The Solidarity Fund: rapid implementation in an unstable context
Summary
The French Court of Accounts reviews the Solidarity Fund, one of the main business support programs the French Government put in place from March 2020. For the year 2020 the fund distributed EUR11.8 billion of aid to 2 million enterprises and entrepreneurs. Strand 1 paid monthly aid equal to lost turnover up to EUR 1500, with few eligibility criteria and very limited a priori controls; from March to September 2020 it reached more than 1.7 million beneficiaries for a total cost of EUR6.8 billion, and the Court estimated fraud over that period at between EUR20 million and EUR100 million. From October the fund widened to larger firms, with the aid ceiling rising to EUR 200 000 per month from December, and spending reached EUR8.7 billion in October to December 2020. The Court recommends tools to keep cumulated aid from exceeding the damage suffered, and stronger fraud prevention.
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The Solidarity Fund: rapid implementation in an unstable
context
The Solidarity Fund, together with compensation for partial activity and State-guaranteed loans, is one of
the main business support schemes implemented by the Government since March 2020 in order to limit the
economic consequences of the health crisis.
Over the whole of 2020, the success of the Solidarity Fund in the face of the health crisis is real. Created in
two weeks, thanks to the strong mobilisation of all stakeholders and the widest possible use of existing, simple and
effective tools, it has made it possible to limit the effects of the crisis through the rapid distribution, for the year 2020,
of EUR11.8 billion of aid to 2 million individual and independent enterprises and entrepreneurs.
A simple and rapidly deployed device
During the first confinement, this fund was dedicated exclusively to very small enterprises (VSEs), micro-
entrepreneurs, self-employed and the liberal professions who had been subject to administrative closure measures
or experienced a significant decrease in their turnover. It takes the form of direct aid, in two ways:
- under strand 1, the main component intended to provide replacement income, the aid, equal to the
company’s monthly loss of turnover up to the limit of EUR 1500 per month, was renewable each month.
For this aspect, few eligibility criteria, a simple and highly automated application filing and processing
procedure, and very limited a priori controls, were used to facilitate the speed of payments. This simplicity
and speed of payments were assessed by the beneficiaries interviewed by the French Court in August
2020.
- under strand 2, intended to strengthen the treasury of the firms most in difficulty, aid could only be applied
for once. It was educated at the regional level with more detailed specific criteria.
The solidarity fund is characterised by a simple design and the use of existing tools allowing for very rapid
payments, but also regular adaptations in view of the difficulties encountered during the first two phases of the
health crisis. Thus, from the first disconfinement, between July and September 2020, the solidarity fund was
refocused on certain sectors, for a smaller number of beneficiaries, but also an increased ceiling in some cases.
Table n°1: evolution of the solidarity fund (part 1 monthly aid) between March and
September 2020
First Lockdown First end of lockdown
March April May June July August September
Activity All priority (S1) and related sectors (S1
sector Bis)
Limits of 10 10 20
employees
20 for S1 and S1 bis
Limits of 1 000 000 EUR 1 000 000 EUR 2 000 000 EUR
turnover
2 000 000 EUR for S1
and S1 bis
Limits of 1 500 EUR 1 500 EUR 3 000 EUR
the
monthly 3 000 EUR for S1 and S1
aid bis
Number of 3 000 000 250 000 – 300 000
potentially
eligible
companies
Source : French Cour of Accounts, according to the general directorate for enterprise.
From March to September 2020, strand 1 of the aid was subject to a massive appeal, with more than 1.7
million beneficiaries, for aid amounting to an average amount of EUR 1 383 and a total cost of EUR6.8 billion.
Focusing on the sectors most affected by the crisis and the smallest enterprises, it has proved to be a very good
tool for the emergency disbursement of small amounts of aid. On the other hand, strand 2 was only very successful,
accounting for only EUR300 million, or 4 % of the total amount of aid. Over this period, fraud could, according to
the French Court’s estimate be between EUR20 million and EUR100 million, a relatively small amount.
Enlargement in favour of larger enterprises belonging to the sectors most affected by the crisis
Starting in October, the new activity restriction measures led to a substantial expansion of the fund, which
was tasked with distributing much higher subsidies to larger firms. The fund, once again open to all small businesses
undergoing a significant decrease in turnover, is also aimed at those in the sectors most affected by the crisis
(restaurants, hotels, events, etc.) with a significantly increased ceiling on aid (EUR 10 000 per month, then EUR
200 000 per month from December) as well as the size of eligible companies (up to 50 employees, then without a
ceiling from December).
Table n°2: Evolution of the solidarity fund between October and December 2020
October November December
Activity sector All All All
(curfew zone)
administrative closure,
S1 and S1 bis outside
curfew zones
Limits of employees 50 None
Limits of turnover None
Methods of calculation
Up to 100% loss of turnover within the limit of the 100% loss of turnover up
ceiling (variable according to sector and zone); for to 10,000 EUR or 20%
bans on receiving the public, distance selling is not monthly turnover up to
included in the calculation of loss of turnover 200,000 EUR ; for bans
on receiving the public,
distance selling is not
included in the
calculation of loss of
turnover
Amount ceiling 1 500 EUR (All) 1 500 EUR (All) 1 500 EUR (All)
administrative closure, administrative closure, administrative closure,
fire zones, S1 and S1 S1 and S1 bis) zones, S1 and S1 bis,
bis) discotheques and ski
resort)
Number of potentially indeterminate 3 000 000 200 000 (increased aid) +
eligible companies 3 000 000
Source : French Cour of Accounts, according to the general directorate for enterprise.
As a result of changes in the eligibility criteria, expenditure increased sharply between October and
December 2020, with EUR8.7 billion compared to EUR6.8 billion for the previous seven months (of which EUR0.3
billion for strand 2).The resources made available to the Fund were more than doubled in the Amending Finance
Act of 30 November 2020, reaching EUR19.8 billion.
Graph n°1: Tier 1 aid paid in 2020 per compensated month (in M€)
NB: As at 31 January 2021, the aid paid was for the months of March to December 2020.
Source: French Court of Accounts based on provisional data from the Directorate General of Public Finances (DGFIP) as
at 28 February 2021.
An evolution to be mastered, controls to be strengthened
Gradually, the fund has shifted from a general tool to support the income of self-employed or small business
managers, to the support of more sustainable measures aimed at preventing the bankruptcy of larger businesses,
particularly in the areas of catering, hospitality, tourism, events, sport and culture. The Fund’s general operating
principles have not evolved in parallel, as the vast majority of aid applications retain a quasi-automatic payment
based on essentially declarative information. However, the use of the same tool, for very different audiences and
objectives, carries risks that need to be controlled. Thus, since the solidarity fund can be combined with other State
aid, regional support funds or even certain social security organisations, it is possible to pay a cumulative amount
of aid in excess of the damage suffered. On the other hand, the risk of fraud is increased, since it is a question of
paying higher amounts of aid in a sustainable way. The administration, aware of the consequences of this situation,
has initiated a modification of its procedures and a strengthening of controls.
The solidarity fund is meant to be gradually phased out, with the end of the health crisis. Its extinction will
have to be carried out with caution because it contributes, together with the other mechanisms put in place in the
context of this crisis, to keeping companies which would have disappeared without this aid, independently of the
health crisis, in operation. The abolition of the solidarity fund and other emergency measures, which is necessary
once the calming of the health crisis has led to a return to normal activity, could lead to a significant resurgence of
business failures.
The French Court makes the following recommendations to the Ministry of Economy, Finance and Recovery:
1. in accordance with the regulations, to charge the contribution of local authorities to the Solidarity Fund for
operating expenditure;
2. to put in place tools to prevent the cumulation of aid paid to a company to exceed the damage suffered;
3. to support the increase in the amount of aid and the extension of the fund to larger enterprises through the
introduction of a more demanding aid instruction and a strengthened fraud prevention and sanctions measure.
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