The Court of Auditors is concerned about the “uncertainties” of the government’s budget forecasts

July 8, 2022

Will the government stick to its public deficit forecast of 5% at the end of 2022? ? The Court of Auditors pointed out Thursday the “many hazards” weighing on this forecast, criticisms also formulated by the High Council of Public Finances which extends them to growth and inflation expectations.

Confirmed in the draft amending budget (PLFR) that the government presented on Thursday afternoon, the target of 5% public deficit “remains marred by multiple uncertainties” linked to “the health and geopolitical situation”, judges the Court of Auditors in its annual report on the situation and outlook for public finances.

Beyond the consequences of the war in Ukraine and the evolution of the pandemic on public finances, which are difficult to quantify, the Court is alarmed by the financial impact of the PLFR, rich in around twenty billion in new expenditure .

The measures drawn by the executive to support purchasing power, to which is added the resilience plan announced in mid-March, “will deteriorate the 2022 deficit compared to the LFI scenario (initial finance law, editor’s note) “, she anticipates as well.

According to the draft amending budget that the Court cites in its report, public expenditure should increase by nearly 60 billion euros compared to that envisaged in the LFI.

An additional cost primarily attributable to high inflation (5.8% over one year in June according to INSEE), which should increase the state debt burden by nearly 18 billion.

“For me, this is undoubtedly the main point of concern”, worried the first president of the Court of Auditors Pierre Moscovici Thursday at a press conference. “We cannot live under the illusion of free debt,” he added.

“Our line will remain that of the restoration of public finances”, replied the Minister of the Economy Bruno Le Maire in the afternoon, at the end of the Council of Ministers.

On the side of the Ministry of Public Accounts, it is pointed out that the 60 billion increase in expenditure encompasses a broader spectrum than only the new expenditure planned in the PLFR.

They “include all the inflation / energy measures taken since the LFI, the increase in the debt burden but also the updates of forecasts of public administration and social security expenditure”, insists the cabinet of Gabriel Attal.

Recorded in the PLFR, the extension until the end of September of the discount of 15 to 18 cents on the price of a liter of fuel, and the creation of a “worker fuel allowance”, generate additional expenditure of 4.6 billion euros. euros, for a total cost over the year of 7.6 billion euros.

The bill for aid to companies that consume large amounts of gas and electricity should double to climb to 3 billion in 2022.

? Stall ?

Fortunately for the state, revenues are expected to increase almost as much as expenditure, with an expected increase of 57 billion euros compared to the BIA.

On their own, the wage increases granted by companies to cushion inflation should represent “around 8 billion euros in additional revenue in social security contributions, social security contributions and income tax”, specifies the institution of rue Cambon.

But beware, as with the trajectory of public finances as a whole, the uncertainty around revenue forecasts is “very high”.

The government’s growth (2.5%) and inflation (5%) forecasts for 2022 are just as shrouded in uncertainty, regretted Thursday the High Council of Public Finances.

In an opinion published in the morning, the independent body responsible for assessing the credibility of budget forecasts doubts in particular the dynamism of consumption, on which the executive is counting to achieve its objective.

With a public debt of 112.5% ??of GDP and a deficit of 6.4% at the end of 2021, the government’s budgetary room for maneuver is limited.

The Court of Auditors also regrets that “France did not take advantage of dynamic economic activity between 2017 and 2019 to restore its public finances”.

To place France on a better budgetary trajectory, it once again advocates “sustained efforts” on controlling public spending and in terms of investment.

With the explosion of the deficit and the debt, the sustainability of public finances “is becoming more than ever a requirement without which the country would be exposed to growing risks that could threaten its sovereignty”, concludes the report.