Who Breaks a Butterfly Upon a Wheel? Reforming the French Government 2007-2012

Posted by Maximilien Queyranne

In 2007, at the beginning of President Sarkozy’s mandate, the French government launched an ambitious reform agenda to improve the quality of services to the public, to reduce costs and to modernize management of central government financial and human resources. This program was called RGPP (a French acronym for the general review of public policies). As pointed by the OECD, RGPP was active during a key period for public sector reform in France. This momentum it created was characterized by a cocktail of: (i) a president who solemnly promised during the election campaign of 2007 to drastically modernize and streamline the public sector; (ii) a retirement spike in the public sector which allowed for restructuring and boosting productivity; and (iii) a country with some fiscal room for maneuver, a year before the onset of the global financial and economic crisis.

Five years later, the new government has decided to kill off RGPP, on the basis of a report by government internal auditors. At the same time, the OECD published a special review providing an international perspective on RGPP. These reports show that the OECD and government internal auditors’ analyses are largely consistent regarding RGPP’s scope and objectives, but disagree on the methods and decision-making processes that it employed. The reports also indicate that RGPP was poorly integrated with the PFM reforms initiated by the 2001 Organic Budget Framework Law (Loi organique relative aux lois de finances, LOLF) many of which were implemented before RGPP began.

1. RGPP scope and objectives

The initial goal of RGPP was to rethink public policies by scrutinizing all public spending programs, as well as taxes and compulsory contributions (the review of the second area was later abandoned). But its scope was quickly limited to central government, excluding social security bodies and local authorities, which account for two-thirds of public spending in France. Moreover, RGPP gave priority to the efficiency gains that could be achieved by reducing operating costs, reducing the size of the civil service, or reorganizing operational systems, rather than savings that could be achieved by more radical policies, e.g., by transferring functions from the government to the private or non-profit sectors. In fact, during the RGPP period, half of the line ministries were given new missions or functions to carry out, in a country where public expenditure already accounts for more than half of GDP (the second highest rank among OECD countries). In addition, RGPP paid little attention to program spending (Euros 150 billion in 2012), such as subsidies to NGOs tax expenditures (Euros 70 billion) as well as spending on health and social benefits (Euros 320 billion for the social security system). Interestingly, the major overhaul of the pension system in 2008 was implemented outside the RGPP.

Nevertheless, RGPP did lead to some tangible benefits. For example: (i) full-time staffing levels were reduced by 5.4% in 2009-2012, of which 3% can be attributed directly to RGPP reforms; (ii) the number of government departments was reduced at both the central level and the local level; and (iii) functions such as procurement of some goods and services, property management, information and communication systems, and logistics were pooled. The fiscal savings arising from these measures is estimated at about Euros 11.9 billion for 2009-2012, equivalent to 3% of central government spending.

2. RGPP method

The internal audit report criticized RGPP because of: (i) excessive control of the reform process by the President’s Office, with limited ownership by line ministries; (ii) insufficient involvement of public sector actors (including local authorities and social security bodies); (iii) the confidentiality of the audits which prevent effective consultation and communication with all stakeholders; (iv) an excessive focus on budgetary savings, mainly through reductions in staffing, rather than encouraging greater mobility of resources; and (iv) the very tight timeline provided for reviewing and implementing the reforms, which limited the room for negotiation with public sector unions and managers.

Another point of criticism of RGPP involves the extensive use that was made of consulting firms. The OECD report finds that “a fine balance has been achieved...[that] facilitated cultural accommodation between the world of private consulting and the world of French administration”. The internal audit report, on the other hand, was critical both of the heavy cost of the consultants employed by RGPP – estimated at Euros 253 million in 2007-2011,[1] and the lack of public sector knowledge displayed by many of them.

3. How about PFM reforms?

As is well documented, the LOLF introduced reforms in many areas that were new to France, including program budgeting, to improve the efficiency and impact of public spending, and accrual accounting, to improve reporting and limit fiscal risks (such as unreported or contingent liabilities). The implementation of the LOLF was carried out over a five-year period, and substantially improved fiscal transparency and the quality of public accounts, as well as bringing some significant operational benefits. Nevertheless, the RGPP audits made little use of the newly designed programmatic structure of the budget and the LOLF performance indicators, and paid little attention to reinforcing the role of budget managers. Moreover, the government’s financial statements, published on an accrual basis for the first time in 2007, were not scrutinized by the auditors to carry out financial or fiscal analysis.

Ten years after the adoption of the LOLF, and five years after the launch of RGPP, the French public sector shows many signs of “reform fatigue”, at a time when fiscal consolidation will reach an unprecedented level in recent history. In this context, the government is facing an historical challenge, namely to find new and consensual ways to reform the public sector, under an increasingly tight deadline. Better to join at the latter end of a feast, than the beginning of a fray?

[1] These data account for all DGME’s private consulting fees in the period. It doesn’t account for private consulting fees paid by line ministries during the same period.

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