Why Macron is attempting to stoke a French baby boom

Based on average fertility rates, France is Europe’s baby utopia.

In 2022, there were 1.8 live births for every woman in France. This was the highest rate across the Continent except for Georgia, according to official figures.

Parents in France get big tax cuts if they have more children, and access to a wide range of heavily subsidised childcare.

But even these incentives are no longer enough. Births in France have been falling since 2010, and in January, new data gave President Emmanuel Macron a nasty shock.

French births in 2023 plunged to the lowest level on record since World War Two.

Last year, 678,000 babies were born in France, according to L’Institut national de la statistique et des études économiques (Insee). This was down 7pc year-on-year and a drop of nearly a fifth compared to 2010.

Hours after the figures were released, Macron held a press conference to announce a plan for “demographic rearmament”.

In a frantic bid to prevent steep population decline, the French president has proposed two solutions: reforming parental leave so that it is better paid and lasts for longer and free fertility checks for everyone at 25.

“France will only be stronger if it revives the birth rate,” Macron said.

But economists warn his proposals are unlikely to work. If they fail, alarm bells will be sounding for the French economy. And if France’s birth rate cannot be saved, the UK stands little chance.

Britain is already having fewer children than France. There were 605,479 live births in England and Wales in 2022, the lowest number since 2002. There were just 1.5 live births per woman last year.

“Having a fertility rate below 1.5 means that each new generation is less than three quarters of the size of the previous one,” says Stefania Marcassa, a professor at THEMA, Université de Cergy-Pontoise.

France is not yet at this level, but it is far below the 2.2 benchmark which is considered the rate necessary to maintain a population level.

Macron is worried for three reasons. First, a falling birth rate will make economic growth more difficult, says Andrew Kenningham, of Capital Economics. “If the population is declining, then the size of the economy is going to get smaller,” he says.

A smaller population means that government debt will be higher per person. And the ratio of working people to pensioners, known as the dependency ratio, will decrease.

Policymakers are worried France’s declining population will destabilise the welfare state, in particular the pension system, says Hélène Périvier, an economist at the Centre de recherche en économie de Sciences Po.

France erupted into protest last year in response to Macron’s pension reforms, which included raising the pension age from 62 to 64 by 2030 and making people work for an extra year and a half (a total of 43 years) before they can receive a full pension by 2027.

But these measures were based on an assumption of a fertility rate of 1.8. Now, it is 1.68. If it stays at this level, Macron’s reforms may not reduce the pension deficit, meaning more dramatic and inevitably unpopular reform could be needed.

“The argument is that we will need to have more people working in order to pay the pension for people who are living longer and longer,” says Périvier.

If France cannot solve the problem of its dependency ratio, policymakers may have to turn to higher immigration levels, adds Périvier.

But analysts think Macron’s proposals will do little to shift the dial because the drop is tied to more deep-seated economic changes. “I’m not sure they will have a huge effect,” says Marcassa, of the Université de Cergy-Pontoise.

Périvier blames high housing costs and the fact that women are having children later because they are pursuing careers. In 2003, the average woman in France started having children at 29.5. By 2023, this had risen to 31, according to Insee.

The reasons for the drop in the French birth rate echo those across other Western nations. “If there is a problem, it is a bigger problem in countries other than France,” says Capital Economics’ Kenningham.

France already has two systems in place that mean having children makes much more economic sense than in the UK.

The first is the tax system. “The more children you have, the less you pay in tax,” says Périvier.

Unlike in the UK, the French income tax system is calculated on a household basis rather than an individual basis, and it incorporates major incentives to have more children.

In France, a couple’s income is taxed as a household. If there are just two people in the household, their combined income is divided by two and then each portion is taxed according to the French tax bands. A family’s first and second children each count as half a share. This means a family with two children would be taxed on each third of their combined income.

Effectively, the more children a family has, the less likely they are to fall into higher tax brackets. A third child and every child thereafter counts as a whole share. There is, however, a cap of  €1,500 on a family’s total savings through this system, which was reduced under Macron’s predecessor, François Hollande.

Many of the problems with the UK’s child benefits system stem from the fact that HMRC cannot yet collect tax information at a household level. This has created a major distortion which Chancellor Jeremy Hunt hopes to eradicate. Currently, two parents earning £49,000 per year will receive full child benefits, but a single parent earning over £50,000 will not.

Parents in France also get far more support with childcare. Before children start school, parents have three options. Children under three can access creches, with two-thirds of the fees subsidised by the social security system. There is also a system of subsidised childminders. The level of support changes depending on parents’ income, but wealthier families can also take advantage of tax rebates if they employ a nanny.

Children also start school earlier in France. They are enrolled when they are three years old (and in some cases from the age of two-and-a-half), rather than four in the UK. And there is a system of after school care provided by the local municipality and is also heavily subsidised.

But blindly pursuing a higher birth rate to fix France’s economic woes could backfire, Périvier warns.

The issue intersects with labour force participation. More young people will only help the economy if they are economically active. “As long as we have unemployed people, having more children is not necessarily a good solution,” she says. “Rather than more people, it is better to have more people who are educated and able to work.”