Social security blow for French

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The Independent Online
French taxpayers will have to pay more in health and national insurance contributions next year to reduce the shortfall in the social security budget and fund new allowances promised by President Jacques Chirac during his election campaign. Better-off pensioners, whose tax and contributions are very low, could be among those hardest hit.

The inevitable prospect of higher contributions has been broached in one form or other by a succession of ministers in recent days, including the Economy Minister, Jean Arthuis, and the minister with responsibility for families, Colette Codaccioni.

Among specific proposals are the means-testing of family allowances and the classification as taxable income of benefits which have not before been taxed. The likelihood of higher contributions has already been deplored by Socialist politicians and will be met with an outcry by trade unions, who say that existing contribution rates already make the French one of the most highly taxed peoples in Europe.

But the ministers say they have no choice: the deficit in the social security budget (which includes health, family and unemployment benefit) has risen sharply over the past three years with the increase in unemployment and a relative decline in contributions from the working population.

Alain Juppe's government has promised to reduce the social security deficit by two-thirds over the next year - a promise thought unrealisable without some highly creative accounting. This may not, however, be so difficult: creative, or at least highly muddled, accounting, seems to have afflicted the French social security system for years.

Presenting an audit of the 1994 social security budget yesterday, Pierre Joxe, the head of the Court of Accounts, attacked the whole system for its lack of transparency and accountability. He complained that his officers had repeatedly failed to get answers from officials about the real state of the finances and said that there was no real record of overall revenue and outgoings.

As a result, he said, any estimate of the balance in a system that turned over an estimated Fr1,500bn(pounds 200bn) a year was almost meaningless.