efficient, which is bound to apply to the performance system itself. Also, the pragmatic nature of the
approach suggests that the LOLF is not to be considered as a new rigid system, although stability is an
important condition for meaningful performance examination.
As a dynamic process, the shift to performance-based budgeting is sometimes expected to significantly
affect the incentive framework of the administration and its executive heads so that adjustments of the
organizational structure of the administration and human resources allocations are foreseen as a result.
Such a trend however would be more bottom-up in nature, when pragmatic adaptations appear relevant
and possible. The new result-oriented budget framework, combined with increased executive autonomy
and accountability, seems to create such dynamic conditions.
Another component of the dynamic process, top-down in nature, is also at play. While the LOLF covers
the general State budget, a significant share of public fund outside this budget remained untouched by the
reform. In that respect a new LOLF-type of approach is now under preparation for credits outside the
general State budget (except for the local authorities). Thus the “LOLFSS’ - Loi Organique relative aux
Lois de Financement de la Sécurité Sociale”, under discussion since March 2005, is intended to establish
a performance management approach to social programmes expenditures (those which are off the State
budget). While some aspects of the LOLFSS are entering into force as early as 2006, the performance
system is to be implemented at the occasion of the 2008 budget Act.
Besides its dynamic and pragmatic character, the LOLF should not however lend itself to too high
expectations. First, performance management and analysis remain a very complex task, with many
technical difficulties. Second, while the LOLF can serve as a useful framework, improving public
finances quality will be critically dependant upon the participants’ contributions and their political
decisions.
Box 2 - The French LOLF and the EPC Working Group on the Quality of Public Finances
Some elements drawn from the French LOLF experience can be relevant for the work of the EPC-WGQFP.
Analysing the ‘quality of public finances’, when viewed from a performance-based approach, needs to duly encom
two dimensions of public finances: the administrative implementation of public policies choices and the global ec
effects of these decisions. In the French experience, these complementary approaches are structurally built in the
along the taxonomy of the goals and performance indicators.
Limiting the scope of the analysis to management aspects, as in the output-focused approach, with primary
consideration towards raising efficiency, cost-effectiveness and the quality of service, would be bound to miss a
major dimension of the ‘quality of public finances’.
The outcome-focused approach, with primary consideration towards raising effectiveness with respects to
political requirements from the society at large, is just another critical aspect of ‘quality of public finances’.
For that matter, analysing the ‘quality of public finances’ ought to distinguish between positive and normative
statements on the issue. Public finances have a significant political economics dimension, such as adjustment
trade-offs that differently affects each type of economic agents in society. Such normative trade-off ought to be
regulated by the democratic process, considering their political nature. Thus, the democratic process only
should fulfil the primary function of setting the rules over the level or the nature of public expenditures or fiscal
instruments.
This however, leaves considerable scope for useful analysis on how to push further the effectiveness and
efficiency frontier, once goals and priorities have been democratically adopted.