp. 206-208. Devaux was the head of the public accounts division.

The Constitutional and Financial Framework

25

their amounts before the Ministry of Finances and before Parlement. Nationalized Industries and the Extrabudgetary Sector Another important question dealt with by the Organic Law is concerned with the scope of the budget or, to look at it another way, the scope of the extrabudgetary sector. The Organic Law reaffirms the traditional principle of the unity of the budget and says that it must include all the revenues and expenditures of the state. It adds that all the accounts which form the budget must be prepared and kept according to the rules of public accounting. The details of these rules, it is specified in the Organic Law, are to be determined by a decree (article 16). 13 In fact, the budget is far from including all the revenues and expenditures of the government. T h e extrabudgetary sector, which has greatly expanded in the post-war period, remains untouched, leaving outside the budget a large sector of public spending (such as the finances of the départements and communes, public authorities and enterprises, and social security). In fact, there was very little pressure on the reformers of 1959 to include these in the budget, for, by that time, the Ministry of Finances had more or less succeeded in extending its control to this sector. Only the Assembly would have gained from an enlargement of the budgetary sector, and the extension of legislative control was not the objective of the authors of the 1959 reform. They wanted to streamline parliamentary procedure and to shorten the budgetary discussion—aims which could hardly have been achieved through an expansion of the budget. Moreover, despite some criticism in Parlement and in the reports of the Cour des Comptes, 14 the extrabudgetary sector has developed further since is T h e decree in question was approved in 1962: Décret No 62-1587 du 29 décembre 1962 portant règlement général sur la comptabilité publique. J. O., 30 December 1962. T h e decree confirms the annual cash-accounting system established in 1954. 14 This court, formed of high civil servants, is responsible for controlling public accounts. It fulfills in France the functions of the Parliamentary Committee on Public Accounts in Great Britain, or of the General Accounting Office in the United States.

The French Budgetary Process

»4

1959, and in so many different and complex ways as to defy description. 1 5 B u t because it shows more precisely the real scope of budgetary control and is typical of the previous pattern of deviation from rigid rules, I shall name the major areas of public spending not included in the budget: universities, lycées, hospitals, national museums, Caisses des dépôts et consignations, and so on. 2. NATIONALIZED ENTERPRISES: Electricité de France, Société Nationale des chemins de fer, Renault, and the like. 1. PUBLIC INSTITUTIONS:

3. SEMIPUBLIC AND PRIVATE ORGANIZATIONS WHICH CARRY OUT PUBLIC SERVICES:

the social insurance and trust-fund accounts, and such. 16

T h e importance and the complexity of the extrabudgetary sector posed many problems to those responsible for the elaboration, coordination, and control of the government's economic and financial policy. T h e budget loses much of its value as instrument of coordination and control when too many of the government's financial activities are not included in it. T h e notion of "balanced" and "unbalanced" budgets is made meaningless because the surplus or the deficit varies according to the degree of "budgétisation" or "débudgétisation." But administrative control has been at the expense of parliamentary control. T h e subcommittees, which under the Fourth Republic used to control the nationalized enterprises, were abolished in 1958, leaving great masses of expenditure beyond parliamentary reach. As pointed out by Senator Pellenc, Parlement, during the budgetary discussion, deals only with one-third of the total government e x p e n d i t u r e — t h a t is, with the sector of government spending which corresponds to the role of the state before W o r l d W a r II. For the other two-thirds (nationalized industries and social services), parliamentary control hardly exists within the framework of the budgetary discussion. 17 In 1958/1959, an effort 15 Amselek, Le Budget, p. 52, and, for an interesting account, Pallez, "Finances Publiques," pp. 52-76. 16 In my outline I leave aside the problem of departmental and communal finances, though the links between them and the annual budget are numerous and have caused much controversy between the government and Parlement during the budgetary debates. Many members of Parlement are mayors or counseillers généraux, and their main interest in the budgetary discussion is in discovering what the contribution of the central government is to various local programs and then asking for more. IT M. Pellenc, Conditions d'un redressement français, pp. 17-18.

The

Constitutional

and

Financial

Framework

25

was made to organize some form of parliamentary control over the extrabudgetary sector, as the result of which Parlement was allowed to establish select committees of control, the information provided to Parlement and its standing committees was improved, and the role of the budgetary rapporteurs was extended to the extrabudgetary sector. FINAL

AND T E M P O R A R Y

TRANSACTIONS

Budgetary transactions fall under two main headings. The first, "once-and-for-all transactions," includes all the revenues and expenses of the general budget, the annexed budgets, and the special assignment accounts; these "correspond to the spending activities of the State." 18 The second heading, "temporary transactions," represents, on the income side, the repayment of loans and interest payments, and, on the expenditure side, governmental loans and advances. These include the special treasury accounts (except for the special assignment accounts) and correspond to "the banking activities of the State." 19 The aim of the distinction is to show with more accuracy than was the case under the previous Republic the meaning of the budgetary deficit (or surplus). It shows what contribution, if any, the surplus of current revenues over current expenditure makes to the financing of loans and advances and what will have to be met out of Treasury resources (borrowings, Treasury cash balances, and any advances from the Bank of France). Table 1 shows that in 1964 part A of the budget (budgetary transactions) had a surplus of 532 million francs and part B (loans and advances) a deficit of 5,266 million, leaving an overall budgetary deficit of 4,734 million (total cash requirement). The table, which shows the allocation of revenues and expenses according to their "final" or "temporary" nature, forms an article of the Finance Bill and is voted on immediately after the examination and the vote on the revenue budget and before the discussion on the estimates. It sets up the financial framework within which the 18 See Le Budget de 1965, published by La Documentation Française, p. 8. 19 Ibid. T h i s division has the advantage at the administrative level of corresponding functionally to two major divisions of the Ministry of Finances—the budget division and the treasury division.

26

The French Budgetary Process

budgetary discussion takes place and enables the Minister of Finances to object to parliamentary proposals which may upset the équilibre, as defined in the article. It is important to note, however, that équilibre does not necessarily mean that the budget shows a perfect balance between revenues and expenditure. T h e équilibre described in table 1 is, as we have seen, deficitary, while in the 1965, 1966, and 1967 budgets the équilibre showed a small surplus (see table 2). TABLE

1

BALANCE OF REVENUES AND EXPENDITURE IN THE 1 9 6 4

BUDGET

(in millions of francs) Revenues

A.

BUDGETARY TRANSACTIONS

(final)

general budget annexed budgets special treasury accounts (special assignment accounts) TOTAL

B.

Limits of Authorized Expenditure

(temporary) special treasury accounts (loans)

86,661 13,212

86,313 13,212

3,296

3,112

103,169

102,637

8,597 8^97

13,863 13,863 5,266 4,734

LOANS AND ADVANCES

TOTAL NET LOANS AND ADVANCES

Total cash requirement

THE

CAPITAL

BUDGET

T h e distinction between current and capital expenditure is basic to the French system. Current expenditure "includes the purchase of goods and services, the remuneration of personnel, as well as pension plans." Capital (or investment) expenditure "consists in the creation of durable goods." 20 T h e r e is no rule which specifies which part of the capital expenditure program should be covered 20 Both definitions are borrowed from a publication of the Ministry of Finances on the 1965 budget (La Documentation Française). Defence expenditure is also divided into current and capital, but, because of its special character, I do not deal with it here.

The Constitutional

and Financial

Framework

TABLE 2 BALANCE OF REVENUES AND EXPENDITURE IN THE 1965, 1966 AND 1967 BUDGETS

(in millions of francs) 1965

1966

1961

115,595

123,588

136,115

109,958

119,809

134,218

BUDGETARY TRANSACTIONS (final)

(general budget, annexed budgets, special assignment accounts) revenues expenditure deficit (—) or excess ( + ) in budgetary transactions LOANS AND ADVANCES

+

5,657

+

3,779

+

1,897

(temporary)

(special treasury accounts excluding most of the special assignment accounts) revenues expenditure deficit of temporary transactions (loans and advances) TOTAL CASH REQUIREMENT

+

10,322

11,526

12,590

15,947

15,229

14,369

5,625 12

+

3,773

-

1,779

6

+

118

by taxes and w h i c h by loans. In some cases, however, the governm e n t states the purpose of its borrowings. In M a y 1967, for example, the g o v e r n m e n t b o r r o w e d 1.25 b i l l i o n francs in order to "complete the

financing

of priority investments." Part of that m o n e y

was to be lent to the F u n d for E c o n o m i c and Social D e v e l o p m e n t , b u t another part, as m a n y observers k n e w , was to be used at least temporarily to h e l p finance the deficit of the social funds. 2 1

insurance

Some pressure groups (the Syndicate of the M o t o r C a r In-

dustries, for example) w o u l d like the g o v e r n m e n t to make a m o r e systematic use of assigned borrowings (emprunts

affectes)

because,

first, the loans are raised rapidly and, second, they have the assurance that the g o v e r n m e n t w i l l spend the money according to the stated purpose of the loans. 22 21 Gilbert Mathieu, Le Monde, 21-22 May 1967. Some borrowings, however, like the borrowings of the Post Office, are allocated to capital projects. 22 In 1965 and 1966, for example, at the instigation of the Syndicate of the Motor Car Industries, the government borrowed to finance some highway programs.

28

The French Budgetary Process

Capital expenditure is by nature long-term expenditure. The time span between the authorization of a particular project and its complete realization may be several years and thus overlap the annual framework of the budget. 23 This raises the problem of whether all the necessary funds should be appropriated when the government first commits itself to a program or whether the appropriation should be phased on an annual basis until the completion of the program. In some budgetary systems (that of the United States, for example), all the funds necessary for the execution of a program are appropriated when the program is authorized, and the executive determines the phasing of the expenditure. In some systems (Great Britain's, for example) funds are appropriated one year at a time. In France, this difficulty was resolved by including in the budget two complementary kinds of appropriation with regard to the multi-annual capital programs—the autorisations de programme and the crédits de paiement. The autorisations de programme constitute the upper limit of the total funds that the ministers are authorized to commit to an investment. The crédits de paiement constitute the upper limit of the funds that can be ordered for payment or paid during one financial year to meet the cost of commitments entered into within the framework of the corresponding autorisations de programme (article 12 of the Organic Law). The same budgetary chapter includes both appropriations—one authorizing the multi-annual program (autorisations de programme) and one authorizing yearly payments (crédits de paiement). The autorisations de programme enable the government to undertake, under a precise financial ceiling, the realization of the program (long-term tenders, contracts, and so forth). The crédits de paiement, on the other hand, constitute, first, a forecast of what the government will have to disburse during a single financial year to pay for the realization of a program and, second, an authorization to pay it. The annual phasings of the crédits de paiement corresponding to a program are given in the appendixes to the Finance Bill, but the government is not bound to realize the program according to these breakdowns.24 23 See pp. 33-34. 24 The following is a typical breakdown (applied to a multi-annual program of 130 million francs): first year, 20 percent (1962, 26 M); second year, 30 percent (1963,

The

Constitutional

and Financial

Framework

29

T h e autorisations de programme remain in force for an indefinite period of time, and, until they have been canceled, the government is expected to include the necessary appropriations for their payment in the yearly Finance Bill. They can be revised during the implementation of the program to take technical changes or variations in prices into account. These changes are referred to Parlement only if they are in excess of the autorisations de programme already granted. T h e use of autorisations de programme and crédits de paiement has profoundly changed the outlook of the investment budget. For one thing, the budget's primary aim is not so much to establish accurately the amount of money that will be spent during the financial year as to stress the financial and economic importance of decisions which will commit both the government and Parlement for many years ahead. For another, the budget is not only an accounting instrument, but it is an instrument used to organize and plan the government investment programs within the framework of the National Plan and the program laws. CONTINUING I T E M S AND N E W

MEASURES

Budgeting is largely an incremental decision-making process. 25 T h e government must guarantee its basic functions (such as police, justice, and education), and pay its debts. Participants in the budgetary process usually accept the current level of expenditure of the various ministries as the base, or the amount of expenditure that will continue and will not normally be subjected to intensive scrutiny, and focus their attention on "the increment between the base 39 M); third year, 30 percent (1964, 39 M); a n d fourth year, 20 percent (1965, 26 M). It seems that until 1963 most ministries applied this breakdown to nearly all their programs. T h i s lack of flexibility led to all kinds of distortions in the implementation of the programs and m a d e it necessary for the ministries to carry over large a m o u n t s of appropriated f u n d s from year to year. See D. Floquet, " L e Problème des reports budgétaires, étude appliquée au Ministère de l'Intérieur," p. 43. 25 For an interesting discussion, see A. Wildavsky, The Politics of the Budgetary Process, pp. 13-16. See also Marjorie Hunter, " U . S. Budget: Why Some Say It Defies T r i m m i n g , " in J a m e s W . Davis, ed., Politics, Programs and Budgets (Englewood Cliffs, N . J . , 1969), p p . 8-10, and Charles E. L i n d b l o m , "Decision-Making in T a x a t i o n and Expenditure."

3°

The French Budgetary Process

and the sum that is requested for the coming year." 26 Before 1956, no formal distinction was drawn between the continuing and the new expenditure, but, in fact, the whole budgetary process was focused on changes in previous spending. In 1955, when it became obvious that Parlement would not have the time to vote the 1956 budget before the election, the government asked Parlement to adopt the measures which had already been approved in the 1955 budget, and kept for further discussion after the elections those which were being proposed for the first time. T h e procedure worked well, and the authors of the 1956 budgetary reform institutionalized it. They divided each chapter into two categories of measure: all those approved by Parlement in the previous years, called services votes and translated here as continuing items, and mesures nouvelles (new measures). T h e continuing items "represent the minimal funds which the government considers indispensable to carrying out the public services under the terms approved by Parlement the previous year . . . insofar as capital expenditure is concerned, the estimates for the voted services are at best equal to the cost of the programs already authorized by a program law, or to the forecasts as outlined in the most recent timetable, or, for lack of a timetable, to the previous year's estimates eventually modified . . ." (article 33 of the Organic Law). In order to explain how the system works in practice, one chapter of the budget of the Ministry of Agriculture for 1966 will be used for demonstration—chapter 31-01, which concerns the salaries of the ministry's central administration. In table 3 the first column, titled "1965 Budget," shows the total appropriation vote in the previous budgetary year (16,654,422 francs). T h e second column, titled "readjustments," shows the modifications made in that voted amount by already approved administrative and legislative decisions. Since these modifications mark an increase over the previous year's vote, the n u m b e r is preceded by a plus sign (-1-871,171 francs). T h e sum of the numbers in these two columns gives the amount for the continuing items—17.525,593 francs (column 3). T h e Organic Law does not define the autorisations nouvelles 26 See Wildavsky, The Politics, pp. 16-17, and, for a good summing-up, Ira Sharkansky, The Politics of Taxing and Spending, pp. 49-52.

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