Opinion on the budget bill and the social security financing bill for the year 2020

On Monday 23 September 2019, the High Council of Public Finance adopted an opinion concerning the budget bill and the social security financing bill for the year 2020.

Opinion's summary

The High Council of public finance considers that the Government's growth forecast is achievable by 2019 and plausible by 2020. He stressed that this forecast does not take into account takes into account the possibility of a no-deal Brexit and its consequences on French growth.

The High Council considers that inflation, employment and private wage bill forecasts used by the Government for 2019 are consistent with the information available. They are reasonable for 2020. 

Regarding public finances, the High Council considers that the forecasts of the compulsory levies for 2019 and 2020 are consistent with the macroeconomic scenario used by the government. It considers that the forecasting trend of public expenditure for 2019 and 2020 is plausible. The interest expense could be lower than expected. On the other hand, there are risks on the revenue levy in favor of the European Union and the evolution of public local administration expenditures. In total, the High Council considers that the forecast of nominal government balance for 2019 and 2020 (respectively -3.1 and -2.2 points of GDP) is plausible.

The Government forecasts a 0.1 point of GDP reduction in the structural deficit for 2019, which would amount to 2.2 point of GDP. In relation to the trajectory defined in the public finance programming law for 2018 to 2022 (LPFP), the structural balance gap would be -0.1 points in 2018 and -0.3 points in 2019 respectively. The High Council indicates that such a deviation is very close to the trigger threshold of the correction mechanism provided for in article 23 of the 2012 Organic Law (-0.25 points on average over two years).

In 2020, the structural deficit would still be 2.2 points of GDP, compared with 1.6 percentage points in the 2018 LPFP. The High Council therefore notes that the Government submits an article of the budget bill, which deviates significantly from the trajectory of the 2018 public finance programming law. Such a choice leads to a problem of coherence between the PLF 2020 and the 2018 LPFP and weakens the scope of the multi-year programming exercise in terms of public finances.