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Welfare funding to be reformed

Prime minister calls on social partners to be "creative" with ideas to improve competitiveness and boost jobs

FRANCE is to embark on a complete reform of the funding of its social welfare programmes.

After a two-day round-table conference of business, union and local authority leaders, Prime Minister Jean-Marc Ayrault said "France was in a difficult economic and social position" and its social partners needed to be creative with ways to get it back to work.

He responded to businesses' pleas that they could no longer bear the brunt of paying for the social programme as it was hitting their global competitiveness and he said he planned major reforms in 2013 to "increase and diversify sources of funding".

He announced no concrete measures but said "social dialogue would be the trade-mark of his government" to ensure "structural reforms would not be put in place by chance". The constitution would be rewritten so no law could be passed without discussion with the people involved.

However, former President Sarkozy's plan to cut business costs by imposing a "social VAT" was to be scrapped.

Ayrault wants to cut labour costs and issues raised included increasing the Contribution Sociale Généralisée tax, which helps fund social programmes. President Hollande said during his campaign that he wanted the CSG to gradually merge with income tax.

At present labour costs are 22.6% of France's Gross Domestic Product as against an average of 17.5% across the European Union and moving some business costs on to CSG, which is not just paid by workers but a wide spectrum of the population through capital gains, investments and rent revenues, would shift the burden.

However, the talks also proposed a rise in companies' unemployment contributions if they employ a majority of staff on temporary contracts and will look at ways to keep staff in work while companies are in difficulty.

After restricting the pay of state-owned companies' chief executives, Ayrault also said private companies would face laws to ban "abusive remuneration" and would be forced to put workers on remuneration committees.

Ayrault said he was calling in leading businessman Louis Gallois, former boss of multinational EADS, to look at new ways of increasing businesses' competitiveness; including rethinking and harmonising administrative rules so they do not handicap businesses.

He closed the meeting by saying he would announce a reform to the Smic minimum wage by the end of 2012 and launch talks on reforming the retirement system by the beginning of 2013.
Photo: JMAyrault

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