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February 2011

 File n°39 

Financial Inadmissibility:
Article 40 of the Constitution

 

 

 

 

 

 

    Key Points

    Article 40 of the Constitution limits the power of parliamentarians to initiate legislation in financial matters. It prohibits the creation or the increase of an item of public expenditure and only authorizes the diminution of public resources when such a measure is balanced by the increase of other public resources. In the case of credits released by finance bills, the Institutional Act of August 1, 2001, concerning finance acts, reduced the rigidity of this restriction by authorizing parliamentarians to carry out transfers between programmes within the same mission as long as the overall amount of funds allocated to the mission was not increased.

See also files 38 and 41

 

    Article 40 of the Constitution, which has remained unchanged since 1958, provides that “bills and amendments introduced by Members of Parliament shall not be admissible where their adoption would have as a consequence either a diminution of public resources or the creation or increase of an item of public expenditure”.

    This restriction on the right of parliamentarians to initiate financial measures is one of the constituent components of the “rationalized parliamentarianism” which characterizes the institutions of the Fifth Republic.

    I. – THE PROCEDURE

    1. – Prior to tabling

    According to the jurisprudence of the Constitutional Council, “the respect of article 40 of the Constitution requires a systematic examination of the admissibility...of Members’ bills and amendments formulated by M.P.s. This must be carried out prior to the announcement of their tabling” and “before they may be published, distributed and put to discussion” (decision n°2009-581 DC of June 25, 2009).

    a) Members’ Bills

    In accordance with article 89, paragraph 1, of the Rules of Procedure of the National Assembly, the judgement of their admissibility is granted to a delegation of the Bureau of the National Assembly which shall refuse the tabling of Members’ bills “where it appears that their passing would have the results set out in article 40 of the Constitution

    b) Amendments in Committee

    Article 89, paragraph 2, of the Rules of Procedure of the National Assembly provides that inadmissibility will be decided, for amendments tabled in committee, by the chairman of the relevant committee and, in case of doubt, by its bureau.

    The chairman of the lead committee may consult, if he feels it necessary, his counterpart on the Finance Committee.

    c) Amendments in Plenary Sitting

    According to article 89, paragraph 3, of the Rules of Procedure of the National Assembly, the President of the National Assembly must refuse the tabling of an amendment in plenary sitting when it appears clear that it would result in either a diminution of public revenue or the creation or increase of any public expenditure. In the case of doubt, he takes his decision after having consulted the Chairman of the Finance Committee.

    In practice, the opinions of the Chairman of the Finance Committee are always followed by the President of the National Assembly.

    2. – After tabling

      The provisions of article 40 of the Constitution may be applied “at any moment” during the legislative procedure, by the Government or by any M.P., to Members’ bills and amendments as well as to modifications introduced by committees to bills which have been referred to them.

    In such a case, it is the responsibility of the Chairman of the Finance Committee to decide upon their admissibility (article 89, paragraph 4, of the Rules of Procedure of the National Assembly).

    II. – GENERAL PRINCIPLES : FIELD OF APPLICATION
    AND THE REFERENCE BASE

    1. – The field of application

    Article 40 of the Constitution is aimed at public resources and expenditure. Its field of application covers State resources and expenditure, those of territorial units and authorities and the various social security bodies (with the exception of complementary systems).

    By extension, article 40 can be applied to public bodies receiving public financing: public establishments of an administrative nature and to most public industrial and commercial establishments. Article 40 does not, however, concern public companies and professional training organizations.

    2. – The reference base

    The reference base is the comparative term chosen to decide the “cost” of an amendment, i.e. either the loss in revenue or the creation of or increase in expenditure it would generate.

    The following are the possible reference bases:

    - Existing law (legislative and regulatory laws in force);

    - Proposed law (bill under discussion).

    The choice between these two bases is always, in theory, made on the side of that which is most favourable to the parliamentary initiative.

    III. – THE RELATIVE OUTLAWING OF DECREASING PUBLIC RESOURCES

    Article 40 of the Constitution prohibits the diminution of public resources by parliamentary initiative. The use of the plural form of “resources” has the effect of authorizing the balancing of the loss of one form of revenue by the increase in another form of revenue.

    This balancing, usually referred to as the “guarantee”, conditions the admissibility of an amendment or of a Member’s bill which would lead to a decrease in revenue. The balancing must benefit the authority or the body which undergoes the loss in revenue. Thus, it is not possible to balance a loss in resources for the State by an increase in taxes received by territorial units.

    The guarantee must be real and the revenue which is generated by it must be received in real terms. It is however accepted that the guarantee may consist of the creation of a new tax or the increase in the rate of an existing tax “at the same level” as the loss of revenue thus balanced. This practice makes the writing of amendments easier. In practice, during discussion in plenary sitting, the Government very often abolishes the guarantee before the passing of an amendment which it has decided to accept or not to oppose.

    IV. – THE ABSOLUTE OUTLAWING OF INCREASING PUBLIC EXPENDITURE

    Article 40 of the Constitution may be applied to a parliamentary initiative which creates or increases an item of public expenditure. The use of the singular has the effect of prohibiting any type of balancing: the creation or the increase of an item of public expenditure cannot be guaranteed either by an increase in revenue or by a decrease in expenditure. Thus the fact that the creation of a new item of expenditure may lead to more than proportional savings elsewhere has no effect as regards article 40: the amendment or the Member’s bill will be inadmissible.

    The definition of items of expenditure covers direct and certain expenditure but also potential or optional expenditure; thus amendments which open up the legal possibility of spending are inadmissible.

    However, simple management expenditure is not inadmissible as it is defined as a measure whose cost for public finances could apparently be covered by the mobilization of already existing administrative means without extending the missions of the bodies concerned. The same applies to non-prescriptive provisions and requests for reports, which are always financially admissible.

    Thus article 40 is extremely severe regarding expenditure matters whilst it is, in practice, much less restrictive concerning parliamentary initiative in the area of revenue.

    V. – THE APPLICATION OF ARTICLE 40 TO AMENDMENTS
    ON FINANCE BILLS AND SOCIAL SECURITY FINANCING BILLS

    1. – Finance bills

    Since the introduction of the Institutional Act of August 1, 2001 concerning finance acts (LOLF), the conditions governing the application of article 40 to amendments dealing with finance bills have become clearer and more flexible.

    Article 47 of the LOLF provides that, for the application of article 40 of the Constitution, “expenditure is taken, in the context of amendments concerning credits, to mean the expenditure of the mission”. This thus provides parliamentarians with a new possibility in that they can propose the transfer of credits between the programmes of the same mission without increasing the overall amount of the expenditure of this mission. The basis of the right of amendment, which before was carried out at the level of the budgetary chapter, has thus been broadened. This distinct relaxation only concerns amendments calculated according to the credits.

    Credit amendments must have precise motives, i.e. both the increase in the credits for one programme and the decrease in those for one or several other programmes must be justified and must be set out in a precise cost allocation calculation.

    In application of the last paragraph of article 47 of the LOLF, all amendments no matter what texts they deal with, must comply with the provisions of the institutional act. This provision has the notable effect of protecting the exclusive area of finance acts: thus, amendments which propose to introduce into another bill, provisions which can only be part of a finance bill, (e.g. the allocation to another legal entity of revenue set aside for the State) will be deemed inadmissible.

    2. – Social security financing bills

    The Institutional Act of August 2, 2005 concerning social security financing acts provides for a similar financial admissibility system for such bills. It states, in particular, that “expenditure is taken to mean, in the case of amendments to social security financing bills dealing with expenditure targets, each expenditure target per branch or for the national expenditure target for health insurance”. Parliamentarians may thus introduce amendments increasing the figure for one or several sub-targets in an expenditure target as long as the overall amount of this target is not increased.

    This institutional act also provides for the protection of the area of acts dealing with the financing of the social security system and in particular of their exclusive area (e.g. the allocation to another body of revenue exclusively of the social systems).