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04/12/2016

French 2016 budget exposes empty promises on development

Development Policy

French 2016 budget exposes empty promises on development

France has pledged a further €100 million to help refugees in Jordan, Lebanon and Turkey.

[Enes Reyhan/Flickr]

France’s numerous promises of aid for the Global South do not feature in the government’s 2016 budget bill, which will finally be adopted today (16 December). EurActiv France reports

Fiercely debated in both of France’s houses of parliament (the National Assembly and the Senate), French official development assistance (ODA) credits for 2016 are a long way from reflecting the French government’s promises.

Masses of promises

President François Hollande pledged a €4 billion increase in ODA by 2020, half of which would be dedicated to climate action. On top of these announcements, France has committed to providing an extra €370 million for climate adaptation in the most vulnerable countries.

The government also made financial promises related to the Syrian crisis. With the situation deteriorating in the refugee camps in Syria’s neighbouring countries (Jordan, Lebanon, Turkey), France has pledged €100 million to the UN agencies active in the area (the World Food Programme and the High Commission for Refugees).

A sizeable gap

The promises do not stop there. A further €100 million will be allocated to the fight against the Ebola virus. Not to mention the €2 billion promised at the conference on the electrification of Africa in July.

Many of these promises will be honoured as loans, and a minority as grants. But France’s draft budget for 2016 shows little trace of the myriad development commitments the country has made.

First presented in early October, the budget contained an initial cut in development assistance of more than 6%, or €177 million.

>>Read: Oxfam: ‘French 2016 budget contradicts development promises’

From the very first discussions, the government agreed to add €50 million to its Syrian crisis budget, and increase the share of the Financial Transaction Tax (FTT) to be assigned to the development budget to €260 million, an increase of €100 million on 2015.

Short of constituting an increase in ODA, this should, at best, balance the government’s books. “There is great disappointment over the reality of budget credits dedicated to development and the climate,” said Christian Reboul from Oxfam France.

>>Read: France to use 50% of FTT revenue on overseas aid

Due to budgetary constraints, France has had to fall back on the Financial Transaction Tax (FTT) to fill the sizeable gap in the development budget.

Members of parliament adopted an amendment to the budget increasing the share of the FTT assigned to ODA to 50% of the tax’s revenue.

Rollercoaster ride

“But the government is against this increase, and has put through another amendment to withdraw €162 million from the development assistance budget,” Reboul said. “This vote took place on the quiet thanks to a government manoeuvre, in the presence of only five MPs,” the specialist said.

>>Read: French plans to expand FTT may sink European negotiations

Though it may have been saved from the worst of the cuts, the French development budget will none the less struggle to cover all of the country’s promises. “In the end, only the increased assignment of FTT funds will allow for a slight increase,” said Reboul.

The outlook for 2017

Yet the debates over the 2016 budget resulted in the Financial Transaction Tax being extended to cover “day trading” operations, which consist of buying and selling shares on the same day.

The taxation of these highly speculative operations is expected to increase the revenue of the French FTT from €2 billion to €4 billion, according to Oxfam’s estimates.

This broadened tax base will boost the new tax, whose revenues have so far been disappointing. While experts estimated revenues of around €1.5 billion for 2015, the FTT raised only €700 million, and is predicted to bring in €932.7 million in 2016.

The new tax base will be introduced on 31 December 2016. “This means it will have no impact on this year’s budgetary cycle,” Reboul said.

France’s development assistance budget could feel the benefit of this extra cash from 2017. By then the more ambitious European FTT may finally have come to fruition to further swell the EU’s ODA budgets. 

Background

As part of a budgetary consolidation policy, France has reduced its aid budget by more than 20% since 2012.

With several important international agreements finalised in 2015, the French president, François Hollande, promised to assign extra funding to the fight against climate change in poor countries.

The United Nations General Assembly adopted the future Sustainable Development Goals (SDGs) in September 2015, to follow on from the Millennium Development Goals, which expire at the end of 2015. This international framework aims to mobilise and coordinate the efforts of all countries to make the world a fairer and more sustainable place by 2030.