Debates on France’s public debt tend to blame excessive growth of government spending. But an examination of the facts shows that public debt is largely a result of economic policies favourable to creditors and the rich.

A study was carried out by a working group of the Collective for a Citizen Audit of Public Debt (CCAPD). It is a contribution to an essential public debate on crucial questions: where does the debt come from? Was it built up in the public interest or for the benefit of already privileged minorities? Who owns the debt? Can we cut the debt without hurting ordinary people? The answers to these questions will determine our future.

The reduction of deficits and public debt has now become the primary objective of economic policy in France, as in most European countries. Lower salaries, or the so-called “pact of responsibility” which requires an additional €50 billion of public spending cuts, are justified in the name of this imperative.

Rising public debt is discussed as if its origin was obvious — excessive growth of public expenditure.

But this assertion does not withstand the scrutiny of the facts. The increase in government debt, which is essentially 79 per cent of the public debt, cannot be explained by increased spending, as the latter’s share in GDP dropped two points over the past 30 years.

If the debt has increased it is primarily because, throughout the years, the state has systematically deprived itself of revenue by giving wealthy households and large businesses tax breaks and loopholes, leading to the share of government revenues in GDP dropping five points in 30 years.

If the state had maintained a constant share of revenues in GDP, public debt would now be 24 percentage points of GDP (£391 billion) less than it is today.

Debt also rose sharply because of interest rates that often reached excessive levels, particularly in the 1990s with the policies of “franc fort” to prepare the country for entry into the euro single currency, resulting in a “snowball effect” that still weighs heavily on the current debt.

If the state — instead of financing itself for 30 years in the financial markets — had resorted to borrowing directly from households or banks at a real interest rate of 2 per cent, the public debt would now lower 29 points of GDP (£472bn) than its current level.

If the state had not reduced revenues and “pampered” financial markets, the audit found, the public debt-to-GDP ratio in 2012 would have been 43 per cent instead of 90 per cent.

In total, 59 per cent of the current public debt results from tax breaks and excessive interest rates.

The audit also assesses the impact of tax havens and the financial crisis of 2008 on soaring public debt.

In total, it is clear that the public debt was caused by economic policies strongly favourable to the interests of creditors and the rich, while sacrifices to reduce the debt burden today are mainly directed at employees, retirees and users of public services. This raises the question of legitimacy.

The report concludes with a series of proposals aimed at reducing the burden of debt — almost £40bn interest per year and more than a £100bn in redemptions — to break the vicious circle of austerity policies and finance public investment, to tackle today’s social and ecological emergency.

By conducting an audit of public debt carried out or controlled by citizens the hope is to finally open a genuine democratic debate on the public debt. 

This debate should lead to the people determining what portion of this debt is illegitimate. Initial assessments proposed by the working group of the CCAPD are intended as a contribution to this debate.