25 March 2020

2020- n° 73

In 2019, the public deficit reached 3.0% of GDP, the notified debt 98.1% of GDP General government national accounts - first results - year 2019

The general government deficit for 2019 stands at €72.8 billion, accounting for 3.0 % of gross domestic product (GDP), after 2.3 % in 2018. Excluding the impact of the transformation of the CICE into a reduction in social contributions, which induces a one-off additional cost in national accounts, the deficit stands at 2.1%. As a share of GDP, revenues increased from 53.4% to 52.6%, while the share of expenditure in GDP was virtually stable (55.7% in 2018 and 55.6% in 2019). Excluding the change in the scope of general government due to the creation of the operator France Compétences, expenditures represent 55.3% of GDP. The tax and social security contribution rate fell by 0.7 points to 44.1% of GDP (43.8% excluding the change in the scope due to France Compétences).

Total expenditure accelerated in 2019 to +2.6% (+2.0% excluding the change in scope related to the creation of France Compétences) in current euros after +1.3% in 2018. Excluding tax credit, they increase by 2.8% in 2019 after +0.7% in 2018. Operating expenses accelerated and stood at +1.7% in 2019, after +1.3% in 2018. Intermediate consumption accelerated (+2.9% after +1.9%), as well as remuneration (+1.2% after +1.0%) as a result of the “career paths and remuneration” reform (protocole sur les parcours professionnels, les carrières et les rémunérations). After a slight increase in 2018 (+0.5%), the interest burden on the debt fell sharply (−12.2%) due to historically low medium and long-term rates in 2019 and a falling indexation burden due to lower inflation.

Social benefits increased by 2.7%, after +1.8% in 2018. Cash benefits increased by 2.9% after +2.1% in 2018, driven in particular by the expansion and revaluation of the activity bonus (prime d’activité). Social transfers in kind of market goods and services accelerated to +1.9% after +1.0% in 2018, primarily due to a smaller decrease in housing subsidies, but also to a slight acceleration in social transfers in kind of market health.

Other transfers and subsidies rebounded (+4.9%) after a decline of 2.1% between 2017 and 2018, marked by the timing of repayments of the additional 3% contribution on dividends tax (€9.0bn in 2017 and €0.4bn in 2018). In addition, the integration of the entire professional training and apprenticeship financing system into the public administration related to the creation of France Compétences has led to an increase in subsidies of €7.8 billion. Excluding this scope effect, subsidies decrease notably due to the drop in the CICE rate between 2017 and 2018, which has an impact, in national accounting terms, on 2018 and 2019 expenditure (−€1.1 billion). This decrease is amplified by the continued decline in subsidies for subsidized contracts and hiring aids in SMEs. France's contribution to the European budget, on the other hand, is virtually stable (+€0.4 billion).

Net acquisitions of non-financial assets increased by 10.2% in 2019, or €8.4 billion, following a 5.0% increase in 2018. The increase comes mainly from local government investment (+€6.9 billion, i.e. an increase of 15.1%), traditionally very dynamic at the end of the municipal electoral cycle. It is also accentuated by the upturn in hospital investment. State investment, on the other hand, declined (−€0.4 billion), marked in particular by an exceptional reduction linked to the sale of the Îlot Saint-Germain from the Ministry of Defence.

Total revenue increased by 1.2% (+0.6% excluding the change in the scope related to the creation of France Compétences), after +2.5% in 2018 in current euros. Taxes on income and wealth slowed (+1.8% after +6.2%). The CSG has been lowered for modest pensioners (−€1.7 billion), which slows its return after a sharp increase in 2018 due to the increase in the rate on January 1, 2018 as part of the switching from employee social security contributions to the CSG. Personal income tax increased by €1.7 billion. Corporate income tax increased by €4.2 billion, notably because the reduction in social security contributions as part of the transformation of the CICE has a positive effect on companies' taxable income.

Finally, other current taxes decreased by €3.1 billion, notably due to the second stage of the housing tax rebate for 80% of households (65% rebate in 2019 after a 30% rebate in 2018, i.e. a decrease of €3.6 billion).

Taxes on products and production increased by 5.2%, after +4.0% in 2018. VAT revenues were up €6.7 billion (after +€5.6 billion). Taxes on energy consumption (fuel, electricity, natural gas) fell slightly, by €0.3 billion. Transfer duties for transactions (droits de mutation à titre onéreux) increased by €1.4 billion and property tax on built-up properties by €0.8 billion. Tobacco taxes increased by €0.3 billion during a period of rising package prices, as the drop in consumption (−7.1%) partly offset the increase in tax rates. Taxes on salaries and labour increased by €7.4 billion, including €7.8 billion related to the integration of all levies related to professional training and apprenticeships into the public administration.

Social security contributions collected decreased by 4.4% (after −1.7% in 2018) due to the impact of the increase in the switching from employee social security contributions to the CSG as well as the transformation of the CICE into a reduction in social contributions. Employer contributions thus fell by 6.4% (after +2.5%). Household contributions were stable (+0.4% after −10.1%), as the fall in employees’ contributions was offset by an increase in contributions from self-employed persons.

The deterioration in the general government borrowing requirement in 2019 comes mainly from the State, for −€18.2 billion, due to the effect of VAT transfers to social security administrations intended to compensate in particular for the transformation of the CICE into social contribution reductions. The surplus of the social security administrations increased by €2.3 billion between 2018 and 2019.

Local public administrations recorded a slight financing requirement in 2019 after being in surplus en 2018 (−€0.9 billion after +€2.7 billion in 2018): expenditure, particularly investment, increased in a sustained manner, more than revenue.

Finally, the financing requirement of the various central government bodies was reduced by €0.1 billion: expenditure and revenue are increasing sharply due to the entry of apprenticeship and professional training policies into the field of public administration with the creation of France Compétences, but without impact on the financing requirement.

At the end of 2019, general government debt (consolidated gross debt at nominal value) amounted to €2,380.1 billion. It increased by €65.2 billion in 2019, after €56.3 billion in 2018. It reached 98.1% of GDP at the end of 2019, as in 2018. Net public debt increased by 0.2 pt of GDP, reaching 89.5% of GDP at the end of 2019.

The State's contribution to public debt increased by €70.0 billion, a change that was much lower than its financing requirement (−€83.6 billion), due in particular to a very high amount of issue premiums. The debt of central agencies increased by €1.7 billion, reflecting in particular the debt growth of SNCF Réseau (+€1.4 billion) and, to a lesser extent, that of the Universities (+€0.2 billion).

The contribution of local public administrations to the debt reached €210.3 billion at the end of 2019 compared with €205.7 billion at the end of 2018, an increase of €4.6 billion, reflecting in particular the indebtedness of municipalities (+€1.6 billion). In addition, Société du Grand Paris (SGP) increased its debt by €2.6 billion and Île-de-France Mobilités by €0.8 billion.

The social security administrations saw their contribution to public debt fall sharply again (−11.0 billion euros after −21.5 billion euros in 2018), mainly due to the continued debt reduction by Cades (−15.3 billion euros after −17.9 billion euros in 2018). Conversely, Acoss and Unédic increased their debt in the form of bonds by €2.9 billion and €1.5 billion respectively.