More Cheeseparing? Increasing Public Expenditure Efficiency in France

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Posted by Maximilien Queyranne and Jean-Jacques Hallaert1

Jean-Jacques Hallaert and Maximilien Queyranne recently published an IMF Working Paper on France’s spending policy and reforms. They identify areas where there is scope for increasing expenditure efficiency, while maintaining or even improving social and economic outcomes. 

At 57½ percent of GDP, public expenditure in France is among the highest in the world. Spending has outpaced GDP growth for over three decades. Notwithstanding successive tax increases, France has experienced chronically large fiscal deficits and a growing public debt burden, approaching 100 percent of GDP.

The fiscal consolidation that started in 2011 was initially supported by revenue-raising measures but is now intended to be fully expenditure-based. It aims to bring the overall deficit below 3 percent of GDP by 2017, turn around the growth in public debt, and achieve a structural fiscal balance over the medium term.

Identifying areas for savings has proved difficult, and there is no clearly articulated consensus on the areas where spending is too high or inefficient. This is in part because of concerns about the social and economic impact of specific spending cuts, in particular the impact on inequality.

Spending measures have thus mainly relied on across-the-board savings to limit nominal spending growth. These cuts have focused on central government spending and the health sector, while local governments and social security funds spending have continued to grow faster than GDP.

A shift from a policy of containment to broader and deeper efficiency-oriented reforms would increase the chance of success and the sustainability of the ongoing fiscal consolidation, while protecting the French “social model”. The government has recently initiated some steps for structural savings e.g., family allowances, health, and pensions.

The working paper identifies areas where there is scope for greater expenditure efficiency in France. This requires an assessment not only of fiscal costs but also the intended results, such as the achievement of social objectives, and the provision of high quality public goods and services. 

Based on these results, the paper provides policy options for expenditure reform in each of the following areas, drawing on successful reform episodes in other countries:

[1] Maximilien Queyranne is an Economist in the Expenditure Policy Division of the IMF’s Fiscal Affairs Department; Jean-Jacques Hallaert is a Senior Economist in the IMF’s European Department.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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