Chapter 864: The National Budget System
This was precisely the reason Prussia was the first to withdraw from the war—if they continued any longer, the nation would face total bankruptcy.
In truth, Prussia had only managed to hold out this long by relying entirely on funding provided by the British.
Seeing the Crown Prince turn the page, Brienne spoke immediately.
"Your Highness, the total expenditure for the first ten months of this year stands at 650 million francs, with an estimated year-end total of 800 million. This means we will face a deficit of 30 million francs."
Since Joseph took charge of the government, France had enjoyed two consecutive years of fiscal surplus; last year's surplus had reached as high as 100 million francs.
This year, under the immense drain of the war, the situation had once again shifted to the state spending more than it earned.
Joseph glanced at the bottom of the report at the total national debt: 1.87 billion francs.
He gave a dismissive smile and told Brienne, "Our domestic production hasn't suffered any serious disruption, and the Iberian-Apennine Common Market will bring even greater sales to our factories. I'm confident our balance of payments will turn around quickly once the war ends."
What he didn't say was that France was highly likely to emerge victorious in this war. When that happened, they would secure substantial war reparations. Combined with various other war dividends, the treasury's revenue was bound to skyrocket.
Furthermore, this money wouldn't suffer from the common pitfall of war reparations, where the defeated nation pays a small portion and then refuses to settle the rest.
Approximately 400 million of France's national debt was owed to Dutch banks. Previously, the Flemish armistice agreement had stipulated that war reparations would be collateralized against the debts of countries like Britain and France.
In other words, if the Netherlands tried to default, the amount would simply be deducted from what France owed them.
Later, Austria would also be able to provide a massive sum in reparations. Austria wasn't a pauper like Prussia; their vast empire could be squeezed for a significant amount of wealth.
Even if the reparations weren't paid in full, they would at least help reduce France's debt by another hundred or two hundred million.
By then, France's total debt could be compressed to less than 1.5 billion francs.
And keep in mind, these were only the direct gains from the war. As the victor, there would be countless hidden sources of income to follow.
Within a few years, France wouldn't have to worry about debt at all.
Having reviewed the income and expenditure for the first ten months, Joseph picked up the France 1794 Financial Expenditure Estimation Report compiled by the treasury.
He didn't have high expectations for the report; after all, no nation in this era had yet established a formal fiscal budget.
Consequently, he had instructed Brienne to gather officials from the finance, industry, and agriculture departments to form a Budget Committee. They were to start by practicing with estimates for next year's national expenditures, gradually moving toward formal budgeting once they had accumulated enough talent and experience.
National financial management in this era was still in its infancy, essentially a game of plugging holes as they appeared. If the treasury ran dry, they would desperately tighten their belts and halt all activity.
Britain wouldn't begin establishing a fiscal budget system for another forty years, and other countries would be even later.
From the perspective of national governance, however, creating a budget was vital.
First, it limited unnecessary waste. By setting hard limits on spending in advance, there would be no extra funds to squander.
Second, it encouraged departments to use their funds more efficiently. If a department exceeded its budget, its head would surely be punished, whereas savings would be rewarded.
One shouldn't underestimate the initiative of officials at various levels; by saving a little here and there, it wouldn't be surprising to scrape together tens of millions of francs for the country over the course of a year.
Most importantly, it strengthened the government's centralized management of financial resources, ensuring limited funds were allocated where they were needed most.
In the current era, for instance, the budget would naturally favor the development of the steam engine and industries related to steam power, coal, and steel, thereby accelerating the entire nation's progress in those fields.
In fact, the reason France had been able to overtake Britain in steam engine technology was that Joseph had used his power to implement a state-driven model, pitting the collective might of France against Watt's single company.
If they still couldn't win under those conditions, France might as well give up any talk of European hegemony.
By implementing a national budgeting model, this practice of mobilizing the entire country's strength to break through in key sectors would become the norm. This would allow France to achieve far greater progress than other powers, even when spending the same amount of capital.
Brienne spoke from the side, "Your Highness, the Budget Committee estimates that next year's total fiscal expenditure should be around 850 million francs."
Joseph nodded, finding the figure reasonably plausible. He opened the Expenditure Estimation Report, but as his eyes scanned the summary of the major line items, his brow immediately furrowed.
Recurring expenditures—meaning official salaries, road and bridge maintenance, national debt interest, and so on—accounted for 50 percent.
Government investment spending—covering water conservancy, paving roads, and the like—took up 4.5 percent.
Industrial and technological development spending—primarily the Industrial Development Fund and state-level research and development—amounted to 8 percent.
Public service spending—for education, social relief, and such—accounted for 1.5 percent.
...
Joseph immediately flipped forward to check the breakdown of industrial and technological development spending, which was his primary concern. He saw that the total annual investment for the Industrial Development Fund was less than 35 million francs.
The projects involved were concentrated in five key areas, including steam engines, automated textiles, and chemicals. There was no funding allocated for any emerging sectors.
He raised his hand to interrupt Brienne, who was still talking, and turned to look at the Minister of Industry.
"Count Mirabeau, I recall mentioning to you that we should invest heavily in the inland shipping and postal telecommunications industries next year. Why are there no plans for these in the Industrial Development Fund?"
"Yes, Your Highness, you did indeed mention it—more than once," Mirabeau said, rubbing his hands together uncomfortably. "However, fiscal resources are limited. We must prioritize industries like steam engines and steel smelting. There simply isn't enough left for anything else..."
"Out of a total expenditure of 850 million francs, industrial development should be allocated at least 100 million. How could it not be enough?"
Mirabeau glanced at Brienne and explained, "Your Highness, next year's military spending must take top priority, so we had no choice but to squeeze the industrial development budget first."
Joseph quickly flipped back to the front and finally spotted the last major category: military spending, which accounted for 36 percent.
He did a quick mental calculation. Out of a total budget of 850 million, 36 percent was over 300 million francs!
He frowned and shook his head. "Surely military spending shouldn't require that much?"
After all, they had fought half a year of total war this year, and military costs had only totaled around 140 million. Did Brienne expect the country to remain in a state of national war for the entirety of next year?
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