26 March 2015

2015- n° 73

In 2014, the public deficit reached 4.0% of GDP, the compulsory levies ratio remained at 44.7% of GDP General government national accounts - first results - Year 2014

The 2014 public deficit reached -84.8 billon euros, accounting for -4.0% of GDP after -4.1% of GDP in 2013. As a share of GDP, revenues increased from 52.9% to 53.2%, slightly faster than expenditures which rose from 57.0% to 57.2%. The compulsory levies ratio stood at 44.7% of GDP.

Operating expenditures rose by 1.3% in 2014. Intermediate consumption fell for the first time since 2001 (-0.6% after +1.9% in 2013), whereas wages continued to increase (+1.9% after +1.7%). In spite of the increasing public debt over the year, interest paid went down (-1.7%), due to lower interest rates and lower inflation, which reduced the charge on inflation linked bonds.

Social benefits slowed down : +2.4% after +2.8% in 2013. Benefits in kind accelerated (+2.8% after +2.4%), notably due to health care goods. Conversely, social benefits in cash slowed down (+ 2.2% after +2.9%), in particular for unemployement benefits and pensions, notably because of the lack of general revaluation of pensions in 2014.

Other transfers and subsidies accelerated markedly at +6.9% (+1.6% in 2013), increasing by +€9.2bn. In particular, subsidies on wages due the new tax credit for encouraging competitiveness and jobs (Crédit d’impôt pour la compétitivité et l’emploi, CICE) amounted to €10.2bn. Conversely, the French contribution to the European Union went down by €2.6bn : the exceptional revision of GNI in all Members States benefited France for €1.6bn.

Net acquisition of non-financial assets - fixed assets, stocks and lands - shrunk by 7.7% in 2014 (-€6.8bn) after a 2.8% increase in 2013. The fall mainly came from local government (-€5.2bn), as a repercussion of last year municipal elections, and, to a lesser extent, from the State (-€1.5bn). This decrease is explained by lower deliveries of military equipement than in 2013.

All in all, primary expenditures (excluding interest charges) went up by 1.8%, significantly faster than inflation (0.7% year/year).

Taxes on income and wealth slowed down significantly at +0.2% after +4.9% in 2013. Revenues from the Impôt de Solidarité sur la Fortune (ISF, wealth tax) were up by €0.8bn due to tax regularization of assets located abroad. The council tax was up by €0.3bn. Conversely, the end of the imposition forfaitaire annuelle reduces corporation tax by €0.6bn. Personal income tax (including taxes on financial gains) went slightly down (-€0.7bn) after a sharp increase in 2013 (+€5.7bn).

The growth of taxes on product and production went down at +2.5% (+€8.2bn) after +2.8% in 2013. VAT increased by €3.8bn, mostly because of higher rates in 2014 (normal rate went up from 19.6% to 20%, reduced rate from 7% to 10%). Other taxes contribute to the global growth of revenues : the taxe foncière sur les propriétés bâties (TFPB, land tax) for +€0,8bn, the cotisation sur la valeur ajoutée des entreprises (CVAE, corporation value added tax) for +€0,7bn, the contribution au service public de l’électricité (CSPE, electricity bill tax) for +€0.6bn et the droits de mutation à titre onéreux (DMTO, tax on real estate transactions) for +€0.6bn.

Social contributions slowed down (+2.6% after + 3.1%). This was the case for employees contributions (+3.4% after +5.2%) and independent workers ones (+2.1% after +4.4%) while the growth of employers contributions was steady (+2.4% after +2.3%). The year 2014 marked the repercussion of the end of contributions exemption on overtime payments which occurred after 2012.

The slight reduction in general governement net borrowing in 2014 was mainly due to local government, whose net borrowing decreased by €4.1bn, mainly because of the drop in gross fixed capital formation (-€4.8bn). The State deficit increased by €4.9bn, in particular because of the second program “Investing for the future” (which accounted for 7.6bn and has benefited the Central agencies, which showed a +2.9bn surplus). The deficit of social security funds slightly improves (-0.6bn).

At the end of 2014, the Maastricht debt accounted for € 2,037.8bn, a € 84.4bn year-on-year growth after a € 84.3bn increase in 2013. Maastricht debt is the gross consolidated debt of the general government, measured at face value. It reached 95.0% of GDP at the end of 2014,after 92.3% at the end of 2013. The net public debt had a similar growth reaching 86.3% of GDP after 83.5% at the end of 2013.

The State contribution to debt rose by € 74.3bn, a variation very close to its net borrowing (€ 74.7bn). Central agencies (central government units other than the State) contribution is steady at € 22.6bn at the end of 2014.

Local governement debt reached € 188.2bn in 2014 compared to € 183.3bn at the end of 2013, an increase of € 4.9bn close to their net borrowing for 2014 (€ 4.5bn).

Social security funds contribution to debt grew by € 5.1bn to stand at € 216.8bn at the end of 2014. Their higher net borrowing (€ 8.6bn) is partly financed by a State purchase of € 3.1bn of securities from Acoss not included in the Maastricht debt.