on the application of the European Code of Social Security by France
(Period from 1 July 2007 to 30 June 2008)
(Adopted by the Committee of Ministers on 10 June 2009
at the 1060th meeting of the Ministers' Deputies)
The Committee of Ministers,
In the exercise of the functions conferred upon it by Article 75 of the European Code of Social Security (hereinafter referred to as the “Code”), and with a view to supervising the application of this instrument by the Contracting Parties;
Whereas the Code, opened for signature on 16 April 1964, entered into force on 17 March 1968 and since 18 February 1987 has been binding on France, which ratified it on 17 February 1986;
Whereas, when ratifying the Code, the Government of France stated that it accepted, in addition to the parts which must be applied by every Contracting Party (Parts I, XI, XII, XIII and XIV), the following parts of the Code:
– Part II on “medical care”,
– Part IV on “unemployment benefit”,
– Part V on “old-age benefit”,
– Part VI on “employment injury benefit”,
– Part VII on “family benefit”,
– Part VIII on “maternity benefit”,
– Part IX on “invalidity benefit”;
Whereas, in pursuance of paragraph 1 of Article 74 of the Code, the Government of France submitted its 21st annual report on the application of the Code, for the period from 1 July 2007 to 30 June 2008;
Whereas, in accordance with paragraph 4 of Article 74, that report was examined by the ILO Committee of Experts on the Application of Conventions and Recommendations, at its 79th meeting in November and December 2008,
I. concerning Part II (Medical care) of the Code, that in the Committee of Ministers’ previous resolution, the government was invited to describe its new policy for health insurance, specifying the measures taken to reduce the deficit in the branch, ensure that the system is sustainable in the long term and that high-quality services are in practice available for all. The government indicates in its reply that Act No. 2007-1786 on social security financing for 2008 of 19 December 2007 introduced deductibles from the reimbursement of certain products and health care for basic health insurance schemes, called “medical deductibles”. These new deductibles, which are in addition to existing cost sharing and flat rate reimbursements, apply to all persons, except for children, pregnant women and persons with low means. Their amount is a flat rate (€0.50 for each box of medicine and each paramedical act, and €2 for health-related transport) and they are applicable up to an annual ceiling of €50 per person. The new contributions introduced by the act also include a contribution by employers (10%) and employees (2.5%) on awards of stock options allocated to the financing of the health insurance scheme, the extension into 2008 of the exceptional rate for contributions by pharmaceutical enterprises based on their turnover and the extension of the Social Solidarity Contribution on public law associations operating in a competitive context. The government also reports a bill for the establishment of regional health agencies which will group together the services of the state and certain health insurance personnel for the unified management of the out-patient, hospital and socio-medical sectors;
II. concerning Part V (Old-age benefit), that in reply to the Committee of Ministers’ request, the report contains the calculation of the replacement rate of the old-age pension for a standard beneficiary of 65 years of age with 120 quarters (30 years) of contributions in 2004, without children and with a spouse of pensionable age having no individual entitlements. The percentage of the amount of the pension in relation to the average wage determined in accordance with Article 65 of the Code is 39.50% for a pension paid in 2004, which is below the 40% prescribed by the Code. The same calculation for the pension paid in 2008 would lower this percentage to 37.50%. The government, however, explains that these are very simplified methods of calculation and are confined to the basic retirement scheme. It therefore provides a more elaborate calculation which takes into account both wage and contribution fluctuations over the years of work taken into consideration and the two elements which constitute the compulsory retirement benefit for employed persons in France: the basic scheme and, for non-managerial employed persons, the supplementary ARRCO pay-as-you-go scheme. The calculation is made for a standard beneficiary who has completed 120 quarters of insurance and employment at the minimum wage (SMIC) in 2008. The replacement rate of the gross pension in relation to the last gross wage (€1 267 in 2008) is 56% and therefore exceeds the minimum rate required by the Code.
The Committee of Ministers notes that, in selecting the method of calculation of the replacement rate envisaged in Article 28.a of the Code, the government indicates that the old-age pension continues to be covered by Article 65 of the Code and consequently takes as the reference wage for its calculation the gross monthly wage of a skilled manual male employee in the metal and metallurgy sector (€2 000 in 2004). However, where this calculation gives a replacement rate that is lower than the 40% determined by the Code, the government undertakes a more elaborate calculation in which the wage of the skilled manual employee is replaced by the minimum wage (SMIC). The Committee of Ministers is bound to note that the SMIC cannot be used as a reference wage under the terms of Article 65 of the Code. If, however, the government intends to make use of the method of calculation envisaged in Article 66 of the Code, it has to demonstrate that the SMIC is equal to the wage of an ordinary adult male labourer and that the amount of the minimum old-age pension provided to persons protected in France is in no event lower than 40% of the SMIC. Finally, to be able to take into account the supplementary ARRCO pay-as-you-go scheme, it is necessary to demonstrate that this scheme covers at least 50% of all employees, in accordance with Article 27.a of the Code;
III. concerning the governance and financing of social security during periods of crisis, that according to the government’s report for the period ending 30 June 2008, the social security deficit has continued to decrease. The improvement of the financial situation of the social security system remains a priority for the government, which has set as its objective a return to financial equilibrium for the general scheme by 2011. Its strategy is based on new measures to contain costs, more secure resources and greater control over exemptions and niches sociales, the continued clarification of the financial relationship between the state and the social security system and the reimbursement of earlier social security deficits by 2021. The Bill on finance and the financing of social security which will be submitted to parliament in the autumn of 2008 will include measures in this respect. In the meantime, several additional measures have been taken in the context of the Act on social security financing for 2008, which introduced new sources of revenue, adapted various measures relating to exemptions from social contributions and abolished all measures granting total exemptions from contributions in relation to employment injury insurance.
The Committee of Ministers considers that the return to the annual equilibrium of social financing must constitute a priority for the public authorities. It nevertheless understands that the task of stabilising the financial situation of the social security system, which is incumbent upon the government, is liable to become a greater burden in view of the current crisis in the global financial system which may endanger social security assets. The Committee of Ministers notes with concern that, according to the indications provided to the press in October 2008 by the directors of the Pension Reserve Fund in France, since the beginning of the year the fund’s global assets have lost 11% of their value, or €3.8 billion. In the current situation, the Committee of Ministers believes it important to emphasise that, while it is true that the provisions of the Code were not designed for the management of social security in a crisis situation, they nevertheless establish parameters to ensure the stability and sound governance of the system. A sound management policy in periods of crisis would therefore consist in bearing these parameters in mind to allow the progressive return of the system to its normal condition, even though emergency measures may temporarily introduce significant adjustments into these parameters. The role of the European Code of Social Security therefore takes on particular importance with a view to ensuring the concerted recovery from the crisis of European countries by obliging them all to bring their social security systems back to the initial parameters.
The Committee of Ministers also wishes to emphasise in this respect that during periods of crisis no Contracting Party can discharge its general responsibility under Article 70.3 of the Code for the maintenance of financial equilibrium and to safeguard the viability of the social security system without, at the same time, being committed to the obligation to achieve time-bound results. It is with the aim of achieving the desired result within the determined time limits that this provision of the Code places each Contracting Party under the obligation to “take all measures required”, including emergency measures dictated by the crisis. The Committee of Ministers notes in this context that at the operational level, through the introduction since 1996 of the management of the social security system in the context of the annual act on the financing of social security, the French Government has progressively adopted one of the most significant arsenals of financial instruments and regulations in Europe. The experience acquired by the government in the close financial management of social security affords it comparative advantages to ensure wise governance in these perilous times for both the financial system and the social security system, by maintaining the latter within the parameters envisaged by the Code. The Committee of Ministers trusts that, despite the financial crisis, the government will be in a position to specify in its next report, with reference to the relevant texts, the time-bound commitments and revised schedules that it has determined or intends to determine for:
a. re-establishing the financial equilibrium of the social security system;
b. stopping the continued growth of the public debt in relation to social security;
c. paying off former debts contracted by the state;
d. envisaging sufficient budgetary allocations to cover the state’s future commitments to social security, particularly in relation to the compensation of exemptions or benefits provided on behalf of the state; and
e. introducing governance rules to clarify the financial relations between the social security system and the state and to prevent debts from being renewed in future;
IV. concerning the control and inspection in relation to social security, that in reply to the Committee of Ministers’ request, the government’s report contains detailed explanations of French policy to control and combat social fraud, in the context of which action is envisaged in relation to all of the actors in the social security system. With regard to enterprises and employers, the priority actions introduced include the monitoring of the secondment of employees, of mechanisms for the evasion of social contributions, of exemption measures, the reduction and re-evaluation of income subject to contributions, but in particular to combat hidden employment. Insured persons are subject to greater controls relating to the conditions for the granting of benefits (income from work and personal means, household resources, dependent persons and children, stable and lawful residence, etc.), while health professionals are controlled in relation to the conditions for the application of rules respecting fees for medical acts and procedures for the prescription of medicines. All of these measures are intended to establish in each branch of social security a real culture of supervision based on a renewed legal framework covering:
– the strengthening of the powers of controllers of social security institutions to improve the conditions under which they monitor financial records and means through the procedure for assessing elements of living standards and benefits provided outside France;
– the development of procedures for the exchange of data and information among social institutions and between these institutions and the fiscal and judicial authorities;
– the achievement of greater awareness by enterprises to dissuade them from committing fraud or abuse in relation to their social security declarations and the payment of contributions (particularly through the application of a flat-rate penalty procedure equivalent to six times of the amount of the minimum wage for employers who hide or reduce the contributions to be paid and through a procedure against those who challenge the obligation of affiliation to the social security system); and
– the improvement of awareness among beneficiaries and health professionals and providers through the effective application of penalties in cases of proven fraud as envisaged in the Social Security Code.
Decree No. 2008-371 of 18 April 2008 created new structures entrusted with co-ordinating policy to combat both social security and fiscal fraud. Accordingly, the National Commission to Combat Fraud, the political body which gathers together the ministers concerned, defines the objectives of the policy to combat fraud. The National Delegation to Combat Fraud, an administrative body, co-ordinates the action taken between the competent state services, on the one hand, and between these services and social security institutions, on the other. It contributes to the effective collection of public income from contributions and the payment of social benefits, and the prevention of any fraud or abuse by beneficiaries. It guides the work of operational committees to combat illegal work and of the local committees which co-ordinate all joint action at the local level undertaken by the administrative services responsible for combating fraud. At the level of social security institutions, a coherent and identifiable administrative network has been established with the creation of a fraud department for each branch of social security and the appointment of local focal points to share good practices and knowledge.
The Committee of Ministers observes that the new French policy to control and combat social security fraud lies within a general trend that has emerged over recent years in several European countries consisting, on the one hand, of equipping social security systems with their own inspection and punishment mechanisms and, on the other, of ensuring close collaboration between these mechanisms and other public services entrusted with supervision and enforcement, such as the fiscal services, the labour inspectorate, services to control the residence of foreign nationals and migration, etc. The legal, administrative and operational means deployed in France for the implementation of this policy are unparalleled in Europe. The extent and systematic nature of the measures adopted allow the coverage of all the persons concerned throughout the national territory, at all administrative levels and in all branches of social security. The Committee of Ministers sees them as new elements in the French response to the increasingly complex problem of the management of a social security system that is replete with many niches sociales, social exemptions and reductions, and other subsidies, privileges and inequalities. It shares the government’s opinion that, while fraud is committed by only a minority of actors and beneficiaries and its suppression will not, in itself, resolve the imbalance of social security finances, it is nevertheless a reality that must not be denied, as it has a real financial impact;
V. concerning the financial crisis, that European social security systems are set to pass through the worst financial and possibly economic crisis since the systems were first created. Many national indicators are giving the convergent message that the impact of the crisis may be severe, global in its scope and pose a real threat to the financial viability and sustainable development of social security systems. The Committee of Ministers recalls that, to enable member states to discharge their general responsibility for the financial viability of social security, Article 70.3 of the European Code of Social Security places each state under the obligation to “take all measures required for this purpose”. The Committee of Ministers trusts that the measures adopted or envisaged by governments will be commensurate with the gravity of the financial situation and the primary responsibility of the state to ensure the viability and sustainable development of social security.
In this connection, the Committee of Ministers wishes to emphasise that the system of regular reporting and supervision of the application of the Code could serve as an additional channel of first-hand information on the legal and regulatory measures taken by member states to combat the crisis;
Finds that law and practice in France continue to give full effect to the parts of the Code which have been accepted;
Decides to invite the Government of France:
I. concerning Part II (Medical care), to provide further particulars in its next report on the tangible results of these measures in terms of the financial recovery and unified management of the system;
II. concerning Part V (Old-age benefit), to provide in its next report the updated calculation of the old-age pension so as to demonstrate that the replacement rate envisaged by the Code is still achieved;
III. concerning control and inspection in relation to social security, in view of the concern to resolve the imbalance in social security financing, in accordance with Article 70.3 of the Code, to specify in its next report whether estimates and actuarial calculations have been made of the financial impact of fraud on the social security system and to compare them to the cost of operating the new structures responsible for combating fraud. It is further requested to indicate the proportion of these costs that are borne by the general social security scheme in relation to the potential financial benefit that may accrue to it as a result of the measures for the collection of contributions carried out by these structures. With a view to preventing significant resources being withdrawn from the social security system to cover public policies pursuing other objectives, the Committee of Ministers invites the government to provide a transparent picture of the additional administrative costs arising out of its policy to combat social security fraud for the general social security scheme and to specify the role that the representatives of the persons protected, and particularly trade unions, will be called upon to play in the implementation of this policy, in accordance with Article 71.1 of the Code;
IV. concerning the financial crisis, and with a view to helping the Council of Europe bodies to forge a concerted response to the crisis, to furnish, under Part V of the report form which requests a general appreciation of the difficulties encountered in the application of the Code in practice, detailed information on the impact of the current financial and economic crisis on national social security systems and the measures taken or planned with a view to maintaining their financial viability and reinforcing social protection for the most vulnerable groups of the population.