Économie et Statistique n° 373 Family support - An attempt at a quantification and valuation of voluntary work - An economic evaluation of the landscape - Evaluation of the equalising performance of central government financial assistance to the communs

Economie et Statistique
Paru le : 01/04/2005
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Evaluation of the equalising performance of central government financial assistance to the communes

Guy Gilbert et Alain Guengant

The 36,600 French communes are far from able to offer their residents and businesses the same level of local public services for a given tax burden. Their «purchasing power in terms of collective consumption» varies considerably. Tax wealth is concentrated in a small number of communes while the costs of providing services differ considerably from one commune to the next due to disparities in economic, social, demographic and topographic situations. The purpose of the regional equalisation policy is to smooth out these disparities in tax potential adjusted by «charges». It concerns an annual sum of approximately €20 billion in transfers derived mainly from recycling the growth in financial equalisation paid by central government in return for withdrawing and cutting taxes or spending on transfers of responsibilities. These transfers are then shared between local authorities based on equalising criteria. The 2003 constitutional reform, which set a target for the system to move towards greater «equality», steps up the need for an evaluation of equalisation today. A preliminary overall and commune-by-commune evaluation is presented here. The overall analysis shows that the equalisation mechanisms are relatively effective and that this effectiveness increases over time. They reduced purchasing power inequalities by some 40% in 2001 as opposed to just 34% in 1994. This improvement in performance is due to new, less expensive, but intrinsically more equalising measures slowly replacing older, more expensive offsetting measures with little intrinsic equalising power. The commune-by-commune evaluation confirms the broad spread of situations. Equalisation satisfies the constitutional criterion in 71% of communes, where purchasing power is brought close to average commune purchasing power. Yet the mechanisms overequalise in 21% of cases and counterequalise in 8% of cases.

Economie et Statistique
No 373
Paru le : 01/04/2005