€50 billion in savings - the details
16 April 2014
In line with the announcement made by the President on 14 January, a plan is to be set in motion to reduce public expenditure by €50 billion between 2015 and 2017. It has two goals:
To enable the Responsibility and Solidarity Pact to be implemented,
To honour our commitments in terms of reducing our public deficits.
The savings effort will be shared between the different sources of public expenditure.
These savings will require operational expenditure by the ministries to be controlled. This means savings on property expenditure, the pooling of support functions (particularly purchases and information systems) and a reduction in the state’s everyday expenditure.
Civil servants will contribute to the necessary savings effort through a continued stabilization in the value of the civil service index point.
The plan to create jobs in national education, security and justice will be maintained, in view of the priority being given to young people and to French people’s security.
Government interventions will also be refocused to be made more effective.
Government operators and other government agencies will have their expenditure and interventions revised downwards. Their resources increased by 15% under the previous five-year term.
The first piece of legislation on decentralization (the so-called MAPTAM act), passed in January 2014, enables pooling between communes and various levels of community, which is a source of savings.
The bill clarifying the Republic’s territorial organization will eliminate the general competence clause for departments and regions. This is a way of rationalizing expenditure and clarifying the roles of the various players.
For example, entrusting regional councils with full competence over economic development (some of which were exercised by the departments) will enable nearly €500 million of savings to be made (source: the Queyranne, Demaël qand Jurgensen report of 2013). This will also enable procedures for entrepreneurs and beneficiaries of subsidies to be simplified.
The General Operating Grant (DGF) will be reformed in the 2015 budget, to encourage good practice and strengthen financial solidarity mechanisms between wealthy and disadvantaged local authorities.
In a simplification drive, the Consultative Evaluation Standards Committee (CNEN), established before the summer, will give a greater role to elected representatives in reducing the volume of regulation, old and new.
Local government expenditure has been increasing markedly for more than 20 years. Its share of the nation’s wealth increased from 8% of GDP in 1980 to 11% in 2005. Between 2010 and 2012, expenditure by local government (authorities and groups of authorities) rose by €12 billion. The €11 billion reduction in its resources between 2015 and 2017 should enable the increase in their expenditure to be kept in line with the rate of inflation.
Savings will require a broadening of the structural reforms under way as part of the national health strategy:
organizing patient pathways better by strengthening primary care, developing outpatient surgery, making it easier for patients to return home after hospitalization, and improving follow-up for elderly people who risk losing their independence;
improving our expenditure on medication, thanks to more mindful consumption, greater use of generic drugs, and prices more in line with therapeutic innovations;
making treatment more appropriate in order to reduce the number of unnecessary or avoidable acts and interventions
These savings will protect not only the quality of care but also the degree to which care is covered by health insurance: there will be no transfer of charges to top-up schemes or patients.
Health insurance expenditure allows everyone to afford a high-quality health system. By ensuring that everyone’s care is covered, health insurance is a pillar of the social contract.
This expenditure accounts for €179 billion in 2014. The rise in this expenditure has been better controlled in recent years. The National Health Insurance Expenditure Target (ONDAM) rose by 2.4% per year in 2012 and 2013, as opposed to 4% on average over the past 15 years.
Nearly €3 billion of these savings will result from reforms already under way: the modernization of family policy decided on in 2013; the act guaranteeing the future and fairness of the pensions system; and the agreement between the social partners on the additional pensions systems AGIRC and ARRCO.
Additionally, social security funds will make €1.2 billion in savings, among other things by making use of the opportunities provided by computerization, simplification and better coordination between the different bodies.
In the present context of low inflation, welfare payments will not be increased for a year. This stability will relate to pensions in the basic pensions system (€1.3 billion). The same effort could be made for the additional pension schemes run by the social partners (€2 billion). This temporary effort will not affect retired people on the most modest pensions, because the minimum vieillesse (1) will continue to be increased. The level of other welfare payments (housing, family, disability) will also remain stable until October 2015 (€0.7 billion). This measure will not affect the minima sociaux (2) (RSA (3), ASS (4), adult disability benefit and minimum vieillesse), the increase in which will be guaranteed.
Decided on in the poverty plan of January 2013, the exceptional upgrading commitments for the RSA, complément familial (5) and family support allowance are confirmed. But they will be deferred for a year.
A new unemployment insurance convention agreed on by the employers and unions will enable the operation of the labour market to be improved, particularly in terms of job security and vocational training. The unemployment insurance system will have to make a better contribution to the proper functioning of the labour market and enable UNEDIC (6) to be restored to final equilibrium by 2017 (€2 billion in total).
Finally, the updating of family policy begun in 2013 will be continued, by making help for families fairer and focusing benefits more on women’s employment (€0.8 billion).
France devotes a third of its national wealth to welfare expenditure. This system, which is among the most generous in the world, enables us not only to provide the whole population with cover against certain risks (unemployment and retirement) and costs (family) but also to provide those in precarious circumstances with solidarity mechanisms guaranteeing minimum living standards.
(1) welfare payment for elderly people.
(2) benefits for those on the lowest incomes.
(3) revenu de solidarité active – inclusion income support comparable to the US EITC (earned income tax credit) and the British WTC (working tax credit).
(4) allocation de solidarité spécifique – allowance paid to long-term unemployed people who are no longer entitled to unemployment benefit.
(5) means-tested family allowance (for parents with three children above the age of three).
(6) French national organization which manages unemployment benefit schemes.