The government is easing budgetary demands on local departments, as announced by Prime Minister Michel Barnier. He acknowledged the limitations of the current departmental model and revealed plans for financial relief amid rising social spending and declining revenues. Key measures include reducing the levy rate on departmental revenues, increasing contributions to the National Solidarity Fund, and establishing a new steering body to collaboratively design social policies, aimed at addressing the financial challenges faced by local authorities.
Government’s Shift in Budgetary Demands
The government is softening its approach regarding budgetary requirements. Michel Barnier, during his address on Friday morning in Angers at the Assembly of Departments of France, revealed that the financial demands placed on local departments will be lessened. “I am here to communicate that we will significantly ease the financial burden placed upon you by the upcoming finance bill, considering your unique circumstances that may not have been well accounted for in earlier budget assessments,” stated the Prime Minister, eliciting applause from the local officials present.
Challenges Faced by Local Departments
Barnier acknowledged that the conventional “departmental model” has encountered limitations over the past 30 years. Nevertheless, he refrained from disclosing specific figures regarding the reduction in contributions, indicating that these would be determined through discussions in the Senate. Departments are grappling with soaring social spending demands, particularly in child protection, care for dependent elderly individuals, and support for people with disabilities. Concurrently, they are experiencing a decline in revenue from real estate transactions and lower-than-anticipated VAT returns.
The 2025 finance bill outlines a five billion euros effort for local authorities, with the Departments of France highlighting that they bear the brunt of this financial strain—44% of the effort, amounting to 2.2 billion euros, is required from them despite their recognized economic fragility. In response, departments have been urging the government to reassess its budgetary plans, with some led by right and center factions threatening to suspend the payment of active solidarity income (RSA) and cease the care for new unaccompanied minors (MNA).
To alleviate the pressure on local departments, the Prime Minister announced five key measures: a reduction in the levy rate on departmental revenues, originally set at 2%. Barnier pointed out that a “significant portion” of their expenditures is “not manageable.” A long-awaited announcement was also made regarding a three-year increase in the ceiling for transfer duties on real estate transactions by 0.5 points, which is expected to generate one billion euros.
Additionally, Barnier indicated plans to revert, “at a minimum,” the retroactive aspect of the reduction in the rate of the Compensation Fund for value-added tax, which supports local authorities’ investment spending. Contributions from the National Solidarity Fund for Autonomy to departments will see an increase of 200 million euros in 2025. Lastly, the rise in contributions from local employers to the National Pension Fund for local authority agents will be extended over a four-year period instead of three.
Looking ahead, Barnier announced the formation of a “steering body shared between the State and the departments” at the start of 2025. This entity will focus on exploring the establishment of a “single social allowance.” “Social policies must now be collaboratively designed by the State and the departments,” he emphasized, promoting a “multi-year contractualization that will foresee and limit” the growth of departmental expenditures.
Earlier that morning, Maud Bregeon, the government’s spokesperson, hinted at the possibility of reducing the savings expected from departments in the forthcoming 2025 budget. “We are open to decreasing the effort required compared to current demands, as we recognize that many departments are facing exceptionally challenging situations,” she stated.