Europe's news in English

COPY LINK

FAMILY

France confirmed as European champions for welfare spending

France devotes more than one third of its GDP to providing its citizens with welfare protection, according to new figures. No other country in Europe is as generous.

Published: 22 December 2016 13:02 CET

France confirmed as European champions for welfare spending

Photo: AFP

The new figures from Eurostat will give ammunition to right wing presidential candidate François Fillon, who has vowed to dramatically shred pubic spending if elected next May.

In the year 2014 France spent 34.3 percent of its GDP on welfare, well above the European average of 28.7 percent.

Behind France came Denmark which dedicated 33.5 percent of GDP on social spending then Finland (31.9 percent), the Netherlands (30.9 percent).

The UK was down in ninth place after spending 27.4 percent of GDP on its welfare state, just behind Germany on 29.1 percent.

The figures show France’s welfare spending has jumped dramatically since 2008 when it devoted 30.4 percent of GDP on social spending.

That rise was mirrored, to varying degrees by most other countries, although the jump was far narrower in the UK, which saw a hike of 1.5 percentage points in welfare spending between 2008 and 2014 and Germany, where spending rose by 2 percentage points.

Most of welfare spending goes on pensions and other benefits and services directed towards the elderly (45.5 percent), while health care also takes up a huge chunk (35 percent). Other areas of welfare spending include family allowances, unemployment benefits and social housing.

But when the overall social spending is broken down into categories France does not always come out on top.

Indeed when it comes to family allowances both the UK (2.8 percent of overall welfare spending) and Germany (3.1 percent) both spend more than France (2 percent).

As for unemployment benefits, another hot potato issue in France that those on the right want to dramatically cutback, France dedicates 6.2 percent of overall social spending, well above the UK’s 1.7 percent.

With France under pressure from Brussels to cut its debt and François Fillon the favourite to be elected president next May, France may not hold onto to its title of European champion for much longer.

Member comments

Log in here to leave a comment.

Become a Member to leave a comment.

French property: What is buying 'en tontine'?

What is it?

The ‘clause de tontine’ sometimes also known as a ‘clause d’accroissement’ is a clause that is inserted into the property deeds when you are buying a house or apartment.

It can only be inserted during the purchase, and cannot be added later.

It’s basically a ‘group purchase’. It’s most commonly used by unmarried couples who are buying together but it can be used by larger groups too – for example a group of friends buying a holiday home together.

You will have to ask a notaire to draw up the tontine clause during the property purchase and it can only be used if

the parties are equally involved in the financing of the purchase
the parties involved have a roughly equal life expectancy (for this reason tontine clauses may be rejected if there is a significant difference in age between the purchasers)

What’s the point of it?

The main reason that people use it is to sidestep France’s strict inheritance laws, which assign that a certain portion of every estate must go to children, at the expense of a partner.

READ ALSO How France’s strict inheritance laws work

For this reason it is particularly used by couples who have children from previous relationships.

On a property with a tontine clause in effect, when one owner dies their share of the property passes in its entirely to the other member/members of the tontine.

This cuts out children from inheritance, but means that a surviving partner is not evicted from their home in favour of the children of the deceased.

It also has the advantage of making the intentions of the deceased clear, to avoid arguments among heirs after their death.

It should be noted, however, that the tontine clause only takes in the property that it covers – other assets may be subject to French inheritance law so it’s therefore probably wise to arrange a will, to ensure your wishes for your estate are met.

The surviving party can ask a notaire to update the property deeds to show that they are the sole owner, if they want. Be aware there will be a fee, which could reach four figures for the privilege – and it doesn’t actually involve any change to the property title.

Drawbacks

The advantages of the system are clear, especially for blended families, but there are some potential drawbacks too, which mean that anyone considering buying in this way would be well advised to take proper legal advice before they start.

Inheritance tax – while a tontine will help you to avoid restrictions on inheritance, it does not exempt you from inheritance tax. French inheritance tax is structured according to your relationship to the deceased, and people who are neither married nor related to the deceased pay an eye-watering inheritance tax rate of 60 percent.

The only exception to this top rate of inheritance tax is if the property is your main residence and it is valued at under €76,000 – in that case, tax is paid at a rate of 5.8 percent.

Married couples and family members pay a much lower rate or not tax, but if you’re not married to your tontine co-purchaser, be careful that you’re not lining yourself up for a massive tax bill in future years.

Wealth tax – depending on the value of the property, it could tip you over into the ‘wealth tax’ category when you inherit. France’s wealth tax is a real estate based tax and is levied on anyone who has real estate assets (property and land) worth €1.3 million or more.

The calculation includes property held en tontine.

Tax savings – you might hear tontines being advised as a way to limit your French tax liability.

While this used to be true, changes to tax laws means there are no no significant tax advantages to buying this way – the same is true for buying a property via an SCI, which used to represent a tax saving until the law was tightened up.

Disinheriting family members – One side effect of the tontine clause on mixed families is to effectively disinherit any children of the first person to die.

Because the property passed to the survivor, under French law, only their direct descendants – rather than any family by marriage – are entitled to automatic inheritance.

That means that the children of the surviving partner will be entitled to the statutory share of the entire asset (between 25 and 30 percent depending on the number of children), but the children of the first person to die will be entitled to nothing. Obviously you can choose to leave them something in your will, but you can only leave them some or all of the estate which is not automatically given to the children on the survivor.

Divorce/dispute – if the members of the tontine split up or (in the case of friends) fall out, then they can either sell the whole property or agree to buy each other out.

However, if one party refuses to sell, then you have very limited legal options – unlike a standard property purchase a tontine is not regarded as joint ownership, so one partner cannot be forced to sell as part of a divorce procedings, for example.

Basically the tontine can only be ended or changed with the agreement of all parties – so if you can’t agree between yourselves then you may be stuck with it.

Url copied to clipboard!