August is an excellent month to bury bad news in France. The annual migration to the coast by the French is well under way, with those who are still in town avoiding the TV news or newspapers. National life is put on hold, and whilst some Ministers continue to battle with day to day issues, this year Laurent Fabius is notably high profile, flying to Iraq this week, most Ministers (and the President) slope off for a rest.
The Constitutional Council has last week decided to shake the slumber of the political class, with a decision striking down part of the Responsibility Pact on the grounds that it is unconstitutional. But is the Council playing politics with the Constitution, rather than acting as the impartial guarantee it was designed to be?The Constitutional Council acts very much like a court, adjudicating over the constitutionality of draft and, since 2010, existing laws. The French Constitution is a bulky thing, encompassing 89 articles in its main body (dating from 1958 when Charles de Gaulle brought in the Fifth Republic’s Presidential system with a strong executive and weakened Parliament) and various other texts, such as the 1789 Declaration of the Rights of Man and the Citizen, and the recitals from the Fourth Republic’s constitution.
Knocking it back
It’s all good sport that the opposition would of course claim lack of constitutional basis for the Government’s reforms, especially the leading measure of the year: The Responsibility Pact. However, the Constitutional Council has become rather temperamental in recent years and public policy is finding itself constrained.
During the Sarkozy Administration, out of 99 texts sent to the Council, it invalidated (at least partially) 57. Since 2012, this level of sanction has continued unabated, with 25 out of a total of 47 bills. The right’s clamour that the government is cack-handed and incompetent when writing its bills is clearly wrong. The government relies in any event on the Council of State’s lawyers who validate the constitutionality of the texts before they reach the cabinet (although they suffer amendments afterwards, much of what is invalidated starts off in the text). Since 2002 the rate of bills invalidated as been fairly constant, at around 50% of those submitted. The number of bills submitted to the Council has also been fairly constant, at around 95 for each 5 year Presidential term. Hollande is on course to fall squarely within the average. Whilst it might be tempting to view the current wave of activism as personified in one of the members of the Council, or its President, Jean-Louis Debré, that would be unfair. Whilst Debré is the son of the politician who wrote most of the 1958 Constitution and clearly feels that it is a family heirloom, the Council’s itchy fingers date back 5 years before his Presidency begins.
So if the Council isn’t targeting the Socialists more than the Conservatives, what is it doing?
75% or bust
The first headline grabbing invalidation was the government’s initial promise to raise the marginal tax rate of the super rich (over 1 million euros a year in income) to 75%. This now infamous campaign promise was shot down by the Council on the grounds that it was confiscatory. The ruling in effect created a constitutional ceiling on tax rates of around 60 to 70% (deliciously, no one is quite sure), thus constraining fiscal policy (but also social charges and the like which are lumped into the calculation). Whilst the case law about protection against confiscation existed before, never before had the Council been so clear that they, and not the elected government, should set the threshold.
Partially invalidating the Responsibility Pact, the Council has once again set a key principle, not necessarily of Constitutional Law, but of tax policy. One of the key elements of the Responsibility Pact was a reduction in the social charges paid by employees at the lower end of the pay scale. All employees at minimum wage up to 130% of the minimum would be exempted from paying their contributions – the burden would fall therefore on those at the upper end of the scale. The measure actually added to an existing measure that exempts many who earn the minimum wage only, but ensures that there is no crunch effect for those who get a slight pay rise and then end up taking home less. This effectively creates a high deductible, in a very similar way to the way the income tax system incorporates an allowance at the bottom end.
The measure was important, not because the rest of the Pact required it to survive economically (it didn’t), but politically. The left of the Socialist Party, disquieted by anything resembling capitalism, sought tax breaks for the poor, and the new Prime Minister, Manuel Valls, introduced the measure, to be paid for by spending cuts. The price of the Pact passing Parliament was the reduction in social charges, which in turn the left hoped would boost consumption. It was also an easily sellable measure of social justice.
The Council objected, stating that it would lead to a situation where some employees would receive the social benefits the charges pay for, without contributing themselves. This resulted in inequality before the law.
The fact that the income tax system, and the existing rules on certain social charges already work on this principle, seems to have left the Council indifferent. The Council has effectively given constitutional protection to the principle that everybody should pay something. This Conservative dogma, espoused by figures such as François Bayrou, argues that people only value something if they have paid towards it. It ignores incapacity to pay and goes someway to comforting the Victorian idea of a poor made up of those deserving and undeserving.
Make it stop
The government has promised to look to income tax rates to provide the same level of benefit from next year for those affected. Sadly, this will not have its impact at the end of January 2015, when the social charges cut would have kicked in, but August 2015 at the earliest. The simplest bet would be to increase the 0% income tax bracket (currently applicable up to € 6,011) up to something closer to € 10,000 – this policy has been successfully pioneered by the Conservative-Liberal Coalition government of the UK the past four years. It would also enable the government to rely on the different articles in the Constitution that govern tax policy as opposed to social charges (yes, there really is a distinction) which suggest the government has a freer hand on taxes. However, many on the left of the Socialist Party want to make the CSG, the heftiest of the myriad of social charges that goes straight into state coffers rather than one of the autonomous organisations that run other social welfare programmes, progressive, which would have largely the same effect as the invalidated tax break. As CSG falls into the state’s coffers it should also be subject to freer government discretion.
Whatever it does, the government will be wary of the Council’s red pen. Government spin has wisely focused this past week on the Council’s responsibility for invalidating the measure, to dispel the highly damaging idea that the government was irresponsible or cavalier in promising the measure in the first place. There is a growing public perception of this, partly due to the Conservatives’ effective (if false) accusations of the government’s competence. In fact, the reason why there is a perception of a larger number of bills has been stymied by the Council since 2012 is because there have been a larger number of big eye-catching reforms in the past two years than in the previous four. The first year of the Sarkozy administration was packed with initiatives, but progress slowed thereafter, due to the financial crisis. Inversely, the Socialists had trouble getting big measures passed in the first year, but they have come thick and fast since. That there are some failures in all this action is the price you pay for the action itself.
The government should consider the bigger issue though, for when policy becomes constrained by a creeping constitutionalism, democracy suffers. Three of the most Conservative members will leave in 2016, and the President and the National Assembly Speaker will be able to choose two new members (the Speaker of the Senate, likely at that point to be a Conservative, chooses the third). They should ensure that those chosen recognise that the Constitutional Council does not make policy, it applies the Constitution in a restrained and democratic manner. Perhaps then the Council will retreat from policy, and return to principle.