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Issue Brief on the Adoption of Finance Bills in France

Could a Hung Parliament Result in the Rejection of the Annual Budget Law and Lead to a “French Shutdown”?

 

Executive summary

The 1958 Constitution of the Fifth Republic and the 2001 Organic law on Financial Acts (LOLF) provide a strict framework for parliamentary scrutiny of fiscal laws and lay down a series of mechanisms to avoid any institutional deadlock.

Article 47 of the French Constitution sets a maximum constitutional deadline of 70 days for the adoption of Finance bills, starting from the submission of the bill by the Government no later than the first Tuesday in October.

If, after the bill has been introduced, Parliament does not pass the bill within this period, the Executive may proceed by means of a “budget ordinance”. This text, intended as a “sanction” on the legislators, enables it to implement the provisions of the Finance Bill without any control by Parliament.

This situation has never arisen, mainly because the Government has resorted to the procedure of Article 49, paragraph 3 of the Constitution in situations of simple majority, with the final word always going to the National Assembly (lower House of Parliament).

If the budget law has not been passed by December 31, the Executive requests urgent authorization from Parliament to levy taxes and to appropriate, by decree, the means necessary for the operation of the public services.

In the sole event that the budget law was blocked by a situation not provided for in the laws (at the date in question), the Constitutional Council ruled in 1979 that the Government and Parliament had to find a solution in view of ensuring the continuity of the functioning of the State.

Accordingly, even if the legislation does not provide for the hypothetical rejection of budget laws or other emergency laws of a budgetary scope by the National Assembly, existing jurisprudence suggests that the Constitutional Council would most certainly give priority to the obligation to ensure, in all circumstances, the normal and regular operation of public services, in practice by extending the previous year’s budget.

Consequently, even in the event of the failure of Parliament to adopt a finance law, a shutdown scenario such as that which exists in the United States seems politically and institutionally unrealistic.

 

The Government and the administrative departments are also subject to a strict timetable for the preparation of the budget bill (1). The Executive must submit the bill no later than the first Tuesday in October. This requirement ensures that Parliament has sufficient time to consider and vote on the text.

“Fiscal laws” include all parliamentary interventions during the budgetary cycle, i.e. the fiscal laws formerly referred to as initial, revised and discharge bills.

 

The Constitution and the Organic Law have resolved the problems arising from the failure of Parliament to take decisions on the budget within the prescribed timeframe

 

Basically, since a budget is essential for the proper operation of the State, the legislation makes it possible to deal with the difficulties that may arise in cases where the National Assembly or the Senate delays or even refuses to decide on the budget bill or does not do so within 70 days of the bill’s submission.

While Article 40 of the Constitution deprives members of Parliament of the possibility of creating new expenditures or reducing State revenues (2), Article 47 stipulates that the Government alone has the initiative power in budget law matters.

Article 39 of the Constitution stipulates that the National Assembly is the first Chamber to receive the Finance Bill (PLF). According to Article 47 of the Constitution, the National Assembly has 40 days after the bill is received to vote on the text. The bill is then forwarded to the Senate, which has 15 days to reach a decision (3).

Article 40 of the LOLF stipulates that if the National Assembly has not voted on the first reading of the bill as a whole within the 40-day period, the Executive may submit to the Senate the text as originally introduced, if relevant amended by the amendments adopted by the National Assembly and accepted by the Executive. The Senate must then act within 15 days of the referral.

If the Senate has not voted on the first reading of the Finance Bill as a whole within the 15-day time limit, the Government will resubmit to the National Assembly the text submitted to the Senate, modified, where appropriate, by the amendments voted on by the Senate and accepted by the Government.

The budget bill is then considered under the expedited procedure provided for in Article 45 of the Constitution.

If Parliament has not reached a decision within 70 days of the bill’s submission, its provisions may be put into effect by means of a “budget ordinance”. Budget ordinances are adopted by the Council of Ministers and, unlike the ordinances provided for in Article 38 of the Constitution, do not require ratification by Parliament. The Government has never used this mechanism, as it has always managed to secure a timely vote on the budget law.

 

Rejection of a finance bill is not an obstacle to the introduction of a new finance bill

 

In the event of rejection, no provision prevents the Government from tabling a new Bill within a timeframe compatible with final enactment before the following January 1.

However, time may then quickly run out in the event of rejection of a second PLF, but both the Constitution and the Organic Law provide for alternative emergency solutions.

Sub-section 4 of Article 47of the Constitution states that “if the budget law establishing the resources and appropriating funds for a given fiscal year has not been submitted in time (4) to be promulgated before the beginning of that fiscal year , the Government shall, as a matter of urgency, seek the authorization of Parliament to levy taxes and shall open the appropriations for the services decided by decree“.

Article 45 of the Organic Law specifies the conditions for the execution of this last provision. In this case, the Government has two options:

  • It may request the National Assembly, before December 11 of the year preceding the beginning of the fiscal year, to hold a separate vote on the whole of the first part of the Finance Bill for the year . This section of the bill shall be submitted to the Senate under the expedited procedure ;
  • If the previous procedure “has not been followed or has been unsuccessful, the Government submits to the National Assembly, before December 19 of the year preceding the beginning of the fiscal year, a special bill authorizing it to continue to levy existing taxes until the Finance Act for the year has been passed. This bill shall be considered under the expedited procedure”.

Furthermore, should the Constitutional Council void the budget bill and, as a result, the budget law for the year cannot be promulgated or implemented (5) the fourth paragraph of Article 45 of the Organic Law stipulates that “the Government immediately submits to the National Assembly a special bill authorizing it to continue collecting existing taxes until the budget law for the year has been passed. This bill shall be considered under the expedited procedure”.

But a vote to reject these bills prohibits the Executive from collecting taxes and incurring expenditures.

Moreover, as stipulated in the fifth paragraph of Article 45 of the LOLF, the Government may issue decrees to open credits only for “voted services” only after it has received authorization to continue collecting taxes, either through the promulgation of the first part of the year’s budget law or through the promulgation of a special law. The “voted services” are “the minimum appropriations that the Government deems necessary to continue the operation of public services under the conditions approved by Parliament in the previous year“. They may not exceed the figures of the appropriations approved by the last Finance Act of the year (6).

Article 45 stipulates that the issuance of such decrees shall not disrupt the procedure for discussing the budget Bill for the year.

 

The Constitution allows the Government to make the passing of a Finance Bill an issue of a vote of confidence before the National Assembly

 

The Government may, at any stage of the debate on the Finance Bill, dispense with the assent of the Senate and rely solely on the National Assembly for its approval. Indeed, as provided for in the last paragraph of Article 45 of the Constitution, if the Joint Committee does not adopt a joint text, or if this text is not adopted by both Houses, the Government may, after a new reading by the National Assembly and the Senate, seek a final decision from the National Assembly.

As has been the case since 2022, in the case of a simple majority of a parliamentary group or alliance in the National Assembly, the Government may also use the provisions of Article 49(3) of the Constitution to dispense with a vote on the adoption of the budget by the National Assembly. This procedure may be used at the initiative of the Government at any stage of the passage of the Finance Bill through the National Assembly.

The Prime Minister then makes the passing of the Finance Bill an issue of a vote of confidence before the National Assembly. In that case, the Bill is deemed to have been passed unless a motion of censure is filed within the following 24 hours. To be passed, such a motion requires the support of an absolute majority of the members of the Assembly (i.e. 289 votes out of 577).

To date, no motion of censure has ever been passed under Article 49(3) of the Constitution.

 

What happens if the National Assembly systematically rejects any of the Government’s budget proposals?

 

The 4th Republic (1946-1958) was familiar with Government instability and introduced a system of “provisional twelfths” to deal with the failure of the National Assembly to approve the budget (7).

The “provisional 1/12” was a piece of financial legislation that allowed the Government to collect revenues and incur expenditures equal to 1/12 of the budget provided for in the previous year’s finance law.

The current Constitution and the Organic Law, which establishes a stricter framework for the adoption of financial laws, do not allow the use of such a method.

 

This paper has already pointed out that the Constitution allows the Government to overcome a negative vote in the Senate on finance bills. This has occurred on several occasions in the previous decades.

This leaves only the alternatives, conceivable under current conditions, of a National Assembly lacking an absolute majority, and in which two large opposing blocs (right and center, left and center, or right and left) vote together to:

  • Reject the Government’s proposed budget (and a possible second finance bill) within the 70-day constitutional deadline of Article 47 of the Constitution, or;
  • Reject the alternative solutions described in Article 45 of the Organic Law, or;
  • Adopt a motion of censure following the adoption by the National Assembly of a motion of no confidence according to the procedure set out in Article 49(3) of the Constitution.

 

In the latter option, the adoption of a motion of censure requires the Prime Minister to submit the resignation of the Government to the President of the Republic, as provided for in Article 50 of the Constitution.

However, the only occasion on which this occurred, in 1962, the resignation was not accepted until almost two months after it had been submitted. It is likely that the urgent need to authorize the State to collect taxes and incur public expenditures, under different conditions, would again justify such a delay.

 

Jurisprudence of the Constitutional Council suited to the circumstances

 

As mentioned above, while neither the Constitution nor the Organic Law provides for a remedy in the event of systematic rejection of the Finance Bill and emergency measures, it seems appropriate to refer to the only precedent of the 1980 budget, when the Constitutional Council censured the Finance Bill on December 30, 1979, on the grounds that it had been adopted according to an improper procedure.

Even if the political and legal conditions were different, the second recital of this decision of the Constitutional Council (8) should enable the Government to take the necessary financial measures:

Considering that, in this situation, and in the absence of directly applicable constitutional or organic provisions, it is clearly the responsibility of Parliament and the Executive, within the scope of their respective powers, to take all the financial measures necessary to ensure the continuity of national life; that, to this end, they must be guided, in the event of the late submission of the Finance Bill, by the rules established by the Constitution and by (…) the organic law, both as regards resources and as regards the appropriations and authorizations relating to voted services“.

The use by the Constitutional Council of the word “necessary” demonstrates that the continuity of national life is of paramount concern. However, the reference to “voted services” underlines the fact that, in such circumstances, the Government could only extend the period of application of the previous year’s budget to the extent that this was indispensable.

In fact, according to the last paragraph of art. 45 of the Organic Law, the voted services represent “the minimum appropriations that the Government deems indispensable to continue the operation of public services under the conditions approved by Parliament in the previous year. They may not exceed the figures of appropriations approved by the last Finance Act of the year.

 

Franck Boulin, Attorney-at-Law
Member of the Paris Bar
July 1, 2024

 

(1) Article 39 of the LOLF
(2) Article 40 of the Constitution: “Proposals and amendments formulated by members of Parliament shall not be admissible if their adoption would result either in a reduction of public resources or in the creation or aggravation of a public burden”.
(3) Article 40 of Organic Law 2001-692 on financial laws sets a deadline of 20 days for the Senate, provided that the National Assembly has voted on the first reading within the 40-day deadline.
(4) If the Government’s financial proposals were systematically rejected, this would quickly happen.
(5) Article 62 of the Constitution.
(6) Article 45 of the LOLF.
(7) This term had a different meaning than today. According to the 1946 Constitution, the “National Assembly” corresponded to the parliament of the 5th Republic. It consisted of the Chamber of Deputies and the Council of the Republic.
(8) n˚ 79-111, https://www.conseil-constitutionnel.fr/decision/1979/79111dc.htm.

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