This Thursday, Economy and Budget ministers brought together a small group of personalities tasked with putting forward proposals to better manage public finances and improve forecasts.
Never again. The disappointing budget revenue forecasts for 2023, which led to the slippage of public finances, increasing the announced deficit from 4.4% to 6.1%, left a strong mark on Bercy’s soul. The new team, made up of Antoine Armand, Minister of Economy, and Laurent Saint-Martin, Minister of Public Accounts, therefore decided to create a “scientific committee” in order to establish a «action plan» so as not to repeat the misadventure of the previous government.
Its members, received on Thursday morning by the two ministers, will have to work “improving the quality of macroeconomic forecasts in an evolving context that could justify changes in method”we explain to Bercy. They will also have to make proposals “improve the monitoring and transparency of the budget, starting with the representatives of Parliament”.
The committee is made up of nine personalities “a high level of competence” : Laurent Bach, professor at the ESSEC and member of the Institute of Public Policies, François Ecalle honorary senior advisor to the Court of Auditors and creator of the Fipeco website, Olivier Garnier, chief economist of the Banque de France, Camille Landais, delegate president of the Economic Analysis Council and professor at the London School of Economics, Xavier Jaravel, professor at the London School of Economics, Valérie Plagnol, president of the Cercle des epargnants, Xavier Ragot, president of the OFCE, Ludovic Subran chief economist of Allianz, and Jean-Luc Tavernier , director general of INSEE.
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“Complementary” work with the IGF
“This committee, it should be noted, constitutes one of the cornerstones of the work carried out by the services of the two ministries”. The General Inspectorate of Finance (IGF) has in fact already been tasked with understanding the reasons for such a deep gap (21 billion) between revenue forecasts and reality. According to her, most of this difference (80%) is due to unpredictable external factors (macroeconomics, stakeholder behavior, etc.). Hence the mission of thinking about forecasting models entrusted to the committee. “This work is complementary”let’s explain.
The other aspect – and undoubtedly the most important from a political point of view – is that of transparency. “The monitoring of state expenditure and revenue is ensured on a monthly basis and the LOLF (Organic Law relating to financial laws) provides for very extensive documentation”we remember. In front of these “tens of thousands of pages produced every year”ministers wish to strengthen the “clarity” et “intelligibility” information. “The commission’s point of view will be interesting on this last point”let’s comment.
If it isn’t “under no circumstances question the technical quality of Bercy’s services”the works will be carried out “without taboos”, “even on the most technical topics”. The calculation models so lacking in forecasting budget revenues as a function of growth could therefore, if the members of the committee so wish, be the subject of working meetings with the Bercy services. The conclusions, expected by mid-December, will feed into an action plan that should be drawn up in 2025.
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What are the main challenges facing public finance management in France today?
Interview Between Time.news Editor and Expert on Public Finance Management
Time.news Editor (TNE): Good afternoon, and thank you for joining us today. We’re here to discuss the recent formation of a new scientific committee aimed at improving France’s public finances and forecasting methods. Could you start by giving us a quick overview of the committee’s objectives?
Expert (E): Good afternoon! Yes, absolutely. The recent budgetary challenges, especially the significant deficit increase from 4.4% to 6.1%, prompted the Economy and Budget ministers to establish this committee. Its primary goal is to enhance the quality of macroeconomic forecasts and improve both monitoring and transparency about those forecasts with a particular focus on accountability to Parliament.
TNE: That’s quite a critical task. Can you elaborate on why these forecasts are so essential for public finance management?
E: Certainly! Accurate macroeconomic forecasts are fundamental because they inform government policy decisions, guiding budget allocations and funding for public services. Inaccurate forecasts can lead to underfunding or over-expenditure, as experienced last year. By focusing on improving forecasting methods, the committee aims to prevent such discrepancies and ensure more robust financial planning.
TNE: The committee comprises high-profile experts from various institutions. How important is this diverse expertise in achieving the committee’s goals?
E: It’s crucial. The committee includes prominent figures like economists from the Banque de France and professors from esteemed institutions like the London School of Economics. This diversity of thought and expertise fosters innovative approaches to complex problems, helping to create more effective strategies for financial management.
TNE: You mentioned that the committee is also tasked with enhancing transparency. Why do you think transparency is particularly significant in this context?
E: Transparency is vital for building trust with citizens and lawmakers alike. If the public can see how financial decisions are being made—especially regarding expenditures and deficits—they are more likely to support and understand government policies. Moreover, it can hold financial offices accountable and reduce the potential for mismanagement or errors in future forecasting.
TNE: The article references the previous government’s misadventures with budget forecasts. What lessons do you think the current committee can learn from those past mistakes?
E: One critical lesson is to adopt a more adaptive and responsive approach to economic forecasting. The evolution of economic conditions often necessitates recalibrating forecasts swiftly. Last year’s shortcomings highlight the importance of agility in financial planning. By continually reviewing and adjusting their methods, the committee can better handle unforeseen economic changes.
TNE: Could you explain how the committee will collaborate with the General Inspectorate of Finance (IGF)?
E: The IGF plays a complementary role to the scientific committee, tasked with understanding recent budgetary issues and analyzing how past financial governance can be improved. Their insights will help ensure that the scientific committee’s recommendations are grounded in realistic assessments of the existing public finance structure.
TNE: As we wrap up, what do you believe is the potential impact of this initiative on the broader economic landscape in France?
E: If successful, this initiative could restore confidence in the government’s fiscal management. Improved forecasts and transparency can lead to better policy decisions, stabilize public finances, and ultimately contribute to economic growth. A stable economic environment can also enhance France’s standing in Europe and worldwide.
TNE: Thank you for your insights! This conversation sheds light on the critical intersection of economics and governance, emphasizing the importance of sound fiscal management in today’s climate.
E: Thank you for having me! It’s a crucial topic, and I hope the committee makes significant strides in enhancing France’s public finance system.