Review of social and tax expenditure in favor of family policy

Authors : Corinne Chérubini, Claude Gady-Cherrier, members of IGAS, with IGAS intern Nathan Judais ; Michel Rostagnat, member of CGEDD

Family policy is one of the pillars of the French social model. Designed historically in a pro-birth logic with financial aid for all families, it now has four objectives : compensation for childcare, support for vulnerable families, a work-life balance and guaranteeing financial sustainability of the family branch, according to the report on the evaluation of social security policies.
Family policy is based on tax schemes (family allowance and tax credits), social benefits (family benefits and the family share of solidarity benefits) and offers a range of services, in particular childcare services (national social action fund, spending from local authorities). The scope of the review of social and tax expenditure addressed by the mission is the result of an effort of at least 63 billion euros in 2019. This financial contribution has very slightly decreased since 2012 in constant euros and is estimated by the mission at nearly 2%. In international comparison, France has the highest level of effort in the OECD with 3.6% of its GDP allocated to family policy. For the sake of clarity, the mission recommends to annex to the Finance Act a budgetary statement tracing the social and tax expenditure allocated to family policy.
Governance of the tools contributing to this public policy is fragmented at the central level, between several administrations (directorate of social security, directorate general of social cohesion, directorate of tax legislation, etc.) and the national family allowances fund (CNAF), as well as the central fund of agricultural social mutuality (CCMSA) and at the local level, between departments (“départements” are second-tier administrative subdivisions of France, below the regions) and municipalities, without a lead partner. The expenditure review led the mission to assess the effectiveness of the family policy and to question its objectives in the light of demographic, social and societal developments.
Over time, the weight of the longstanding French family policy has gone hand in hand with a good demographic dynamic in the country compared to its European neighbours. Although a wide range of factors are involved in the decision to have a child or children, family policy has a real, albeit limited and difficult to measure, impact on the birth rate.
With 1.83 children/woman, France has the highest total fertility rate (TFR) in the European Union (EU) and is characterized by a high proportion of families with 3 children or more (23% are children of rank 3 or higher compared to 19% in the EU). However, France, like other European countries, is experiencing a decline in the number of births from 840,000 in 2010 to 740,000 in 2020 ; representing a 12% decrease. Over the same period, the TFR has decreased from 2.03 to 1.83. Moreover, the latest forecasts of the pension guidance council (COR) are based on a central scenario with a fertility indicator of 1.8 compared to 1.95 previously. In addition, the long-term consequences of a falling birth rate on the dynamics of domestic demand and on the financing of pensions, as well as the stability of the desire to have children at a high level (2.39 children/woman) raise the question of the place of birth support in the family policy and invite to bolster confidence among families. In this context, it is important to prioritize stability in family policy and to give priority to quantitative and qualitative strengthening of the provision of services for families, in particular for childcare services.
Secondly, if the social and tax schemes under family policy have powerful redistributive effects, they imperfectly take into account the new family configurations and are accompanied by significant side and threshold effects.
Compensating for some of the costs associated with childcare, the social and tax system ensures a horizontal redistribution between families with children and those without, reinforced for the large families and single-parent families : the median standard of living of a couple with one child is 83% of that of a childless couple and 86% after redistribution, that of a couple with three or more children account for 51% before redistribution and 64% after tax and benefits.
At the same time, the objective of supporting vulnerable families has been strengthened. Reforms since 2013 on the capping of the family tax allowance as well as the reinforcement of the conditions of resources and the modulation of family benefits have flattened the ’U’ curve that characterized the level of support as a function of income. These reforms have reduced support for the most well-off families and have increased certain benefits for low-income families. Despite this development, nearly 2.8 million children, or 20% of them, live below the poverty line : in particular, large families and single-parent families are strongly exposed to poverty.
In particular, the overlapping of multiple family policy schemes generates very complex side effects. There is heterogeneity in the parameters of the aids (resources taken into account, reference year, means tests), which leads to redistributive effects that are difficult to read, not to say random and contradictory. This complexity weighs on the clarity and controllability of this public policy as well as on the effective access to the schemes.
Furthermore, the social and tax system of family policy has difficulty taking into account the issues associated with new family configurations (single-parent families and blended families). Indeed, although significant efforts are made in favor of single-parent families, the latter remain marked by a very unfavorable situation vis-à-vis employment and overexposure to poverty. In addition, the principle of the uniqueness of the beneficiary is not well suited, particularly to situations of alternating custody.
In a long-term perspective, only a very ambitious transformation scenario of the social and tax system would make it possible to improve its overall coherence : the merging of maintenance benefits and the family tax allowance to create a lump-sum maintenance allowance, paid from the first child and adjusted according to the order of the children, could be considered. This allowance, centered on horizontal redistribution, would be formulated in a way that is consistent with universal activity income (or its equivalent) focused on vertical redistribution and taking into account the challenges of reducing family poverty. By contrast, the partial scenarios - merger of all the family maintenance benefits, or merger of the basic allowance and family allowances with an extension of these to the first child - in their current calibration would have a high cost and destabilizing effects for the family policy without resolving the inconsistencies identified. The mission considers that the cost/benefit balance would be clearly unfavorable and recommends that they be dismissed.
The mission has, however, been very selective in identifying the parametric changes that it deemed necessary and that are likely to clarify the system without disturbing the comprehension of it.
Concerning the new school year allowance, the mission recommends increasing it for pupils in technological or vocational courses whose entry costs are higher than those of pupils in the general course, extending it to 3 year olds in line with mandatory schooling at 3 years old and abolishing the tax reduction for school fees for children in primary and secondary education. The IGAS and IGF formulate different scenarios in terms of the amounts to be granted according to the different ages. In addition, the mission recommends maintaining the benefit of the increased family supplement for families welcoming a new child, rather than switching them for 3 years to the young child basic benefit.
Lastly, the mission considers that the strengthening of the service provision to families, primarily childcare provision, should be considered the priority of the family policy. Action to promote a work-life balance is based on the development schemes of childcare provision (national social action fund, effort of the municipalities, etc.), financial support to families (childcare arrangement supplement, home childcare tax credit) and parental leave (Prepare). After a clear development until 2015, the childcare capacity in formal childcare has fallen since 2015 : the increase in the number of collective childcare spaces, driven mainly by the private sector, no longer compensates for the decline in childcare by childminders, while this form of childcare remains the primary one, which is a French feature. These schemes enable mothers to ensure, on average, a fairly good work-life balance : France has a theoretical childcare capacity of 59%, participation of mothers in the labor market of almost 70%, and women’s part-time work is not very dependent on the fact that they have children. France’s performance is better than the EU average but not as good as that of the Scandinavian countries.
This observation conceals major inequalities in access to childcare services provision :

  • from a social point of view : only 31% of children under three years of age from families in the first third of income earners receive care outside the family circle, compared to 76% of those in families in the last third ;
  • from a regional point of view : the average rate of use of childminders of 33 spaces/100 children ranges from 2 to 68 spaces/100 children depending on the department (“départements”), and the childcare capacity of nurseries, amounting on average to 20/100 children, ranges from 6 to 50.

There are three limitations to childcare policy : (i) insufficient supply of childcare in some regions due to the budgetary constraints of the municipalities and the absence of a lead partner, (ii) high out-of-pocket payments for low-income households for access to childminders and (iii) the inadequacy of childcare provision to the diversity of individual situations (nature of the job, atypical working hours, etc.). These difficulties in accessing a childcare solution seriously undermines the equality of opportunity for young children. Combined with the way parental leave works (Prepare), they can also have a disincentivizing effect on mothers with low salaries and less qualifications remaining in or returning to work and therefore contribute to keeping them in a situation of poverty.
The mission makes a number of proposals in this regard :

  • develop the governance of formal childcare in the medium to long term by giving legal competence to the municipality bloc (municipalities and/or inter-municipalities), together with the necessary financial support, in order to clearly define a local leader ; in the short term, strengthen the levers of action of the family allowances fund (CAF) in engineering or support for local authorities and adjusted “local bonus” financial support ;
  • continue efforts to structure the early childhood sector by focusing on developing the attractiveness of the profession and improving training ;
  • complete the work on reducing the out-of-pocket expenses of low-income families, who resort to childminders ;
  • define a new strategic priority for the CNAF and the public employment body, consisting in job retention for single parents, as well as other parents, by developing a comprehensive range of childcare and socio-professional support services.
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