No. 165

FRANCE MOVES TO LIMIT WELFARE

Monsieur Normal becomes Monsieur Meanie

Jusqu’a un point Lord Copper.

A century back the French Republic was obsessed with increasing the birth-rate, to ensure there were enough conscripts to match the Germans in the war they were waiting for – and didn’t that work out well.

Now the Republic assists everybody to have kids, because state support is the right of all the French, regardless of income. Or it was, until last week, when the Hollande Government cut family benefits.

Well, less cut than slightly snipped.

The government has capped tax rebates for families, which will hit hardest (although not by much) higher income earners with three or more kids.[i] This is not exactly the end of the welfare state, in this the case the payment is a supplement paid on top of the basic grant to everybody with dependent children.[ii]

If President Hollande wants to demonstrate how everything could be a lot worse he could suggest critics look to Australia where the baby bonus went in the budget, replaced by more money in means tested family assistance payments – a move enjoying bipartisan support.[iii]

However, Opposition MPs have come over all outraged complaining this is an attack on the French family.[iv] Presumably they are practising for after the summer break when pension reform is promised, to shut the European Union up and deal with a projected Euro20 bn deficit in the scheme that supports it. Although no one seems certain that the president will abolish indexation and raise the retirement age back to 62 where Monsieur Sarkoszy set it.[v]

But, like the family payment cuts, a couple of billion here and there off the pension bill is not going to make much difference, when the state slings citizens a staggering 30 per cent of GDP in social spending.[vi]

It’s a chunk of change and overall the French state still spends 56 per cent of GDP. The national debt is 83 per cent of GDP.[vii]

Making much of a dent in this will be hard, given the sense of entitlement in the community. Last week’s modest cuts were not only condemned as the equivalent of gay marriage (no, the Crows can’t see it either) but as an attack on the wage rightly paid to women for the work of being a mother. It was also an attack on equality, because all children are equal.[viii]

The French, it seems, are very keen on everybody getting a slice of the magic pudding. Just 16 per cent of a survey sample thought that government’s appropriate response in tough times was to limit benefits to people in greatest need but 44 per cent thought high income earners should not get as much.[ix] To the Crows this sounds like a self-serving middle class which likes the idea of the wealthy subsisdising them while leaving the wretched to rot.

In comparison, the Australian welfare system is highly targeted to those in greatest need. Peter Whiteford makes a compelling case that we have the most targeted cash transfers system in the OECD and one of the most progressive tax systems.[x]

Of course we would not look as good if the generous tax breaks for superannuants were included and health care for the old was means tested. However, the demands for more welfare spending on just about everybody are endless and constant vigilance is required to ensure welfare remains a safety net and does not become a feather bed.

Ensuring Australia does not start down the French rue towards unsustainable welfare requires government to stand up to support seekers who argue that they pay their taxes.

For a start, middle-income earners pay about 20 per cent of equalised disposable incomes in direct and income taxes, compared to 35 per cent for the top quintile.[xi] In any case people who assume they lose if they don’t take out as much as they put in to society are losing out have rather missed the point of an egalitarian Australia.

To argue the French system is fairer, let alone more compassionate than Australia’s, well, it’s enough to make a cheval laugh.

 

ENDNOTES


[i] Hugh Carnegy, “France cuts tax breaks for wealthier families to close deficit,” Financial Times, June 3

[ii] CLEISS, “French social security system: family benefits,” @ www.cleiss.fr/docs/regimes/regime_france/an_4.html recovered on June 8

[iii] Patricia Karvelas, “ ‘Excessive baby bonus scrapped’ ” The Australian May 15, Jonathan Swan and Judith Ireland, “Liberals would throw out the limited baby bonus,” Sydney Morning Herald, May 21

[iv] Reuters, “France hits rich families’ tax breaks in benefit reforms,” June 3 @ www.reuters.com/article/2013/06/03/us-france-reform-idUSBRE9520U020130603 recovered on June 8

[v] William Horobin, “Noyer; urges Hollande to cut spending, mull welfare cuts”, Wall Street Journal, May 28

[vi] Reuters, “ECB’s Noyer says France must target spending,” May 28 @ www.reuters.com/article/2013/05/28/us-france-economy-noyer-idUSBRE94R0C420130528 recovered on June 8

[vii] Zachary Laven and Federico Santi, “EU austerity and reform”, May 2012 @ www.europeaninstitute.org/April-2012/eu-austerity-and-reform-a-country-by-country-table-updated-may-3.html recovered on June 8

[ix] Patrick Diamond and Guy Lodge, “European welfare states after the crisis”, 8 Policy Network, January 13 @ http://www.policy-network.net/publications/4320/European-Welfare-States-after-the-Crisis recovered on June 8

[x] Peter Whiteford, “Transfer issues and directions for reform: Australian transfer policy in comparative perspective,” @ http://taxreview.treasury.gov.au/content/html/conference/downloads/conference_report/03_afts_tax_and_transfer_policy_conference_chap_3.pdf recovered on June 8

[xi] Peter Whiteford, “Who gets what? Who pays for it? The welfare state debate revisited” Inside Story, 4 June @ http://inside.org.au/who-gets-what-who-pays-for-it-the-welfare-state-debate-revisited/ recovered on June 8

'2012