Since 2002, the reports of the Pensions Orientation Council (COR) have followed and resembled each other. They report relatively limited pension deficits (67 billion cumulative over 21 years) or even surpluses (4 billion in 2022), which lends credence to the idea that pensions are “under control” and marginal slippage. This is more or less the vision defended by the candidate Emmanuel Macron in 2017, when he said “After more than twenty years of successive reforms, the problem of pensions is no longer a financial problem. The work of the Council of orientation of pensions, which refer, show it.” Faced with the reality of power, the President of the Republic now defends the opposite idea.
Its opponents have endorsed the approach aimed at minimizing or denying the reality of the deficits. They point out that, according to the COR, the pension deficit has been only 0.14% of GDP per year since 2002. At the same time, INSEE attests that the public deficit has averaged 4.30% of GDP per year. An uninformed observer could conclude that pensions are well managed: they would explain only a thirtieth of the deficits while they have represented nearly a quarter of expenditure since 2002.
But this reassuring view is unfounded. Since its creation, the COR has developed a very specific method for calculating the pension deficit, which empties the exercise of its substance. During the publication of his first report in 2001, he posed by “convention” that there is no imbalance in state pensions. He considered that “It is by convention that these balances are zero in 2000”. Since then, the COR has systematically failed to count state pensions in the deficit. It only takes into account private schemes (and in particular Agirc-Arrco with a surplus of 5 billion in 2022) and local authorities (CNRACL).
The COR has never taken into account the deficits of state-subsidized schemes (state workers, SNCF, RATP, etc.). However, they are attested by multiple official data (General Account of the State, Court of Auditors, etc.). Similarly, the COR does not include the non-standard pension contributions of civil servants compared to the private sector, which finances its pensions with contributions representing 28% of gross salaries. The Orientation Council hides the over-contributions of the administrations constituting however subsidies of balance (14% of the index salary in the local communities, 57% for the civil servants of State and 109% for the soldiers).
COR calculations not representative of reality
According to the COR, these subsidies do not have to be taken into account because the State would assume the deficits of the schemes in question. But this argument is not consistent with accounting practices, which are to recognize imbalances even if they are financed elsewhere. No one would dare to say that EDF was not in deficit by 18 billion in 2022, on the grounds that it is a public company. Yet this is what the COR has been doing since its creation by not counting the deficits of state-subsidized pension schemes. Let us add that to claim that the State could erase the deficits of public pensions is an argument that does not take into account the French reality, the state accounts being systematically unbalanced for decades.
In study published this week by the Molinari Economic Institute, we count the deficits concealed by the COR since 2002. They represent 884 billion euros since 2002, or 94% of the pension deficit. Our calculations show that most of the pension deficit is included in the State accounts and excluded from the COR calculation, which poses an obvious problem of transparency.
As often, some will object that – like all numbers – our calculations must be taken with caution. But several recent works attest, as we do, that the calculation of the COR deficit is not representative of reality. In an article published mid-June in the journal Comment, Jean Pascal Beaufret, a former senior civil servant, shows that pensions contribute to more than half of public deficits. In a note published in December, the High Commission for the Plan, underlined that when it is affirmed that our pension schemes are “in surplus”, it is “only a partial report” excluding in particular the schemes of the civil service whose large deficit is covered by public funds. More than 20 years after its creation, it would be desirable for the COR to get into the habit of publishing figures integrating the deficits of state pensions, which concentrate the bulk of the financial slippages.
Opacity and statistical grub
This transparency is key for voters and taxpayers, but also for civil servants who are frequently penalized by their employer’s lack of financial discipline. Few of them have realized that the freezing of the index point is linked to the soaring pension expenditure of the employer State, which now represents 72% of the remuneration it pays. Mechanically, the money that is missing to finance pensions is not available to increase the staff in activity.
As Alfred Sauvy liked to say: “An administration is always hesitant to provide information on its management. To live happily, live in hiding is a well-known course of action” (power and opinion, 1949). However, the lack of transparency in terms of pensions – the main source of financial slippages since the counter-shock of the baby boom – has lasted only too long because it prevents a good diagnosis and the emergence of good reforms. It is time for official figures to give a faithful view of pension deficits.