Parliamentary Assembly
Assembl�e parlementaire

Future of social security in Europe

Doc. 10098
20 February 2004

Report
Committee on Social, Health and Family Affairs
Rapporteur: Mr Claude Evin, France, Socialist Group

Summary

The report recalls that the European economies have gradually opened up over the last thirty years with the consequence of increasing the competition on costs. However, today competitiveness also depends on the effectiveness of the labour force and on the working and social welfare conditions guarantying security for the future. The report stresses that social security has a cost, but it can cost still more economically, socially and politically to be without social security.

The report considers that there is no single and standard answer as regards social security reforms in Council of Europe member states, in view of the fact that traditions and goals in the social security field differ from one European country to another. Nonetheless the Parliamentary Assembly recalls some principles which the member states have a duty to uphold as set out in the legal instruments of the Council of Europe.

The Parliamentary Assembly recommends that the Committee of Ministers include the question of social security and the fight against poverty on the agenda of the Third Summit of Head of States and Governments of the Council of Europe and strengthen the supervisory machinery in the social sphere while recognising that the honouring of member countries’ undertakings in this field should become a priority.

I.          Draft recommendation [Link to the adopted text]

1.         Europe’s economic environment has altered considerably over the last thirty years with the economies of European countries progressively opening up to the global economy. As a result, the competitiveness of the European economies is staked not just on production costs but also on the performance of social security systems guaranteeing security for tomorrow. Concurrently, the transformation of production patterns and of the organisation of labour, now more “flexible”, and the less uniform career sequences, presuppose new standards for social protection.

2.         In this connection, the Parliamentary Assembly expresses its deep concern at the persistence of mass unemployment which poses many problems for the Council of Europe member countries and for their social security systems. It wishes to point out that social rights, if effectively guaranteed, are a factor of social cohesion as well as a factor of democratic stability. Social security has a cost but it can cost still more economically, socially and politically to be without social security.

3.         The future of the retirement pension systems poses a major challenge, in particular considering the ageing of the population due to longer life spans and decline in the number of births. In this context, the Parliamentary Assembly wishes before all else to emphasise the positive aspect of the lengthening of the life span, often represented as a constraint. Confronted with the challenge of the future sustainability of retirement pension systems, it reaffirms the need to maintain a retirement pension system founded on national and inter-generational solidarity, to preserve the right balance between the public scheme and the private one and the state’s role as guarantor.

4.         Specifically, the Assembly considers that the social policies most favourable to the family and to childbearing are those enabling parents, and in particular women, to combine working and family life harmoniously. Countries having pursued this type of policy have the highest fertility rates as against those which have had a strict preference for assistance to mothers remaining at home.

5.         The Parliamentary Assembly is convinced of the need to modify social policies, bearing in mind that societies have changed since the foundation of the European systems of social protection, these no longer being altogether suited to the new circumstances. Present and future reforms have three salient objectives:

i.          better control over the trend of welfare-related expenditure, as the resources available to fund it are more limited than before;

ii.         better responses to the new lifestyles and to the transformations undergone by the social contingencies, as well as to the new social needs, through better life-long training and services catering for the needs of working women and elderly dependent persons;

iii.         more employment-oriented social security systems.

6.         The Parliamentary Assembly stresses that there is no single, unequivocal, standard answer as regards social security reforms, considering how traditions and goals in the social security field differ from one European country to another. While it is not possible to determine one path alone for reforms to social protection, nonetheless some principles should be recalled which the member states have a duty to uphold.

7.         The Assembly advocates applying certain principles of social security as set out in the legal instruments of the Council of Europe, viz. the European Social Charter and the revised European Social Charter, the European Code of Social Security, the Protocol thereto and the revised European Code of Social Security.

8.         The Council of Europe legal instruments in the social field have defined a real European standard and made social protection a fundamental right with an international supervision system. Social security also has a prominent place in the European Convention on Human Rights as many judgments over the last fifteen years have addressed this issue.

9.         The revised European Social Charter introduced a new right to protection against poverty and social exclusion (Article 30). In this context, the Parliamentary Assembly deplores the fact that only eight member states of the Council of Europe have consented to be bound by Article 30. It perceives the need for an expression of political will at European level in order to make social rights more accessible.

10.       Concerning reform of the health systems, the Parliamentary Assembly recalls its Recommendation 1626 (2003) on this subject which identifies as the “main criterion for judging the success of health system reforms the effective access to health care for all, without discrimination, as a basic human right and, as a consequence, the improvement of the general standard of health and welfare of the entire population”.

11.       The Assembly would also emphasise the State’s role as guarantor of the stability of the social security system which should intervene immediately the fundamental principles are infringed, without its essential responsibilities being delegated to private agencies. Likewise, during periods of reform and transition, the State’s responsibility is of prime importance for the future development of social security.

12.       The Parliamentary Assembly is convinced that the strengthening of social cohesion, thanks to a sustained level of social protection, is an effective preventive strategy for reducing risks of social unrest and political disturbances in some of the new democracies belonging to the Council of Europe. Here it recalls that the Second Summit of Heads of State and Government of the Council of Europe in 1997 stated its resolve to pursue social cohesion as an “essential complement to the promotion of human rights and dignity”.

13.       The Parliamentary Assembly also wishes to point out that a number of Council of Europe texts set objectives which would make it possible to raise the level of rights to social security in all member states. This is the case with the revised Social Charter, of which Article 12 asserts the right to social security, Article 13 the right to social and medical assistance and Article 30 the right to protection against poverty and social exclusion. The European Code of Social Security, for its part, lays down rules necessary to guarantee those rights. The Assembly draws attention to the need for these instruments to be ratified as soon as possible and requests the Committee of Ministers to step up its efforts to that end.

14.       In this connection, the Assembly welcomes the work carried out by the European Committee for Social Cohesion in the social security field, particularly the discussion initiated on the impact of the pension system reforms under way on social cohesion and equality between men and women. It also notes the initiative of holding a Euro-Mediterranean conference open to Mediterranean States which are not Council of Europe members in 2004.

15.       It also welcomes the fact that the Steering Committee for Human Rights is currently working on the inclusion of social rights in the European Convention on Human Rights, which would make it possible inter alia to implement the Committee of Ministers' Recommendation No. R(2000)3 on the right to satisfaction of basic material needs of persons in situations of extreme hardship. It fully supports this endeavour.

16.       The Assembly welcomes the decision by the European Council on employment, social policy, health and consumer affairs in Brussels of December 2003 to “strengthen existing co-ordination processes on the policies adopted by Member States in the field of social protection, thus contributing to the necessary modernisation of social protection systems”. In this regard it considers that social security should be a priority area of co-operation between the Council of Europe and the European Union with better planning of joint activities in the medium and long term.

17.       The Assembly invites the parliamentarians of the member states to launch a debate in this connection at national and European level and also to promote – at national level – the Council of Europe’s legal instruments in order to find viable solutions to the complex questions of reform in the social sphere. The Parliamentary Assembly should consider in two years’ time a report presenting the conclusions of these debates in each of its member states.

18.       Accordingly, the Parliamentary Assembly recommends that the Committee of Ministers:

i.          include the question of social security and the fight against poverty on the agenda of the Third Summit of Head of States and Governments of the Council of Europe and promote the inclusion of the five principles of Recommendation No. R(2000)3 of the Committee of Ministers into the European Convention on Human Rights system;

ii.         strengthen the supervisory machinery in the social sphere, recognising as a priority the honouring of member countries’ undertakings in this respect;

iii.         compile knowledge on the situations of different communities in terms of social indicators in those member countries where social problems are a grave cause of political instability, in order to prepare thematic, regional, integrated projects and implement them in close co-operation with the European Union;

iv.         back the co-operation initiatives led by the European Committee for Social Cohesion and the International Labour Office aimed at improving social security in the different member states.

II.         Explanatory memorandum by Mr Evin

A new context

1.         The European and global economic environment has undergone considerable change over the last thirty years. The European economies have gradually opened up, with the result of increasing competition on costs for the enterprises - particularly their wage bills - and fiscal competition for the States. Many people use the increasing openness of the economies as an argument to the effect that we must reduce the burdens on the State and the enterprises, chief among them being the cost of financing social welfare.

2.         However, economic competition depends on other factors than solely production costs. Such factors include a well-trained, highly skilled and sophisticated labour force whose effectiveness is ensured by working and social welfare conditions guaranteeing the present and future security needed for real commitment to the job. The lack of a social welfare system entails high costs not only for individuals but also in terms of the whole economy.

3.         Recent economic developments have also pointed to a transformation in the international division of labour, driving the developed economies towards a post-industrial revolution and a reorientation towards service activities, which are less productive than the old industrial activities. This trend is prompting fears of reduced growth in terms of resources for social expenditure.

4.         Concurrently, new modes of production and labour organisation, which has become more “flexible” with the corollary of less uniform careers, presuppose new standards of social welfare. In fact, most welfare systems were created in order to protect employees/workers with continuous, upwardly mobile careers within an industrial company.

5.         The persistence of mass unemployment is confronting European societies, and also their social welfare systems, with a wide range of problems. Unemployment involves major expenditure (on allowances and other forms of more or less direct cover for such non-workers as persons who have taken early retirement, on disability insurance, etc), while at the same time reducing revenue (given that unemployed persons pay a lower level of social contributions, or even none at all).

6.         It has become vital for many European countries to ensure that their social policies promote employment as effectively as possible by both keeping the costs of labour down and providing services that encourage people to return to work. Development of active social policies combining generous unemployment allowances and vocational training, with personalised support for job-seekers, would seem to be one way of decreasing unemployment without resorting to coercive polices to force people back on to the labour market: indeed, such policies usually lead to an increase in numbers of poor workers.

7.         Society too has changed, modifying the very references that were instrumental in creating the various European social welfare systems. The family model in which the husband works and the wife remains at home has been challenged with the diversification of types of households, particularly the upsurge in single-parent families.

8.         The mass influx of women on to the labour market has not only transformed family models and the labour market itself, but also led to new needs in terms of social services to reconcile working life with family life.

9.         The ageing of the population due to longer life expectancies and the decreasing birth rates is raising many questions about the future sustainability of pension systems. Coupled with this increased life expectancy, the arrival of the baby boomers at retirement age will increase the pressure on European pension systems, while the number of persons capable of financing retirement pensions is in freefall because of plunging birth rates.

10.       At first sight the pay-as-you-go schemes (in which current contributors fund current pensions) would seem to be worst effected by these demographic changes. Conversely, the capital-funded schemes would not appear to be affected by ageing populations in that a given generation prepares for its own retirement, which means that it does not depend on the size of the ensuing generation for financing its pensions. Yet at some stage demographic change will also impact on the capital-funded schemes, because when the pension funds have to pay our large numbers of pensions to the many generations retiring after 2010, they will be forced to sell off their assets (shares, Treasury bonds, etc) in order to secure the requisite financing. On the other hand, there will be fewer persons of working age likely to wish to purchase these assets. This context of mass selling-off of assets to a smaller population will lead to a substantial fall in their value, thereby also devaluing the capital earmarked for retirement pensions and the resources available for retired persons.

11.       If fertility rates have felled throughout Europe since the late 1970s (more recently in central and eastern Europe), many observers have noted that at the present time the social policies most conducive to higher birth rates enable women to harmoniously combine their working and family lives by developing such child-care services as day-nurseries, child-minders and other home-help facilities. Countries having developed this type of family policy have the highest fertility rates, whereas those spending large amounts on family policies aimed exclusively at helping mothers to stay at home have seen a major fall in fertility rates.

12.       While the ageing of the population is not the main factor in present and future increases in health expenditure, it will nonetheless give rise to new needs regarding long-term care for elderly dependent persons, whose numbers are bound to increase over the coming years.

13.       Health expenditure is constantly rising in all European countries. This increase corresponds to virtually unstoppable trends arising out of the ageing of the population and the progress being made in medical and pharmaceutical technology, with each and every advance helping to improve health but also producing extra costs.

14.       We should nevertheless note that health expenditure is increasing at different rates within the different European health systems. Some countries are managing to keep their health expenditure more or less under control, while also guaranteeing access by all to health care. These are the countries which have succeeded in promoting prevention and establishing responsible relations between health-care providers, patients and those funding the system.

Reforms are needed

15.       Such changes require new social policies. The world, and societies worldwide, have undergone such far-reaching change since the European social welfare systems were founded that the latter are no longer completely suited to the new situations. There are three major thrusts to the present and future reforms.

16.       First of all, we need to secure better control over rising social welfare expenditure, since there is now less funding available to cover this expenditure than in the thirty-year boom period following the second world war.

17.       However, we must also of take advantage of the need for reform to tailor the European social welfare systems to new lifestyles and changing social risks. We will be able to correct some of the shortcomings or inequalities in past social policies over the coming years. The need for reform does not solely imply downgrading or cutting back on services: we also need to meet new social needs, such as more effective lifelong vocational training and new services for working women or dependent elderly people.

18.       The last general policy thrust involves making social welfare provision more favourable to employment. In the long term, whatever the social welfare scheme used, the maintenance of a high level of social welfare would appear to depend on the maintenance or re-establishment of a high level of employment. To date, three main series of reforms have been initiated in the various European countries in order to implement this employment priority: reforming the social welfare funding system in order to bring down labour costs; introducing stricter rules on training or other activities to be undertaken in order to qualify for benefit; and promoting community services geared to promoting work by women.

There is no such thing as a single standard response

19.       For all the similarity in the general difficulties encountered by the various social welfare systems, the national governments are facing slightly different challenges in that not all European countries have the same types of welfare institutions or the same aims in terms of social welfare.

20.       Where western Europe is concerned, the social welfare systems can be broken down into three main groups (the Scandinavian countries, the English-speaking countries and the continental European countries), differentiating both the political and social objectives pursued and the instruments used to attain these goals (universal policies and free social services, targeted social policies, social insurance schemes funded from social contributions).

21.       Social policies are organised differently because the historical background in Old Europe, where social security is based mainly on social insurance schemes, differs from that in central and eastern Europe, where social security traditionally comprised intensive State intervention, in accordance with the paternalistic economic model. Even after the major economic reforms conducted in these countries, the Welfare State tradition still has great resonance. Obviously, the funding systems also differ, with greater recourse to taxation in some countries and higher social contributions in others.

22.       In response to these challenges, some countries are seeking to privatise welfare schemes, while others, on the contrary, are reaffirming the need to retain a system based on national and intergenerational solidarities. I personally do not think that the Parliamentary Assembly can adopt specific recommendations for each individual country. To the extent that the approaches and objectives in the social security field vary widely from one European country to another, it is impossible to secure one single solution applicable to all.

On the other hand, there are common principles that should be respected

23.       While we cannot define one single approach to reforming social welfare systems, I do consider that the member States must comply with a number of established principles. These principles are already set out in the documents published by the Council of Europe and other international organisations: the ILO devoted its 2001 Conference to social security problems, and in 2002 the ISSA also reiterated the major principles governing social security.

24.       It is important for the Parliamentary Assembly’s recommendation to reaffirm the principles to be taken into account by member States in implementing their social policies. I would point out that the Council of Europe has already made a major contribution to defining these principles.

25.       As an organisation defending human rights, the Council of Europe’s primary objectives are democracy, the promotion of fundamental rights and the development of the rule of law with an eye to cohesive, sustainable and stable European societies. The essential texts in this context, namely the European Convention on Human Rights, the European Social Charter and the revised European Social Charter, the Protocol thereto and the revised European Code of Social Security, are instruments that supply reliable definitions of the principles of social security.

26.       Social security is grounded in the European Social Charter and the revised Charter. Article 12 of the Charter expressly requests that Contracting Parties:

27.       Article 12 also refers to ILO Convention No. 102 concerning Minimum Standards of Social Security and the European Code of Social Security for the purposes of establishing a level of social welfare protection that can be deemed satisfactory.

28.       The revised European Social Charter now secures 31 different fundamental social rights, thus covering all aspects of social welfare. In addition to the right to social security, the Charter safeguards the right to social and medical assistance and access to social services. The revised Social Charter reinforces this dimension by introducing a new right, namely protection against poverty and social exclusion.

29.       Now signed and/or ratified by virtually all member States of the Council of Europe, the Charter constitutes a veritable European standard in the social field and makes social welfare a fundamental human right.

30.       The European Code of Social Security, the Protocol thereto and the revised Code of Social Security inform States of the standards with which they ought to comply when establishing their social security systems. They set out the minimum level of protection required in the traditional social security branches: social security is aimed at guaranteeing benefits in kind and in cash (care, allowances, pensions, etc) in the event of such contingencies as old age, unemployment, sickness, disability, occupational accidents, maternity and death of the family breadwinner.

31.       Social security also has an important place in the European Convention on Human Rights, and many European Court judgments have dealt with this issue over the past fifteen years.

Principles for the future

32.       The requisite reforms must preserve, or indeed improve all these principles. The primary aim of social security, as its name would suggest, is to provide individuals with security. In other words, everyone today should be able to rely on this system to provide him/her with protection not only for the present but also throughout the coming decades. Consequently, any new social welfare model must be capable of guaranteeing a substitute income of a certain level in the event of realisation of the contingency.

33.       As regards reforming health systems, I would like to point out that the trend towards privatising a wide range of public health services in the more prosperous economies, a trend which is even more pronounced in the economies in transition, has made great inroads into the universality of public health services. It is true that the funding of public health in many States is under attack from many quarters, and strategies must obviously be devised to reduce costs and to combat waste and inefficiency. However, as the Assembly observed in the recommendation adopted on 1 October 2003, reforms of health systems in Europe should reconcile fairness, quality and efficiency. “The main criterion for judging the success of health system reforms should be effective access to health care for all without discrimination, which is a basic human right. This also has the consequence of improving the general standard of health and welfare of the entire population.”

34.       For all these trends, and despite the introduction of higher user contributions, a universal public health scheme capable of guaranteeing equal access to the main health services for all members of society, free of charge or in exchange for minimum participation, should remain the goal to be attained.

35.       In connection with retirement pension refor, I would like to point out that Part V of the European Code of Social Security on old-age benefit provides for the attribution of an old-age benefits in the form of guaranteed periodical payments from a prescribed age onwards, until the death of the person concerned, in accordance with the following rules:

36.       Broadly speaking, the concept of social security presupposes that:

37.       The solidarity aspect must cover the whole of society, and not be confined to solidarity between employers and employees. It is expressed by responsibility on the part of those who have more vis-�-vis those who have less.

38.       The State must stand guarantor for the stability of the social security system, supervise its functioning and intervene as soon as any of the fundamental principles are violated, without delegating these fundamental responsibilities to private operators. It is during such reform and transition periods as the present one that State responsibility is particularly important for the future development of social security.

Social welfare as a factor in social cohesion

39.       The protection provided by social security is even more vital than ever at a time of job insecurity and globalisation, which means that we must reinforce it and extend its cover. I would remind the reader that the Council of Europe has adopted promotion of social cohesion in all its member States as one of its priority objectives, and I would like the Assembly to support this initiative. The Council of Europe has stressed the importance of the following activities:

40.       The social rights provide the starting point for the social cohesion strategy, which stresses the importance of social security systems in the following manner: “Social security systems are one of the most powerful institutional expressions of social solidarity. Any social cohesion strategy must therefore have as a main aim the strengthening of social security systems, especially at a time when many questions are posed about their future development and financing” (paragraph 14).

41.       Social security has the daunting task of promoting social stability, preventing excessive fragmentation of society, calming social conflicts and reducing differences between the social classes. Minimum social welfare standards for all undeniably guarantee fairer societies in which everyone has access to the fundamental social services. Economic development without social development leads to enormous problems in the long run. Reinforcing social cohesion by means of a minimum level of social protection may be considered as a preventive strategy aimed at reducing the risks of social disorder and political disturbance in the future. We can therefore assert that social security is a factor in social cohesion, because living without social security also means living in fear: fear of illness, accidents, unemployment, old age, etc.

In conclusion

42.       I would point out that everyone should be able to rely on the social security system for protection not only today but also for decades to come. Consequently, any new social welfare model must be capable of guaranteeing a substitute income of a specified level in the event of realisation of the contingency covered. Effectively guaranteed social rights are a factor in social cohesion and democratic stability. Social security is expensive, but the lack of social security can be even more costly in economic, social and political terms.

43.       I would stress that at present, as in the future, it is important to affirm principles and rights, but it is also vital to provide effective guarantees for these rights. The stability, credibility and efficiency of social security systems must be guaranteed, and this is a State responsibility. Faced with the increasing tendency to privatise social security systems, I cannot overemphasise the fact that the State is responsible for guaranteeing equality and solidarity vis-�-vis social risks.

44.       At a time of intensive reform of social security systems, the Parliamentary Assembly must therefore once again take the initiative in affirming the major principles underpinning social security and reinforcing human rights. The Assembly must reaffirm the importance of the tools available in the Council of Europe: the European Code of Social Security and the European Social Charter, as well as such other instruments as those devised by the ILO and the ISSA. Our parliamentarians must promote these tools at the national level in order to identify viable and socially just solutions to the complex problems of reforming social security.

Reporting Committee : Social, Health and Family Affairs Committee

Reference to committee: Doc. 9298, Ref. No. 2684 of 21 January 2002

Draft recommendation adopted on 16 January 2004

Members of the committee: Mrs Belohorsk� (Chair), MM Christodoulides (1st Vice-Chairman), Surj�n (2nd Vice-Chairman), Mrs McCafferty (3rd Vice-Chair), Mrs Ahlqvist, Mr Arnau, Mrs Bargholtz, Mr Berzinš, Mrs Biga-Friganovic, Mrs Bolognesi, MM Br�nzan, Brunhart, Buzatu (Alternate: Ionescu), �avusoglu Y�ksel, Colombier, Cox (Alternate: Vis), Daban Alsina, Dees, Donabauer, Drljevic, Evin, Flynn, Mrs Frimannsd�ttir, Mrs Gamzatova, MM Geveaux, Giertych, Glesener, Gonzi, Gregory, G�l�i�ek, G�nd�z Irfan, Gusenbauer, Hegyi, Herrera, Hladiy, H�ie, Mrs Hurskainen, MM Jacquat, Klympush, Baroness Knight (Alternate: Mr Hancock), MM Kocharyan, Lomakin-Rumiantsev, Mrs Lotz (Alternate: Mrs Rupprecht), Mrs Lucic, MM Makhachev, Malachowski, Markowski, Marty (Alternate: Schmied), Mašt�lka, Mrs Milicevic, Mrs Milotinova, MM Mladenov, Monfils (Alternate: Goutry), Ouzk�, Padilla, Pavlidis, Podobnik, Popa, Poty, Poulsen, Provera (Alternate: Tirelli), Pysarenko, Rauber, Riester, Rigoni, Rizzi, Mrs Roseira, Mrs Saks, Mr Seyidov, Mrs Shakhtakhtinskaya, MM Slutsky, Sysas, Mrs Tevdoradze, Mrs Topalli, Mr Vathias, Mrs Vermot-Mangold, MM Viera, Volpinari, Mrs Wegener, MM Van Winsen, Zernovski, ZZ…

NB: The names of those members present at the meeting are printed in italics.

Secretariat of the Committee: Mr Mezei, Ms Meunier, Ms Karanjac, Mr Chahbazian