IV. FRANCE

Box 1. France: Main budget system laws

●1958 Constitution.

●2001 Organic Budget Law (Loi organique relative aux lois de finances, LOLF), August.

●1996 Organic Law relating to the Financing of Social Security (Loi organique relative aux lois de financement de la sécurité sociale, LOLFSS), July.

●Social Security Code.

●1994-95 Financial Jurisdictions Code (external audit law).

●Local Government Code.

●1962 Public Accounting Decree.

●1922 Law on Controlling Expenditure Commitments.

Source: All laws and decrees are available (in French) at www.legifrance.gouv.fr.

and general government debt to 60% of GDP. However, these quantitative limits have not been specifically incorporated into any French laws and, strictly speaking, they are not legally binding on France.4

1.2. Reforms of budget system laws

The adoption of the Constitution in 1958 was a major reform at that time, as it reduced Parliament’s powers in budget making. Prior to 1958, the Minister of Finance was obliged to present to Parliament a draft budget that had already been amended by parliamentary budget committees (Commissions des finances). The Constitution removed this parliamentary privilege, set a limit on the number of parliamentary committees (previously many committees influenced the shape of the budget), and provided the executive with strong powers in budget preparation and execution. Parliament’s powers of amendment became more limited.5 The adoption of the 1959 Ordonnance on the budget system drastically reduced the number of budget lines from the 4 000 prevailing in 1956 (Bouvier et al., 2002, p. 239). Despite this, for more than 40 years, Parliament only had a single vote for existing policies (services votés). This resulted in budget inertia and contributed to a ratcheting-up in the level of total expenditure. Also, since most expenditure was carried over from year to year, there was little debate in Parliament on the objectives of budgetary policies. The legal framework allowed the executive powers to manipulate funds without parliamentary knowledge.6 Finally, the information provided by the executive on budget execution was neither complete nor timely.

IV. FRANCE

To address these and other deficiencies, and at the initiative of Parliament, a new LOLF was adopted in August 2001 (for explanations and background, see for example Camby, 2002, and Hochedez, 2004). This revised “financial constitution” introduced a new philosophical approach to budget management (Bouvier, 2004) and the law was adopted with a wide consensus, following 35 previous attempts to change the 1959 law.7 The main objectives of the 2001 LOLF are:

●To modernise the State by presenting a budget by missions (at a first level of parliamentary vote) and programmes (at a second level – the main management framework to which objectives and indicators of results are linked). The aim is to replace input-oriented, incremental budgeting by

zero-based, results-oriented budgeting. About 850 line items of expenditure will be replaced by 158 programmes.8 Accrual accounting is to accompany

the budget reform.

●To increase parliamentary powers in budgeting and enhance accountability, in line with the 1789 Declaration of Human Rights that “society has the right to ask public agents to account for their administration”. The reduction of the executive’s powers in the budget process is to be achieved by increasing the coverage of the State budget to include off-budget activity previously controlled by the MINEFI, enhancing the clarity and transparency (sincérité) of the annual budget, and increasing the role of Parliament in scrutinising and modifying the composition of proposed budget expenditures. To these ends, budget information available to Parliament and the public is being enhanced – both for the ex ante budget projections and for the ex post results of the budget. In particular, annual reports will be prepared so that Parliament can appreciate whether outcomes and programme objectives are being attained.

The LOLF is to be fully implemented by 2006. Some of the easier provisions were already implemented during 2002-03 (Arthuis, 2003). Several important issues were resolved or addressed in 2004, including the definition of missions and programmes (MINEFI, 2004a, Annex 6) and the structure of a new accounting framework. A guide for development of strategies, objectives and performance indicators, along with the responsibilities of budget programme managers (gestionnaires de crédits), was published conjointly by the executive, the Parliament and the Court of Accounts (MINEFI, 2004b). Full implementation of the LOLF requires changes in mentality. Past attitudes have been formed in the context of a control-based budget system rather than one where performance is highlighted and individual responsibility is rewarded. The LOLF may induce changes in other laws, notably the 1922 Law on Controlling Expenditure Commitments, the 1962 Public Accounting Decree, and the 1983/84 laws relating to public servants’ duties and rights.

With a planned continuation of decentralisation of central government competencies to local governments, and the recurrent financing problems of