French ministries' pension costs drain public service spending, report says

PARIS, Oct 13 (Reuters) - Nearly a third of some French ministries' budgets pay for the pensions of retired civil servants, squeezing out spending on other priorities such as education, a government report said, amid protests over underfunded schools.

The report, a 250-page annex to the finance bill, is the first to break down retirement costs for each ministry and comes amid growing political attention towards the cost of France's rising pensions bill.

It shows that 32% of the education ministry’s budget, or €28.5 billion ($32 billion), ends up with the special pension account that funds state civil servants' pensions. 

"The Ministry of Finance has just dropped a real bombshell," economist Maxime Sbaihi with think tank Institut Montaigne said on X.

"In the midst of a day of protest, France has learnt that a third of the budget allocated to the national education system does not actually go towards education," he added.

The share for the interior ministry, which employs national police officers in France, is 30%. Across all ministries, the average is about 13%.

The report, which said overall pension spending has risen by 2.5 percentage points of GDP between 2000 and 2023 while that for education has declined 0.5, follows street protests by high school students protesting poor conditions in classrooms.

"The burden of pension expenditure within ministerial budgets thus has a crowding-out effect: in each ministry, the funds allocated to pensions are not available to fund public services," the report said.

Pension spending is highest at the largest public employers, like the education ministry which pays teachers, because the money compensates for a demographic imbalance in the state pension scheme. The report says the state pension scheme has only 0.94 workers contributing for every pensioner, compared with 1.5 in the basic statutory private-sector scheme.

Each ministry pays an employer contribution into the pension account, which has been steadily increasing as the number of retirees grows and the number of public workers shrinks.

($1 = 0.8944 euros)

(Reporting by Leigh ThomasEditing by Alexandra Hudson)