Direct Request (CEACR) - adopted 2007, published 97th ILC session (2008)

Social Security (Minimum Standards) Convention, 1952 (No. 102) - France (Ratification: 1974)

With reference to its previous direct request, the Committee notes the detailed report on the application of the Convention, and the nineteenth and twentieth annual reports on the application by France of the European Code Social Security.

Social security management and financing. According to the nineteenth report of the Government, which covers the period ending on 30 June 2006, there have been far-reaching changes over the past 15 years in the way the financing of the General Social Security Scheme is structured. Besides the phasing out of ceilings on the contribution base, the resources of the General Scheme have been extended to include levies on certain behaviours that are costly to the scheme (certain types of alcohol and tobacco, automobile insurance premiums) and other levies (on interest from assets and investments, which go to the family and old-age branches) intended to strengthen financial solidarity between the members of the scheme. Contributions have been introduced on the turnover of the pharmaceutical industry and the wholesale marketing of pharmaceutical products, on company profits and on polluting activities. A new funding instrument with the legal status of a tax – the General Social Contribution – has been introduced gradually since 1991. In 1996 the Social Debt Redemption Fund (CADES) was created for the purpose of clearing, by 2014, both the interest and the principal of the debt run up by the General Scheme. The resources of CADES mostly come from the CRDS – a fiscal levy to repay social security debt – the base for which extends to most incomes other than minima sociaux (means-tested benefits). The Social Security Audit Board analyses the accounts of the social security schemes every year and submits reports to Parliament. Since 1996, the draft annual social security financing law has been accompanied by a report setting out the main lines of health and social security policy and the objectives that will determine the general conditions for financial balance in social security. The overall management of public social security policy has been improved by the Organic Act of 2 August 2005, which enhances truth and fairness in the financial balancing of social security and introduces multi-annual budgeting for income estimates and spending targets.

The Government’s twentieth report, which covers the period ending on 30 June 2007, focuses on the reduction of the social security deficit. Act No. 2006-1640 of 21 December 2006 on social security financing for 2007 provides for fewer new receipts (for the most part adjustments in pharmaceutical industry contributions) but has enabled several new measures to be taken thanks to the establishment in October 2006 of a National Committee to Combat Social Protection Fraud: penalties for incitement to refusal to comply with the prescriptions of the social security legislation, restitution of the carte Vitale (access to care) in the event of transfer of residence abroad, clarification of the status of workers seconded to France vis-à-vis the French social protection system, the introduction of standard-of-living components in means tests and a new national identification directory of insured persons.

(a) The Committee takes note of this information, which shows that greater attention has been paid in the last decade to the financing and sound management of social security in France. It notes that a worsening of the scheme’s finances led the Government to adopt a range of measures: broadening the contribution base and phasing out ceilings, introducing new taxes and contributions, establishing a special mechanism to repay the social debt, shifting the basis for management of the scheme to annual social security financing laws enacted by Parliament, setting up the National Committee to Combat Social Protection Fraud. The Committee notes with interest that, as a result, the social security deficit declined significantly in 2006. It notes, however, that in its report La sécurité sociale, September 2007, the Court of Auditors again draws attention to the extent of the social security’s indebtedness and the size of the deficit, and considers that the remedial measures currently applied by the Government are not commensurate with the gravity of the situation. Although between 2004 and 2006 CADES took over 50 billion euros (€) worth of deficits from the sickness branch of the General Scheme, the total deficits in other branches, financing funds and those foreseen for the coming years in the annex to the 2007 Social Security Financing Act are set to exceed €40 billion by 2009. Besides the deficits, the social security schemes are encumbered by receivables from the State, which are increasing. With the introduction of accrual accounting for the State, it has been possible for the first time to draw up an exact list of the State’s debts and loans with the social institutions. At 31 December 2006, the debts entered under this heading in the State’s balance sheet amounted to €9.13 billion, i.e. an increase of nearly €1 billion in the course of the 2006 financial year. The Court of Auditors considers that, having acknowledged these debts in its 2006 accounts, the State has a duty to clear them as soon as possible. Furthermore, to avoid running up new debts, it is important that the State should make sufficient budgetary provision to meet its commitments to prevent them mounting up year after year. The Court of Auditors further believes that a return to an annual balance in the social accounts must be the public authorities’ priority.

In their joint response (appended to the Court’s report) to the Court of Auditors, the Minister of Labour, Social Relations and Solidarity, the Minister of Health, Youth and Sport and the Minister of the Budget, Public Accounts and the Public Service, fully endorse the demand for clarification of the financial relations between the social security and the State. With the certification of accounts, conducted for the first time this year, both for the State and for the social security, it has been possible to record the mutual debts exhaustively, and the Government has decided to act on this by proceeding as from this year to clear the debt contracted by the State up to the end of 2006 and introducing rules of governance for the future to prevent any recurrence of debt. In particular, it will ensure sound programming of budgetary allocations to the social security for the offsetting of exemptions or benefits paid on the State’s account. The Government is thus following up on the Court’s recommendations.

The Court of Auditors’ work shows that the deficits of the social security schemes and its financing funds in France remain very high, which means further carry-over to future generations of a significant part of the cost of social protection. The persistence of this situation runs counter to the logic of sustainable development for social security, which is what underpins the Convention. In the Committee’s view, a continually mounting public debt sits ill with the principles of good governance of social security established by the Convention which the State has a duty to apply and which confer on it a general responsibility for the management of risks, the provision of benefits and the maintenance of the system’s financial balance. On the contrary, these principles require the State to clear former social security debts as soon as possible and make sufficient budgetary provisions for future commitments. The Committee notes that the French Government is determined to clear the debt contracted by the State up to the end of 2006 and to introduce rules of governance to prevent any recurrence of debt in the future. It would be grateful if in its next report the Government would describe all the measures taken to restore the system’s financial balance. The Committee would also point out that although measures to intensify the control of social security fraud appear necessary and logical at a time of heavy deficits in the schemes, any measure that has the effect of denying or suspending the benefits guaranteed by the Convention for the persons protected must be applied within the limits prescribed by Article 69 and in observance of the principles of proportionality and equal treatment for non-nationals. The Committee accordingly asks the Government to indicate the laws and regulations on which the National Committee to Combat Social Security Fraud will base punitive measures.

(b) The Court of Auditors has also examined the loss in contributions to the General Scheme following the multiple exemptions, allowances, deductions and reductions in the contribution base that help to finance it. Sizeable resources are thus lost to social security to the benefit of a wide range of public policies. In fact, the largest state debts stem from exemptions from social security contributions (€4.5 billion). In the view of the Court, there are now so many exemptions from the general rule that all income earned in exchange for, or in the context, of labour is taxable, that they ought to be reviewed to ascertain what purpose they serve and how effective they are. The Court points out that the information available on the scope of the various allowance arrangements is far from complete, does not give an up to date (or even approximate) cost/benefit analysis of the various arrangements and allows no accurate assessment of the potential effects in the event of any change. The Court considers that, in a context of large public deficits, such periodic reviews are the right approach and that the general aim should be the reduction of such arrangements.

According to the Court, the exemptions from social contributions are concentrated mainly in small enterprises (59 per cent of the exemptions on low wages benefit enterprises with fewer than 50 employees, representing a cost of €9.5 billion in 2005); while measures for profit sharing, participation, company pensions, stock options and free shares, de facto or de jure, benefit only enterprises with more than 200 employees and account for just over €10 billion in loss of revenue. Although there is little difference in these figures in terms of loss of revenue, the various arrangements generate marked distortions between the categories of enterprise benefiting from the exemptions and between the employees benefiting from the exempted income. The scale of the distortion warrants study of a reform of the employers’ share of social contributions with a view to broadening the contribution base, inter alia, by eliminating or capping the exemptions from social contributions applied to the value added of the acquisition of stock options, the special flat-rate deductions granted to certain occupations and the advantages linked to retirement and termination. Such a reform would have the advantage of being neutral in terms of forms of remuneration and size of enterprise. The Government’s twentieth report on the Code shows clearly the growing tendency to promote enterprise (large and small) development at the expense of social security. The 2007 Social Security Financing Act establishes several new measures for small enterprises (adjustment of the contribution base for freelance occupations, extension of the ACCRE system (assistance for unemployed persons who start up or take over an enterprise) to enterprises in “sensitive urban areas”) and a change in the social status of compensation for voluntary retirement in the context of forward management of jobs and skills in large enterprises. Act No. 2006-1666 of 21 December 2006 on financing for 2007 improves the overall relief on employers’ social security contributions in very small enterprises (one to 19 employees) and provides for a partial exemption for enterprises in the research and development zones of “competitiveness clusters” as from 1 July 2007. Act No. 2007-290 of 5 March 2007 establishing a binding entitlement to housing and various measures to further social cohesion introduces several provisions of similar scope on social contributions that apply to freelance workers covered by the micro-enterprise tax regime. Lastly, Act No. 2006-1771 of 30 December 2006 on amended finances for 2006 also introduces a temporary arrangement granting employers tax relief and social security exemptions in employment areas earmarked for revitalization.

On the basis of the foregoing information, the Committee observes that numerous arrangements for exemption, reductions or adjustments of the contribution base have been superimposed, resulting in a lowering of the product of the social security schemes to the benefit of a variable number of beneficiaries, whether workers or employers. Furthermore, the number and variety of these arrangements, the exact scale and impact of which are not known, not only add to the complexity and financial instability of the system but impose constraints on its management, undermining the latter’s efficiency. The Committee notes from the Ministers’ joint response to the Court of Auditors that the Government is still intent upon ensuring sustainable resources for social security and subscribes to the Court’s idea of regularly reviewing the relevance of certain exceptions to the rule that social security contributions are payable on the various advantages in cash and in kind that workers receive in exchange for, or in the context of, work (the “niches sociales”). Noting also the Ministers’ resolve to enhance the fairness of social levies, the Committee requests the Government to give its views on the Court of Auditors’ idea of a reform of the employers’ share of social contributions and a thorough review of existing distortions in the light of the different forms of remuneration and sizes of enterprise. The Committee observes in this context that significant resources are withdrawn from social security to the benefit of economic interests which are sometimes far removed from the objectives of social security. To divert social security resources to other ends, however important they may be, is liable to adversely affect the sound management and financial balance of the system and lead to fraud or misuse of the resources. In any event, there is a need for more thorough checking that resources from the social allowances granted by the State are effectively and efficiently used. For its part, international social security law allows social security resources to be used, for instance to promote the national policy for full employment, but it specifies that where subsidies are granted by the State or the social security system to save jobs, the Government must take the necessary steps to ensure that they are used as planned and to prevent fraud or any misuse by beneficiaries (Employment Promotion and Protection against Unemployment Convention, 1988 (No. 168), 1988, Articles 7 and 30). Given the extent of the exemptions granted to employers, the Committee requests the Government to indicate how far the application of these arrangements by enterprises is assessed and supervised by the competent authorities, and to specify the role played by the National Committee to Combat Social Protection Fraud.

Part II (Medical care). In its conclusions of 2005, the Committee took note of Act No. 2004-810 of 13 August 2004 on sickness insurance, which was a new step in the far-reaching reforms made necessary by a deterioration in the financial position of the sickness insurance system. With regard to the financial effects of the reform, the Government indicates in its twentieth report that following a drop in the deficit in 2005, sickness insurance expenditure again began to grow more rapidly than anticipated as from mid-2006, particularly expenditure on non-hospital medical care, daily sickness benefits and drugs. The warning system introduced by the 2004 reform raised the alert in the spring of 2007 and sickness insurance funds had to submit adjustment plans to limit the growth in expenditure. Accepted by the Government, it will give rise to immediate measures with a view to reinforcing control of medical care, development of outpatient surgery and fraud control – measures, the burden of which would be shared fairly between insured persons, health professionals and the health product industry. In autumn 2007, the Government should propose more structural mechanisms to Parliament, with the aim of regulating health expenditure on a more sustainable basis. Study is under way of the best sources of financing for social security, including the replacement of a part of employers’ social contributions by a supplementary value added tax, which would go to social security. Furthermore, sickness insurance is to be one of the six major public policies to be reviewed in 2007–08 in the context of the “general revision of public policies” introduced by the new Government. The report confirms the latter’s resolve to pursue the efforts for financial recovery and improvement of the quality and efficiency of the health system which began with the Act of 13 August 2004, while implementing an ambitious health policy and ensuring that users are afforded better access to care, prevention and drug innovation.

The Committee takes due note of this statement. It also notes from the main indicators of the general state of health in France that the health of the population is good and tending to improve. The report indicates, however, that although the universal sickness cover (CMU) introduced in 2000 has contributed significantly to improving the health of the least affluent, there are still considerable disparities between men and women, between regions or between social categories, and that in certain population groups and for certain pathologies worrying situations still exist. Progress could be made by prevention and improved coverage, for all age groups. With regard to patient cost sharing, the Government refers to the 2007 report of the High Council for the future of sickness insurance, which shows that the changes have had no major impact on the level of cover, which is offset in part by supplementary insurance, that there has been no departure from the principle that the basic schemes cover, in its entirety, major expenditure on care, and that the system is still consistent with the principles of solidarity. It nonetheless indicates instances of high non-refundable costs (for long-term illnesses, for example), particularly where the patient has no supplementary insurance (7–8 per cent of the population). The Social Security Financing Act for 2007 raised the upper limit of income for entitlement to assistance for the purchase of supplementary health insurance from 15 to 20 per cent above the income ceiling for access to supplementary CMU. There are also tax and social incentives for private insurers to offer supplementary contracts that show “responsibility” and “solidarity”. In view of the scope of the measures for the financial recovery of the system and the fact that a growing share of sickness insurance costs continues to be shifted to patients, health professionals and the health products industry, the Committee requests the Government in its next report to give an account of its new public health policy for sickness insurance, specifying the measures taken to ensure that the system is sustainable in the long term and that high-quality services are actually available for all.

Part V (Old-age benefit). In its direct requests of 2004 and 2005, the Committee requested the Government to provide detailed information on how Act No. 2003-775 of 20 August 2003 reforming pensions is affecting the application of each Article of Part V of the Convention. It reiterates that request. Since the Act raises the length of full insurance to 160 quarters and reduces the pension for missing years, the Committee also drew the Government’s attention to the fact that an old-age benefit of the minimum level required by the Convention (40 per cent of the reference wage) must be secured in all cases for a standard beneficiary (with a wife of pensionable age) who has completed the qualifying period set out in Article 29, paragraph 1(a), of the Convention (30 years or 120 quarters of contribution or employment), and that a reduced benefit must be secured at least after a qualifying period of 15 years, under paragraph 2(a) of the same Article. The Committee nonetheless observes that the replacement rate in the Government’s nineteenth report is calculated in reference to “a man of 60 years with 160 quarters of insurance in 2004, having a spouse of pensionable age with her own entitlements, and two children”. In this case, the full rate pension in 2004 reaches 52.7 per cent of the reference wage (gross monthly wage of a male skilled worker in metallurgy and metal processing). Recalculated for a standard beneficiary of 60 years without children and with 120 quarters of insurance, the pension reaches only 37.5 per cent, which is below the level prescribed by the Convention. The report nonetheless indicates that although the old-age pension may be provided as from age 60, this is an option and not an obligation. For a full-rate (50 per cent) pension to be granted at 60 years, the insured person must have accumulated 160 quarters under basic schemes as a whole. At age 65, on the other hand, the pension is paid at the full rate regardless of the length of insurance. If the insured person has been in the scheme for less than 160 quarters, the pension payable is pro rata. In view of these explanations, the Committee requests the Government to include in its next report an updated calculation of the replacement rate of the old-age pension for a standard beneficiary of 65 years with 120 quarters of insurance, without children and with a spouse of pensionable age having no own entitlements. Please also explain how the reduced pension paid after 15 years of insurance is calculated, bearing in mind that, according to the report, as from 2008 the wage taken as a basis for calculating the pension will be the average of the 25 years of insurance. With regard to the length of the qualifying period in particular, please indicate all breaks in the insurance career or periods of reduced activity that may be counted with a view to increasing the length of insurance.

[The Government is asked to reply in detail to the present comments in 2008.]