Nearly 9 billion savings and 5 billion less revenue… The Court of Auditors prescribes a bitter potion to local elected officials

After the standoff which pitted them sharply against the outgoing Minister of the Economy, Bruno Le Maire – who accused them of being at the origin of the deficit slippage for this year -, local elected officials will probably see red. A report from the Court of Auditors, published this Wednesday, recommends shocking solutions to help them contribute to the recovery of public finances. The result: 8.8 billion savings and 5.4 billion less revenue.

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In a chapter devoted to the financial prospects of communities in 2024, the institution underlines « an acceleration of spending » et « a growing gap between communities and the financial trajectory » on which the State has committed to Brussels. “In 2023, community operating expenses increased by 6.1 % at constant scope, thus increasing by 1.2 points in volume, after a more limited increase in 2022 (+0.2 points). Over the first eight months of 2024 (from January to August), operating expenses increased by 5.4% on a like-for-like basis compared to the same period of 2023. » In short, a slippage that the Court pinpoints without naming it.

Directly reduce revenue

The second chapter of the report corresponds to the « expense review » ordered from the Court by Gabriel Attal in March. This review therefore offers suggestions « concerning the modalities of community participation in achieving the objectives set by the public finance programming law ». Clearly, to reduce the deficits of municipalities, departments and regions – which count in the public deficit within the meaning of Maastricht – by will or by force.

In total, the institution’s experts propose measures to reduce expenses for communities, representing a total amount which would ultimately reach 8.8 billion euros in savings per year. The majority of these spending reductions would be at the hands of communities. The Court advises them to “control the evolution of the workforce” so as to bring them back to their level of the early 2010s. According to the report, this would represent “a saving in spending of 4.1 billion euros per year from 2030”. In order to reduce the payroll, the institution also recommends that local elected officials align “the duration of work over its legal duration” — that is to say, to reduce overtime pay. The result is a saving of 1.3 billion euros per year. The Court also argues that local authorities could generate savings of up to 3 billion euros by 2027 by adopting “good practices in public purchasing”. Finally, to reduce expenses, the institution recommends to the Ministry of Finance and that of Local Authorities to establish an obligation to depreciate all the assets of municipalities and intermunicipalities, which would bring in around 400 million euros per year.

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For the rest of “savings”the Court of Auditors addresses the government, proposing to directly reduce the revenue of local authorities. « Reductions in community revenue must encourage them to mobilize their savings potential in real operating expenses”pleads the institution, in a logic that risks making local elected officials scream.

The idea is simple: as communities are required to vote for a balanced operating budget, if their revenues are reduced, they will be forced to reduce their expenses. To do this, the Court proposes to set “by the annual finance law the rate of revaluation of cadastral rental values”. Today, this national revaluation of the property tax is automatically indexed to inflation, but if this were no longer the case, Parliament could set this rate of increase below that of prices. This measure could cause revenue losses of up to 1.6 billion euros in 2027. Likewise, the Court proposes that the State simply transfers less money to communities, which would generate a saving of 300 million euros by 2025.

Another central point of local finances: the latter receive a share of VAT revenue (52.8 billion euros in 2023). The authors recommend “to clip” the increase in tax revenue allocated to communities to repay them to the State, which would represent a saving of 2.7 billion euros by 2027, to which would be added 800 million euros for another assigned tax , TSCA. Still with regard to VAT revenue, the Court proposes to allocate “part of the increase in VAT revenue to resilience funds” – that is to say a reserve which would make it possible to finance the needs of communities in the event of a crisis, without drawing on state coffers.

In short, a diet that will probably not be to the taste of those mainly concerned. But, “the participation of communities in the recovery of public finances is justified by the share of local expenditure in all public expenditure (17.8 % in 2023), by the majority financing of communities through financial transfers from the State (53.5% of their revenues in 2023) and by the observation of possibilities for improving the quality of local spending.justifies the Court.