Sweeping changes in social insurance contributions

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The French Government has decided to make wide-ranging alterations to the system of social insurance contributions. Starting in 1998, health insurance will no longer be chiefly funded directly from salary deductions but instead from income tax. This will take the form of a "universal social contribution", or CSG, imposed on the totality of revenues.

Prior to 1991, the health insurance system was entirely funded by employer and worker contributions. In that year, however, the Prime Minister, Michel Rocard, set up the "universal social contribution" (contribution sociale généralisée, CSG) imposed on the totality of revenues. CSG aimed to widen the spectrum of funding for social security by levying it on income derived from several forms of investments and savings. This contribution was set at 1.1%. The two right-wing Governments that were in power from 1993 onwards increased this rate, while at the same time reducing health insurance contributions deducted directly from pay. Under the Government led by Alain Juppé, these direct contributions were lowered from 6.8% to 5.5% of pay, and CSG contributions were increased from 2.4% to 3.4%.

The current left-wing Government led by Lionel Jospin announced in September 1997 proposals to make substantial changes in these respective rates from 1998. Health insurance contributions taken at source will be lowered to just 0.75%, whereas CSG contributions imposed on total income will be increased to 7.5%. The first result of this shift will be an automatic increase of 1.1% in the purchasing power of pay. This increase corresponds to the difference between the decrease in health insurance contributions and the increase in the CSG.

However, this also represents a fundamental break in the nature of the French social contribution system. Some trade union organisations, such as Force Ouvrière, are opposed to the idea. They believe that "funding through taxation" could mean giving overall decision-making power to the state and the end of unions' and employers' responsibilities in directing the health insurance scheme (it is at present a system based on equal representation between them). Other organisations, such as the Confédération française démocratique du travail (CFDT), see the opposite: "a measure of equity and fairness, finally in line with the aims of the architects of social security. Everyone will contribute according to his or her income and will receive according to his or her needs." In the opinion of this organisation, this huge shift from pay-based contributions to the CSG is a great step forward towards the creation of an all-encompassing health insurance system.

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