France cuts tax breaks for wealthier families to close deficit France's socialist government, under strong pressure to reform its big and costly social welfare system, has unveiled plans to make annual net savings of €1.7bn in its generous family benefits regime. The relatively modest savings, a first step in a series of welfare reforms promised this year by President François Hollande, are to be achieved mainly by reducing tax breaks for the better-off to avoid a politically sensitive departure from the principle of universal child benefits. "Nobody can dictate the way we conduct our reforms," said Jean-Marc Ayrault, prime minister, as he announced the changes. He echoed remarks Mr Hollande made last week in response to calls from the European Commission, the EU's executive arm, for urgent action in France to reduce public spending and enact structural reforms. "We can perfectly well reduce deficits and at the same time preserve the core of our social model," he said. The savings are needed to close a looming €2bn deficit in the family welfare system - but are only a small part of the €60bn in savings across the board Mr Hollande has promised by 2017 to ensure France meets its recently reset EU target of reducing the budget deficit to below 3 per cent of national output in 2015. He faces a bigger challenge in tackling the country's pension system, which is facing a €20bn deficit and was singled out for action by Brussels last week. Mr Hollande, who has pledged to enact pension reforms in the autumn, has also promised to overhaul the expensive unemployment benefit system and France's multiple and overlapping layers of local government spending. With total public expenditure accounting for 57 per cent of gross national product, France spends about €100bn a year on a range of family supports, among the highest levels in Europe. But Mr Hollande had limited room for manoeuvre to make deeper cuts. There is broad political support for the system, which has helped keep France at the top of European fertility standings, alongside Ireland, at about two children per adult woman - regarded as a vital economic and social asset. The president faced strong opposition from both the left and the right to his earlier suggestion of means-testing child benefits. He switched track partly in response to huge street demonstrations against gay marriage that mobilised the right in defence of traditional family values. But he was immediately criticised on Monday by the centre-right UMP party for again resorting to tax increases to make economies. The bulk of the savings will come from reducing the amount of tax rebates available to higher-income households based on their number of children. Mr Ayrault said this would affect 12 per cent of all households with children, for example hitting those with two children and earning about €5,850 per month. There will be a freeze on the value of child benefits, which at present pay €127 a month to families with two children, €291 for three children and an extra €163 for each additional child. But, unlike the recent removal of child benefit for better-off families in Britain, there will be no change in their universal application. The government, meanwhile, said it planned a 7.5 per cent annual increase in spending in separately-funded, publicly-provided family services through to 2017, or an additional €2bn, within the overall squeeze on public expenditure. This would cover 275,000 new nursery and creche facilities for children aged under three.