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the social security funds, a global approach to public finances is required, possibly via law. Multi-year budgetary projections prepared for the EU and for Parliament are discussed in terms of all government bodies (administrations publiques) (Mer and Lambert, 2003). The 2001 LOLF may have to be supplemented by legal dispositions that integrate fully the revenues, expenditures and balances of the budgets of the State, the social security organisations and local governments.9

2. Principles underlying budget system laws

High-level laws are seen as a channel for specifying important principles.10 Textbooks on the French budgeting system, often written by law faculty professors (e.g. Bouvier et al, 2002; Mekhantar, 2003; Querol, 2002; Saidj, 2003; Trotabas and Cotteret, 1995), inevitably highlight traditional budget principles, notably: annual basis, universality, unity, specificity, balance, and the separation of the person responsible for giving orders to collect revenues or pay expenditures (ordonnateur) from the public accountant (comptable public). Public sector lawyers, rather than economists, have taken the lead in embodying these principles in law.

Traditional principles have been incorporated in successive organic budget laws. However, the annual-basis principle, which relates to annual appropriations, was often not respected.11 Also, the 1959 Ordonnance on the budget system did not require the annual budget projections to be placed in a medium-term context (even though medium-term projections were prepared prior to 2000). This was changed in the 2001 LOLF (Art. 50), which requires four-year projections of revenues and expenditures. The LOLF states that there is to be a single “account” (meaning a document) for total revenues and expenditures of the general budget (Art. 6), an embodiment in law of the principles of budgetary universality and unity. Although the principle of universality has traditionally been stressed, the State budget is presented by the Minister of Finance, whereas the social security financing law is presented by the Minister of Health – clear exceptions to the principles of universality and unity, resulting in a dual budget process. The two separate budget processes are regulated by two separate organic laws (see Box 1). The State budget itself is not unified, as earmarked funds, budget annexes, and special treasury accounts supplement the “general” budget. The 2001 LOLF, like its 1959 predecessor, provides the legal basis for segregation of the State budget. However, the concept and application of a single treasury account is an important principle of public finance in France.

The principle of specifying the budget balance is incorporated in the 2001 LOLF (Art. 1). The notion of “balance” is not clearly defined in the LOLF, which requires the budget to present tables showing the main data associated

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with the fiscal balance and how the fiscal balance will be financed (Art. 34). The LOLF also requires the government to present a report on future orientations of economic and budget policies, taking account of its European commitments (Art. 48). However, there is no legal requirement to specify the links between the revenues, expenditures and balance of general government (as reported to the European Union) and the aggregates of the annual State budget, the social security funds and local governments’ budgets.

The principle of the separation of the person responsible for giving orders to collect revenues or pay expenditures (the ordonnateur) and the public accountants who manage cash revenues and expenditures, was established in Napoleonic times. It was believed that a separation of these functions would allow public accountants, who are financially and personally liable for irregular expenditures or uncollected revenues, to provide an independent check on the authenticity of ordonnateurs’ acts, thereby preventing irregularity and fraud. This principle has largely broken down on the revenue side, since many taxes are self-assessed – the valuation of the amount to be paid and actual tax payment take place nearly simultaneously. Although academics have questioned the need to retain the principle on the expenditure side (e.g. Saidj, 1993), for central ministries this principle is still considered sacrosanct. The LOLF requires responsible management in spending ministries, especially by managers of the 132 budget programmes of the general budget who were nominated in 2004.12 With the accounting function to be decentralised to spending ministries (annual accounts for each ministry will be prepared), the principle of separation of ordonnateurs and comptables will become less important, since programme managers’ responsibilities for “ordering” expenditures and ensuring their payment will increase. Also, computerisation reduces the need for such a distinction.13

The way in which the principle of specificity will apply as from 2006 will completely change. Most State budget titles will be voted by 158 programmes, within the framework of 47 missions (objectives). This replaces the previous 848 chapters for expenditures previously classified by administrative unit and economic type of expenditure. The new performance orientation is accompanied by the newer principles of transparency, accountability and responsibility. Budget transparency (sincérité) is a new principle that was introduced into the 2001 LOLF (Art. 32 and 33). The major reasons are that Parliament wished to increase the scope of the universality principle and transparency – a strong desire for clearer information, including on performance, in the draft budget law and accompanying budget documents. Henceforth, budget programme managers will be responsible for preparing ex ante and ex post performance indicators for their programmes and contributing to annual reports. In this way, the legal basis for the principles of accountability and responsibility of managers of budget programmes for attaining missions has been reinforced.14