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The Parliamentary Examination of Finance Acts
I. – THE FINANCE LAW: PARTICULARITY, CONTENT AND PRESENTATION
Article 34 of the Constitution provides that “Finance Acts shall determine the revenue and expenditure of the State in the conditions and with the reservations provided for by an Institutional Act”. The particular rules which apply to such acts have been significantly changed by the Institutional Act on Finance Laws dating from August 1, 2001 (LOLF) which replaced the ordinance incorporating the Institutional Act of January 2, 1959.
The finance act is the legal act which makes provision for and authorizes the State’s budget. It determines for a budgetary year (i.e. which corresponds to a calendar year) the nature, the amount and the allocation of State resources and expenditure as well as the budgetary and financial balance which results from them (LOLF, article 1).
Only the Government can present finance acts which can only be the result of the adoption of a finance bill (article 47 of the Constitution).
There are three categories of finance acts:
- The finance act of the year,
- The “corrected” finance act,
- The settlement act.
Finance acts must be regular (LOLF, article 32) and their regularity must be considered taking into account all available information and forecasts which can reasonably be expected as a consequence at the moment they are passed.
The finance act of the year is divided into two parts (LOLF, article 34):
- The first part authorizes the raising of taxes, assesses State resources, sets the ceiling on expenditure and lays down the general figures concerning budgetary balance (presented in a balance sheet).
- The second part sets the amount of credits for each of the State budget missions and the employment authorization ceiling for each ministry.
The budget, which up until now was presented by ministry and by type of expenditure (operational, investment etc.) is today a three-tier structure:
- Missions, either ministerial or inter-ministerial,
Missions, initiated exclusively by Government, include a series of programmes linked to a specific public policy falling into the remit of one or several ministries.
Programmes group together all the credits for the implementation of an action or a coherent group of actions which are within the remit of the same ministry and which include precise targets as well as expected results and which are subject to assessment (LOLF, article 7).
The presentation of credits by category (staff, operation, debt servicing, investment, subsidies, financial operations etc.) is only given as an indication and is subject to the category of staff expenditure (category 2) which is limited according to each programme.
The general state budget (in 2009) had 33 missions bringing together 133 programmes divided into 614 actions.
The finance bill has, by necessity, many annexes which are meant to keep parliamentarians well-informed:
- The blue-coloured budgetary documents or Annual Performance Plans (PAP) which set out within each mission, the credits allocated to each of its programmes and which detail, for each action, the targets and the performance indicators. The Annual Performance Reports (RAP) are annexed to the regulation bill and enable a comparison to be drawn between the forecast and the reality of the expenditure as well as presenting the results obtained regarding targets;
- The yellow-coloured budgetary documents are information annexes (e.g. national statistics on road safety, report concerning state shareholdings, financial relations with the European Union etc.);
- Documents dealing with multi-faceted policies which present in great detail those policies (e.g. internal security, overseas units etc.) which are concerned with programmes whose scope goes beyond a single mission;
- Other budgetary documents which enable, in particular, the budget bill to be placed in its economic, social and financial context (e.g. report on obligatory contributions, economic, social and financial report, report on the Nation’s accounts etc.).
II. – A SPECIFIC LEGISLATIVE PROCEDURE
Since 1996, Parliament has taken part in the preparation of the finance bill thanks to a framework debate on public finances, organized in the spring and provided for by the LOLF (article 48). This debate is held on the basis of a Government report on the development of the national economy and on the trends in public finances. The report must include the list of missions and programmes, along with their performance indicators, which are envisaged for the finance bill of the following year.
1. – A budgetary discussion within constitutional time limits
Article 47 of the Constitution sets a 70-day time limit for Parliament to reach a decision on the finance bill and applies the accelerated procedure automatically to such bills.
The time limits are thus set out as follows (LOLF, article 40):
- First reading at the National Assembly: 40 days;
- First reading at the Senate: 20 days;
- Parliamentary “shuttle”: 10 days.
- If the overall time limit of 70 days after the tabling of the bill is not respected, the Government may have recourse to an ordinance to enforce the provisions;
- The finance bill must be tabled at the National Assembly, which has priority over the Senate, before the first Tuesday in October of the year preceding that to which the budget applies (article 39 of the Constitution). In conjunction with the time limits for tabling, this notion of priority has the effect of prohibiting the Government from introducing before the Senate, in the form of amendments, any new measure (decisions of the Constitutional Council n°76-73 DC of December 28, 1976 and n° 2006-544 DC of December 14, 2006);
- These rules which are restrictive for Parliament but also for Government (which is also required to respect the tabling deadlines for the explanatory annexes) aim at ensuring, thanks to the passing of the budget before the beginning of the calendar year, that the Nation continues to function.
2. – Procedural specificity strengthened by the constitutional revision of 2008
The Constitutional Act of July 23, 2008 as well as the provisions of the Rules of Procedure of the National Assembly which result from it, introduced substantial changes into the relationship between Parliament and Government as well as in the ordinary legislative procedure. Many of these do not apply to finance acts:
- In the case of the examination of finance bills in committee, the following aspects remain unchanged: the principle which states that only members of the relevant committee may table amendments in committee and the possibility for consultative committees to meet after the lead committee. In addition, ministers may not attend votes in committee;
- The examination of finance bills may be included with priority status, at any moment, on the agenda of the National Assembly, upon the request of the Government, including during weeks given over, in principle, to a parliamentary agenda (article 48 of the Constitution);
- The discussion on first reading, in plenary sitting, before the National Assembly is on the text presented by the Government and not on the text passed by the committee (article 42 of the Constitution); on other readings, the discussion is on the basis of the bill transmitted by the other assembly and not on that of the committee;
- The so-called Set Time Limit Debate Procedure (the setting of the maximum time for the examination of a bill) is not applicable to the examination of finance bills;
- The possibility for the Government to have recourse to article 49-3 of the Constitution (making the passing of a bill an issue of confidence) has been maintained without any limitation in the case of a vote on the finance bill.
3. – In-depth examination by the eight standing committees
The institutional act (LOLF, article 39) provides for the referral of the finance bill to the Finance Committee and thus excludes the possibility of setting up an ad-hoc committee. However, even though the Finance Committee plays a decisive role in the examination of the bill, the seven other committees are also referred to for opinion.
a) The Predominant Role of the Finance Committee
Of the 73 members of the Finance Committee, around 50 take part directly in the examination of the finance bill.
Foremost amongst them is the General Rapporteur, who is elected every year at the same time as the Chairman of the Committee and the members of its bureau and who has the responsibility of drawing up the general report on the draft budget.
This general report is made of three volumes:
- Volume I is devoted to an overall analysis of the budget placed in its economic and financial context;
- Volume II includes commentaries on the provisions of the first part of the finance bill, i.e. mostly on fiscal measures having an effect on the balance budget concerned;
- Volume III deals with the provisions of the second part of the finance bill, i.e. the examination of articles unrelated to missions. This particularly concerns, for the most significant of such provisions, fiscal or budgetary articles which do not affect the budgetary balance of the year.
The detailed examination of credits is carried out by special rapporteurs of the Finance Committee to whom the institutional act (LOLF, article 57) has granted powers of investigation including giving them access to all evidence and the right to communicate information and documents of a financial and administrative nature (subject to such documents and information not being covered by national defence secrets, internal or external state secrets or by legal confidentiality).
These special rapporteurs are nominated by the Finance Committee during the first term of the year and are permanently responsible for the monitoring of the handling of the budget in their particular field of competence. Each year, they send questionnaires to the ministers before July 10 in preparation for their reports on the finance bill. The Government is obliged to make a written reply by October 10, at the latest (LOLF, article 49).
Each special rapporteur is in charge of the examination of the credits of a mission or in certain cases of one or several programmes within the same mission.
The Finance Committee devotes around fifty hours to the examination of the finance bill for the year.
b) The Opinion of the Other Standing Committees
The seven other standing committees appoint “rapporteurs for opinion” who are in charge of the examination of missions (all or part thereof) falling within their field of competence. Every year around sixty budgetary opinions are thus published.
4. – The specific organization of the budgetary debate
The Conference of Presidents of the National Assembly sets out a very specific organization for the budgetary debate.
As in the classical procedure, the discussion of the first part opens with a general discussion during which the spokespersons of the political groups take the floor. The discussion of the articles of this first part also follows the normal rules (except the article concerning the revenue contribution to the European Union which is organized in a very specific way).
The particularity of the finance bill is due to a “balancing article” and to the provisions of article 42 of the LOLF which makes the passing of the first part, a pre-requisite for the discussion of the second part of the bill to take place. In fact it is this article which assesses the overall budget resources of the State and which places the ceiling on expenditure thus setting the financial balance. The decision of the Constitutional Council of December 24, 1979, annulled the Finance Act for 1980, because it did not comply with this obligation.
The debate in plenary sitting usually takes up 5 days.
The discussion on the second part does not however follow the usual rules. The Conference of Presidents sets, upon a proposal of the Finances Committee, as of the month of June, an indication of the overall length of the debate and the list of missions which will be examined in extended committee. It then draws up, usually at the beginning of October, the dates for meetings. The missions so concerned are examined during a joint meeting of the Finance Committee and the consultative committee(s). The Government is represented at these meetings and their public nature is similar to that of the plenary sitting. These missions will afterwards only be the subject of a very short debate in plenary sitting followed by an examination of possible amendments and a vote on credits. This practice, which was begun during the XIth Parliament, was actually included in the Rules of Procedure in June 2006. As regards the other missions, the parliamentary groups freely divide the time they give over to each discussion between the following two phases:
- The general speeches phase;
- The questions phase which is followed by immediate replies by the ministers;
- At the end of the discussion on the missions which is spread out over three weeks, the National Assembly examines the articles not linked to the second part of the finance bill, the so-called “recapitulation” articles (articles which refer to annexed documents and which relate the distribution of credits by mission), and moves to a vote on the entire finance bill;
- In total, the National Assembly devotes around 150 hours every year in plenary sitting and extended committee to the budget debate.
5. – The parliamentary “shuttle” and the promulgation of the law
As the accelerated procedure is automatically applied to the finance bill, it becomes the subject, after its first reading in the Senate within the time limit of twenty days, of a meeting of a joint National Assembly/Senate committee (CMP) which is responsible for examining the provisions remaining under discussion.
The procedure followed in the case of a successful joint National Assembly/Senate committee (i.e. the drawing-up of an agreed bill) or its failure, is the normal one applied to all bills.
Of course when the National Assembly and the Senate must proceed to a new reading, the debate takes place quite quickly as the missions are not re-discussed one after the other.
Before its promulgation, the finance act is usually submitted to the Constitutional Council for its opinion. The Constitutional Council has developed a substantial jurisprudence in budgetary matters and checks in particular the respect of the institutional rules concerning finance acts.
III. – THE EXAMINATION OF THE OTHER FINANCE ACTS: “CORRECTED” FINANCE ACTS AND SETTLEMENT ACTS
1. – “Corrected finance acts”
“Corrected” finance acts modify the finance act of the year during its year of application and have the same two-part structure.
The main aim of the “corrected” finance act, which is commonly referred to as the “budgetary collective” or “mini-budget”, is to take into account the revised assessments of state resources (to include the disparities between the forecasts and the revenue actually received), to apply to credits the necessary modifications which exceed those which the Government is authorized to carry out through regulations and to decide on the new budgetary balance as a result.
Certain such “mini-budgets”, particularly in the case of a change of Government, or an unforeseen economic situation, may bring about a significant change in fiscal or budgetary policy.
The discussion of credits does not take place mission by mission and only the Budget Minister is responsible for supporting the bill. The debates are relatively short.
2. – Settlement acts
The main aim of the settlement act is to “settle” the definitive amount of the budget revenues and expenditure to which it refers and to establish the budgetary result which is a consequence.
The time limit for the tabling of the settlement bill is set for June 1 of the year following that to which the budget applied (LOLF, article 46). It is supported by the Annual Performance Reports (RAP) which enable a comparison between the budget, including its results and the forecasts made in the Annual Performance Plans (PAP) which are annexed to the finance bill of the year.
The settlement bill is examined according to the normal rules, although article 41 of the LOLF provides that the finance bill of the year may not be discussed before an assembly before the passing in first reading of the settlement bill of the previous year. Since 2006 the National Assembly has been in a position to examine the settlement bill as of the month of June or during the extraordinary session in July.
It should be noted that the Constitutional Act of July 23, 2008, provided for a new type of programming acts which, whilst not, strictly speaking, being finance acts, are, given their subject, very close to such laws. These are programming acts which establish “the multiannual guidelines for public finances” and “shall contribute to achieving the objective of balanced accounts for public administrations” (second last paragraph of article 34 of the Constitution). The ordinary legislative procedure applies to such programming acts.