2001 social security funding bill passed

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The 2001 social security funding bill was passed by the French parliament in October 2000. The key provisions include a cut in social security contributions for low-wage earners, as well as increases in pensions and family allowances. Trade unions have opposed the trend towards greater government involvement in social security, and a major debate has arisen over controlling healthcare spending.

In late October 2000, the French parliament passed the 2001 social security funding bill at first reading (social security finance has been subject to parliamentary vote since 1997 - FR9712184F). The funds involved are significant, with forecast spending of FRF 1,932.9 billion - an amount greater than the state's entire budget. The context of the 2001 law is a return to economic growth and in particular a drop in unemployment, which have resulted in strong growth in social security receipts, enabling the various funds to remain in the black for the second year running (FR0006166N). Only the health insurance fund is still running a deficit.

In terms of funding, the law's most important measure is a cut in social security contributions for low-wage earners. The subsequent drop in social security receipts will be entirely offset by government funding, which buttresses the government's role in the funding of social protection. The trade unions, which have all expressed concern over this trend towards greater state involvement, have put forward competing proposals for the reform of funding. In terms of expenditure, the issue raising most concern seems to be the current inability to bring healthcare spending under control. On this issue, the differences in approach between the various unions that emerged during the controversial social security reform implemented in 1995 by the "Juppé government" are now resurfacing.

Main provisions

The 2001 social security funding law contains 47 measures. The most important measures relating to receipts are:

• a cut in social security contributions for low-wage earners, by means of a progressive reduction, over two years, in the "universal social security contribution" (Contribution Sociale Généralisée, CSG) - currently standing at 7.5% of gross pay (FR9710170F) - and in the "social security debt reimbursement contribution" (Contribution au Remboursement de la Dette Sociale, CRDS) - currently equivalent to 0.5% of gross pay. The reduction will apply to whose income falls below 1.4 times the statutory national minimum wage. Furthermore, retired, unemployed and disabled people who do not pay income tax will be exempt from the CRDS;
• financing for the employer contributions reform fund (Fond de Réforme des Cotisations patronales, FOREC) which is responsible for the employers' social security contribution exemptions provided for in the legislation on the implementation of the 35-hour working week (FR0001137F); and
• financing for the "pension guarantee fund" (Fond de garantie des retraites) set up by the government in anticipation of future funding requirements linked to mass retirements between 2005 and 2010.

The main expenditure provisions are as follows:

• a 2.2% increase in pensions;
• a 1.8% increase in family allowances. Furthermore, a day childcare investment fund (with funds of FRF 1.5 billion) will be established and a parental leave entitlement for parents of seriously ill children will be introduced. Housing assistance schemes will be harmonised (with welfare benefits counted in the same way as work-related income);
• the establishment of a compensation fund for asbestos victims, with 25% government funding; and
• the "national health insurance spending target" (Objectif national de dépenses d'assurance maladie, ONDAM) is set at FRF 693.3 billion for 2001, up 3.5% on forecast spending for 2000. Free healthcare under the Universal Healthcare Insurance (Couverture Maladie Universelle, CMU) scheme (FR0001135F) will be available to those earning under FRF 3,600 per month for a single person - up from the previous FRF 3,500.

Funding debate

The reduction in the CSG "universal social security contribution for low-paid workers", to the extent that it illustrates the government's resolve unilaterally to determine the structure of welfare receipts, has given rise to discontent. The bipartite managing boards of the various social security funds, which, by law, must be consulted on the social security funding bill, have all expressed disapproval. However, not all the trade unions have exactly the same position on this initiative.

The CFDT confederation, which was one of the architects of the CSG and has always advocated that this "contribution" be clearly identified as a social security contribution (rather than taxation), believes that the "proposed CSG exemptions call into question the single, across-the-board deduction on all income including return on financial investments". CFDT also states that "other tax measures exist that would improve the purchasing power of low-wage earners." CGT-FO attacked "the robbing Peter to pay Paul attitude" that exists between social security contributions and government funding. It particularly spoke out against the practice, whereby each year, the "CSG is channelled from one fund to another." In the opinion of CGT, the "CSG exemption for minimum wage earners and those earning up to 1.4 times the minimum wage does indeed lighten the contribution burden but should not be a substitute for wage increases". At a more general level, CGT criticises "systematic transfers between social security funds and the increasing number of specific funds while employers are receiving more and more tax exemptions". It also laments "the postponement of the necessary debate on funding, in particular on contributions to be levied on financial income, and on the shake-up of employers' contributions required to promote stable and skilled employment".

Pensions

CGT-FO acknowledges the "boost" given to pensions but is demanding "permanent rules" to ensure that annual increases in pensions are not based on tax receipts. The pensioners' union (Union Confédérale des retraités) affiliated to CFDT considers that the 2.2% increase in pensions is warranted but insufficient. It is demanding a minimum pension at the same level as the national minimum wage. In the view of CGT, "this necessary boost" does not go far enough, in light of the loss of more than 10% in purchasing power experienced by pensioners over the past few years. Definitive measures must be implemented to re-index pension and retirement allowances to wage increases, says CGT. This would enable pensioners to take full advantage of economic growth.

Health insurance

Health insurance fund expenditure in 2000 is predicted to increase in real terms by 4%, whereas the 2000 national health insurance spending target envisaged a rise capped at 2.5%. The 2001 target of a 3.5% increase in spending is calculated not on the 2000 target of FRF 658 billion but rather on actual spending in this period, ie FRF 669 billion. The CFDT-chaired National Health Insurance Fund (Caisse nationale d'assurance maladie, CNAM) is critical of this shift in the base spending figure, to allow for overspending. In August 2000, the CNAM, which is responsible for spending control in the outpatient healthcare branch, implemented measures reducing consultation fees. This angered general practitioners and specialists alike. The CNAM views the "pardon" for overspending in 2000 contained in the 2001 social security funding bill as undermining the legitimacy of any potential sanctions.

The trade unions are now adopting the same positions on the health insurance issue that they adopted at the time of the 1995 Juppé reform programme. For CFDT, "the positive effect of economic growth on social security funds masks the fact that spending continues to grow significantly, especially in the area of dispensed drugs." The union is demanding that "the 3.5% increase in spending slated for 2001 be used to improve care and the refund system". CGT-FO "criticises the fact that the CNAM chair [ie CFDT] does not seem prepared to re-examine the principles on which the Juppé reform was based, whereby budget savings take precedence over the healthcare needs of the French population." CGT, which "welcomes the extension of the Universal Healthcare Insurance system", states that, despite the various "minor changes", the social security funding bill "fails to shake off the restrictive framework of an accounting rationale".

Commentary

For the second consecutive year, the government has presented parliament with spending targets that are not calculated on the target adopted the year before, but rather on actual spending. As a result, non-compliance with spending targets is in fact endorsed without any explanation from the government as to how it intends to remedy the situation. In parallel with the parliamentary debate on the social security funding bill, and in the light of a consensus that the system of agreements which regulates relations between the various social security funds and general practitioners is in serious crisis, CGT, CGT-FO, CFE-CGC and CFTC have started discussions with three general practitioners' associations. These are very tricky negotiations. While all those involved share a common rejection of what they call "accountancy-based" health spending control (FR9907197F), there are major differences between them. Whereas the trade unions are demanding better social security coverage of healthcare costs, the general practitioner associations reject the establishment of any link between increases in receipts and the funds available to the social security system. Undoubtedly, the talks on health insurance soon to take place under the "industrial relations overhaul" project sponsored by the MEDEF employers' confederation (FR0002143F) underlie, at least in part, this attempt to develop an "alliance", though with no guarantee of a successful outcome. (Pierre Volovitch, IRES)