Will the local government budget soon be put through the wringer? In a letter addressed to the chairs of the finance committees of the two assemblies of Parliament, as well as to the general budget rapporteurs, Bruno Le Maire, the resigning Minister of Finance, points out “the extremely rapid increase in local government expenditure”. Yet another warning from the executive regarding the increase in operating expenditure and investments in the territories, this letter is part of the infinitely complex and highly inflammatory context of the 2025 budget, the drafting and voting of which could be disrupted by the lack of a majority in the National Assembly.
The surge in local authority spending could weigh down the deficit trajectory presented by France to Brussels for 2024 by “16 billion euros”, according to this letter, the content of which was revealed by Les Echos. Taking into account the drop in tax revenues, the public deficit could reach 5.6% of GDP this year, compared to the 5.1% initially announced, or even 6.2% in 2025. At this stage, the Treasury Directorate General estimates that a saving of 30 billion euros divided between the draft finance bill (PLF) and the draft social security financing bill (PLFSS) would allow France to meet its commitments.
“Local authorities represent 8 to 9% of a debt of 3,000 billion euros”
Figures that André Laignel, the vice-president of the very powerful Association of Mayors of France (AMF), strongly disputes. “The communities will never be at 16 billion at the end of the year, since we are today at 9 billion euros in self-financing,” he points out to Public Sénat. “We are faced with a maneuver ordered by resigning ministers, with unfounded figures, a smokescreen intended to shift the responsibility for the catastrophic deficit from the State to the communities,” he says angrily.
“The main problems of the deficit are linked to the functioning of the State and the management of the State, and we are being told about local authorities, knowing full well, this is well known, that they generally carry out their investment programmes within two years before the end of the mandate. The increase we are seeing is classic,” analyses Claude Raynal, the (PS) president of the Senate Finance Committee.
“This letter is excessive and does not hold water,” agrees the communist senator Éric Bocquet, vice-president of the Finance Committee. “Local authorities represent 8 to 9% of a debt of 3,000 billion euros, this is a percentage that has not changed for thirty years. Furthermore, of the 1,000 billion of debt that we owe to Emmanuel Macron’s five-year term, excluding the 400 billion spent on covid-19, there are 600 billion to the credit of Bruno Le Maire who has been at Bercy since 2017!”
“It’s a fairly Pavlovian reflex for Bruno Le Maire to pass the buck to the communities,” mocks LR vice-president of the Senate Mathieu Darnaud.
Communities under pressure
According to a report from the Court of Auditors published at the end of July, local authority savings fell by 4 billion in 2023, a very marked drop for the departments, which can be explained by inflation and the decline in the real estate market, two phenomena that affect local tax revenues. However, local authority operating expenses increased by 6.1% in the same year, again driven by inflation but also due to the revaluation of the civil servants’ index point.
Local authorities have maintained a significant level of investment, in the order of 72.8 billion euros, mainly focused on capital expenditure, particularly on roads. The figures made available by the Directorate General of Public Finances for 2024 – which currently stop at the end of July – show a 7% increase in operating expenditure, or an additional 7.5 billion euros. This largely concerns personnel costs (+ 2.5 billion euros), purchases and external charges (+ 2.3 billion euros).
Let us recall that the law requires local authorities to vote for balanced budgets, to the nearest euro, under penalty of seeing their copies rejected by the prefects. Voted last December, the public finance programming law asks them to reduce their spending by 0.5 points per year between 2024 and 2027. At the beginning of the summer, Bruno Le Maire called on the territories to maintain a target of two billion euros of efforts by the end of the year.
“This trajectory makes no sense. Currently we are at +6, if we want to fall to -0.5%, we would have to undertake staff reductions of around 7%. Nobody will do it”, believes André Laignel. “These objectives are impossible to maintain in the face of constrained expenditure. I would remind you that local authorities are faced with numerous transfers of charges that are the result of regulatory decisions”, points out Senator Mathieu Darnaud.
“There has never been so much money distributed to communities”
But this diagnosis is far from being shared by the elected officials of the former presidential majority. “Decentralization has cost us a crazy amount of money!”, rages a leading Macronist, paraphrasing a famous statement by the President of the Republic. “There has never been so much money distributed to local authorities, tax cuts have been offset, and yet local authorities are withdrawing from everything. In my region, I hold four inaugurations per week, each time the State remains the primary financier,” summarizes this elected official who only spares the departments, “under water because they assume 90% of social policies.”
According to Les Echos, Bruno Le Maire is pushing for a reduction in the overall operating grant for local authorities in 2025 if there are no savings by the end of the year. Six years after the Cahors contracts, which aimed to rationalise local authority spending but which have permanently poisoned relations between local elected officials and the government, the subject is proving explosive. “It would be the return, in another form, of a budgetary straitjacket,” believes Éric Bocquet. “We couldn’t go about stifling local authorities in a better way. With such a budget, there will be immediate censorship from all parties!” predicts André Laignel.
Budget cuts
It must be said that the warnings issued by the Ministry of Economy and Finance add to the concerns raised by the first budgetary decisions. The “ceiling letters” sent at the end of August by Gabriel Attal to his government – which has resigned – provide for the renewal of the appropriations of the 2024 finance law in 2025, but by changing the balances from one ministerial portfolio to another. However, some decisions could directly impact the territories, such as the reduction in investments planned for the “France 2030” plan (-13%). Other credits in decline: those for Agriculture, Food, Forests and Rural Affairs (-6%) and those for Overseas Territories (-4%).
These initial balances did not fail to raise a significant outcry from elected representatives’ associations. “All of this is totally unreasonable. Either we put France back on the rails of development, or we stifle it and we enter into recession,” summarizes André Laignel. “Bercy considers local authorities as a burden, we consider them as a lever for development. I would like to remind you that they represent 70% of public investment.”
“40% less for the green fund, reduction in funding for the Environment Agency (Ademe)… With what legitimacy can a resigning government take such decisions, which clearly do not fall within the management of current affairs?”, Villes de France denounces in a press release. The Association of Small Towns of France (APVF) which brings together municipalities with fewer than 25,000 inhabitants is equally annoyed. “The ecological transition must remain a priority. It must therefore be considered an investment in the future, creating jobs and wealth. The possible reduction of the Green Fund, from 2.5 billion euros to 1 billion euros […] as well as a cut to Ma Prime Rénov’, or even the Ademe heat fund, would send a very negative signal.”
The annual congresses of elected representatives’ associations are likely to be quite lively this fall.
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