The scandal over the French government’s abusive use of consultancy firms has been brewing since the COVID-19 pandemic. But it has taken on a new dimension in the last few days following the publication on Thursday, March 17th, of a very thorough report on the subject. The results of an investigation carried out by the Senate reveals facts that are far more serious than what was initially blamed on Emmanuel Macron and his ministers. It is indeed a phenomenon deemed “tentacular,” according to the report itself. The Macron-McKinsey scandal is now confirmed.
It all started with an investigation into the management of the health crisis, which suggested that Emmanuel Macron and his government were making excessive use of private consulting firms. After four months of investigations and hearings, the senators realised by pulling the thread that the influence of the consultancy firms extended onto the entirety of public policy, to previously unknown proportions. The details of the investigation have aroused public indignation: “a damning report,” according to France TV Info; a “vitriolic” report, said television network Public Sénat. For the senator who led the investigations, Eliane Assassi, all of the reforms of the five-year term were designed and implemented with the help of consulting firms: McKinsey in the lead, followed by Ernst & Young, Roland Berger, Accenture, and CapGemini.
The scandal primarily concerns the amount of money involved. From 2018 to 2021, the financial gush is constant, although official figures have been difficult to obtain, even for the Court of Accounts, the public body responsible for monitoring the accounts of state. A minimum of €1 billion would thus have been spent for the year 2021 alone: a “crazy amount of money” (un pognon de dingue), according to Éliane Assassi, who does not hesitate, in the report, to use the same polemical idiom used by Emmanuel Macron when he denounced the excesses of social aid policies in France. This may even be a low estimate, as the commission of enquiry only looked at the largest administrations. Emmanuel Macron defended himself, explaining that the increased expenditures were necessary because of the COVID crisis, but that they were followed by a decrease—but this decrease does not exist in the figures.
The report is concerned about a form of sickly dependence on consultancy firms: “recourse to consultancy firms may have become the reflex of a state; that sometimes gives the impression that it no longer knows how to do things.” Feelings of incompetence and inferiority are infiltrating the staff of ministries that have no reason to exist. Nevertheless, well-trained French civil servants are able to produce quality work, which is not always the case with consultants, whose deliverables are said to be of ‘uneven quality’. The Interministerial Directorate for Public Transformation—the body most frequently responsible for the use of consultancy firms—deplores what they see as “a lack of legal culture and more broadly of knowledge of the public sector.” The practical results supposedly obtained by consulting missions are not convincing either. €4 million were paid to McKinsey on a reform of the APL, a housing benefit: their proposals caused a computer crash and were never really integrated.
In the absence of results, the direct integration of consultants into administrative teams seems all the more toxic. The exact responsibilities of each are diluted. In December of 2020, McKinsey went on record stating, for example, that “the intervention will remain confidential” and that all documents “will be produced in the ministry’s format.” It is a dangerous mix of genres: “this working method reinforces the opacity of the consultancy services because it does not make it possible to distinguish between the contribution of the consultants, on the one hand, and that of the administration, on the other,” the report deplores.
All this is compounded by accusations of tax evasion. McKinsey, which is headquartered in Delaware, had a turnover of €329 million in 2020, but does not pay a cent in corporate taxes in France. Between 2011 and 2020, McKinsey France says it paid €422 million in taxes and social charges, without specifying the breakdown between corporate tax and social charges. In all likelihood, the amount indicated corresponds mainly to social security contributions (the firm employs around 600 people in France) and various production taxes but does not include corporate income tax. McKinsey is said to be making full use of the well-known transfer pricing system, which allows a parent company (in this case McKinsey U.S.) to charge its subsidiaries (in this case McKinsey France) the price of the services it provides. In respect to McKinsey, “the transfer prices that McKinsey’s French entities pay to the American company are of such a magnitude that they have contributed to making the tax result in France zero or negative for at least 10 years, ” the senate committee report criticises. Since the profit is zero, McKinsey France does not pay any corporate tax. This is the ultimate in tax optimisation, and it is extremely effective at blocking the revenue owed to the state.
Finance Minister Bruno Le Maire is now playing the card of probity and administrative rectitude: “We are going to ensure that McKinsey pays the taxes it owes to France. All the procedures have already been initiated by the General Directorate of Public Finances,” he said on the LCI channel. The only concern—as the vice-president of the Les Républicains party and MP Olivier Marleix reminds us—is that Bruno le Maire’s administration has in the past issued McKinsey with a certificate stating that they were up to date with their tax obligations—a document that is essential to be able to apply for public contracts. But that’s not all: the McKinsey executive affirmed before the Senate, and under oath, that his company was in good standing with the French tax authorities; a false testimony that should normally be paid for dearly in court. The matter has since been referred to the public prosecutor.
For many French people, the scale of the scandal that has hit Emmanuel Macron and his government is to be compared with the accusations that hit François Fillon during the 2017 presidential campaign. François Fillon was accused of paying his wife and children for fake jobs, and of having benefited from undue advantages, such as the delivery of luxury suits. The dexterity of the National Financial Prosecutor’s Office in investigating his case surprised many and raised serious doubts about the commissioned nature of the legal proceedings. They appeared to be intended to eliminate a serious political candidate for Emmanuel Macron, who, having been part of the outgoing team in François Hollande’s government, had all the political leverage and support within the judiciary to harm his competitor. François Fillon remained in the presidential race despite his indictment, but collapsed in relation to voter’s initial intentions.
The facts that have now come to light concerning the consultancy firms are out of all proportion to what François Fillon was accused of at the time. However, no investigation or legal proceedings have been initiated yet.
The political condemnations were unanimous following the publication of the report. As communist candidate Fabien Roussel recalled: “2.4 billion is the construction of 120 schools or 26 hospitals. 2.4 billion is the salary of 2,500 nurses hired over 40 years. 2.4 billion is what Macron has given to consulting firms, some of which practise tax evasion. Shameful.”
In the absence of a judicial enquiry, the aftermath will most certainly be political. The report was adopted unanimously by the committee members on March 16th and will be translated into a legislative proposal. It remains to be seen whether the scale of the revelations will end up affecting the image of candidate Emmanuel Macron.