UN Special Rapporteur on Poverty: The European union’s neoliberal policies are causing poverty throughout Europe

The UN Special Rapporteur on Poverty, Olivier De Schutter, says the EU’s neoliberal policies cause poverty. Hardly a startling revelation given that 14million people were living in poverty in this country when the UK was still a member of the EU. 

Austerity is the enemy of the people.

Over the past decade, various European countries including the UK have been experiencing one of the most dramatic economic crises of the past century. As the effects of the 2007–2009 US subprime mortgage crisis and the 2007–2008 financial crisis rippled across the Atlantic, various fiscally stressed EU countries were forced to borrow heavily in order to keep their banks afloat, leading to an increased accumulation of public debts. Between 2010 and 2011, three states (Greece, Portugal, and Ireland) became insolvent, requiring a bailout package from the European Union and the International Monetary Fund, while Spain and Italy were also at risk.

As a condition for bailout funds, these countries were forced to cut public spending and increase government revenue by passing a series of austerity measures. While these were primarily implemented in the southern European countries most affected by the sovereign debt crisis, similar measures were also taken in other parts of the European Union, most notably in the United Kingdom under David Cameron’s government.

Austerity is an umbrella term that includes a range of different policies sharing the stated aim of reducing public spending, increasing government revenues, and reducing the cost of labor in order to make countries more attractive to private investment. Although policies have varied from country to country, they have generally included measures such as reform to the pension system (e.g., raising the pensionable age, cutting pensions), cuts to health care and social services, increases in regressive taxes (such as VAT), and the liberalisation of the labor market (though, among other things, the erosion of collective bargaining power).

While the weight of these policies varied from country to country, depending on their précises economic condition and their existing social-protection mechanisms, they have generally led to an increase in poverty and inequality, including both increased numbers of people living in poverty and intensification of poverty. 

SOCIAL AND ECONOMIC EFFECTS OF THE ECONOMIC CRISIS AND OF AUSTERITY MEASURES

The main consequences of the crisis and related austerity policies have been an increase in poverty and inequality. Even if austerity policies were to help relaunch the private sector, as their proponents suggest, they would create a highly inequitable growth. The increase in poverty is mainly due to unemployment, to changes in working conditions (e.g., decrease of the minimum wage, increase of flexible and precarious forms of employment), and to pension cuts.

De Schutter’s interview with Afshin Rattansi is well worth watching. What this highlights is the urgent requirement to dump neoliberalism, which means not just dumping the Tories, it means dumping Labour too. In fact, every political party represented in the Houses of Parliament embraces neoliberal orthodoxy to a greater or lesser extent.

In addition to unemployment, all these countries have also seen a rise in the number of working poor. The reasons for the increase of this category are multiple, ranging from the increased use of temporary contracts, to working for multiple months without receiving a salary, as well as cuts to minimum wage enforced as part of austerity measures, and to a general fall in the real value of wages.

The rise of the radical right, and of nationalist politics more generally, poses a pressing problem to democratic politics. Scholars working on the rise of the radical right in post-financial crisis Europe have pointed to the indirect role played by austerity in this phenomenon, underlining the relationship between economic grievances and support for anti-democratic politics (Lamprianou and Ellinas, 2017). The recent rise of radical right parties is all the more concerning in Central and Eastern Europe (CEE), where backsliding into anti-democratic politics has occurred especially quickly.

Statement by Professor Olivier De Schutter, United Nations Special Rapporteur on extreme poverty and human rights, on his visit to the European Union (25 November 2020 to 29 January 2021)

Brussels, 29 January 2021

The European Union was built as a beacon of hope for social progress, but it is still failing too many. During my visit to the European Union, where I have met with EU and national policymakers and officials from over 20 institutions, terms including strategies, plans, and commitments have dominated most discussions. I was impressed by the dedication of all those with whom I met, and by their commitment to seize the moment of this unprecedented crisis as an opportunity to make Europe more inclusive. But if poverty could be eliminated with good intentions, the EU would have long eradicated it. By relegating socioeconomic rights to second-tier, aspirational principles and optional targets, the EU has all but declared poverty a necessary evil and, in doing so, is undermining its own efforts to make poverty history in the region.

Although social policy is determined by EU Member States, social and macroeconomic policies are in fact deeply interdependent, and this interdependence is especially important for anti-poverty efforts. If the EU is ready to take its commitments seriously, a fairer balancing of macroeconomic and social policies is needed – one that places international human rights obligations at its core. Good intentions are not enough: what is needed is to recognize the gaps that remain in the legal and policy framework under which the EU institutions operate, and align them better with the professed intention to eradicate poverty.

II. The face of poverty in the EU

The undeniable improvement in living standards that the EU has spearheaded since its inception has positioned its Member States at the top of the Human Development Index values,¹ and the EU as a whole enjoys relatively low levels of inequality and income concentration.² But one in five people—over 92.4 million or 21.1% of the population—are still at risk of poverty in the EU-27,³ and inequality levels have remained virtually static or even worsened since the 2008 crisis.⁴ A total of 19.4 million children, representing 23.1%, are at risk of poverty across the Union,⁵ an exceedingly high number for developed country standards.

These poverty figures, however, hide the faces of the people behind them: lone mothers for whom juggling care and work responsibilities is virtually impossible, young adults who never finished school and cannot find formal or stable income, and people who cannot work due to health problems are more likely to be at risk of poverty or social exclusion than other groups. I have heard testimonies from people who experience poverty in all of these groups, who have shared with me that they would like to continue studying but cannot because they lack the means to sustain themselves and their families; that this is the first time in their lives that they experience hunger; that they are subjected to maltreatment, in the form of control and punishment, in every interaction with the administrations.

Although poverty statistics can capture part of this reality of inability (not unwillingness) to generate a formal income, anti-poverty policy efforts in the EU have increasingly emphasized employment and labor incentives. The risk of poverty is indeed much higher for those unemployed (at over 65.4%). But policies such as limiting social assistance in amounts or timeframes in order to “incentivize” work will not help those who cannot find work as a result of irreconcilable care responsibilities, limited work experience, low educational levels, or longstanding health problems – all of those for whom the risk of poverty is much higher. In fact, unemployment rates have decreased in all Member States since they peaked in 2013,⁶ which suggests an uneven distribution of the benefits arising from labor market improvements. In other words: poverty will not be ended with employment policies alone, but indeed with strong redistributive measures.

The faces behind the poverty numbers are also markedly gendered: women experience higher poverty rates than men (22.3% vs 20.4%),⁷ and this gap only grows wider with old age (22.3% vs 18.2%)⁸ as a result of inadequate pensions deriving from career interruptions to assume care responsibilities.⁹ The gender gap in pensions ranges between 1.8 % and 48.7% across Member States, but it is estimated at a staggering 37.2% on average.¹⁰ Women are also disproportionately represented among lone-parent families (85% ),¹¹ 40.3% of which have children and are at risk of poverty or social exclusion.¹²

These numbers, shocking in themselves in a region experiencing steady economic growth until very recently, are even more worrying considering that Member States have only decreased their investments in areas critical for poverty reduction – social protection, health, and education – since 2009.¹³ This decrease is particularly inexplicable in countries that have ratified the International Covenant on Economic, Social and Cultural Rights, which includes the obligation to progressively realize human rights and not take retrogressive measures that could hinder that progress.

Although there has indeed been a decline in the number of people at risk of poverty or social exclusion since 2010 – the figure was 11.3 million lower in 2019 than in 2010 –, the EU’s commitment to reduce poverty by 20 million people by 2020 (known as the Europe 2020 poverty target) was largely missed. Other statistics, moreover, paint much grimmer and far less homogenous trends. At-risk-of-poverty rates, when measured against a benchmark based on incomes of 2008 adjusted for inflation –which Eurostat considers “a more reliable measure for monitoring developments over time”—was in fact 2.3 percentage points higher in 2019 than in 2008, with great variations among Member States.¹⁴ Worryingly, when asked about what lessons EU institutions have drawn from the failure to meet the Europe 2020 target, and what could be done differently in the future, interlocutors could not provide a satisfactory answer. Unless the EU designs a Union-wide poverty strategy, with ambitious new targets and coherent measurements, it is bound to repeat the same mistakes.

III. The European Green Deal as the EU’s new growth strategy

The crisis induced by the Covid-19 pandemic hit three months after the Commission presented the Green Deal as the new growth strategy of the EU. The proposals made in the December 2019 communication presenting the Green Deal are designed, not only to accelerate the ecological transformation of the economy, but also to ensure a just and inclusive transition: it makes explicit reference in this regard to both the 2030 Sustainable Development Agenda and the European Pillar of Social Rights.¹⁵ In October 2020, I presented to the 75th session of the UN General Assembly key recommendations on how to reconcile the ecological transformation with poverty eradication.¹⁶ In a number of key areas, the Green Deal succeeds in combining environmental objectives with social justice, the single most important exception being the mobility sector.

This positive assessment, however, should not obfuscate the fact that, as long as the status of social rights is not strengthened, including in impact assessments accompanying legislative or policy proposals implementing the Green Deal, people in poverty will remain at risk of having their rights –to health, to adequate housing, or to a decent standard of living—violated, often without a realistic chance of seeking a remedy. Moreover, while it does include references to the social objectives of the EU, the Green Deal is not a substitute for a poverty eradication strategy, understood as a multiyear timeline setting out measures to be adopted and allocating responsibilities, together with indicators allowing to monitor progress towards targets.

Finally, the Green Deal, for all its ambition, stops short of questioning the macroeconomic policy framework under which the EU operates, despite the major dilemmas it imposes: in the absence of a more fundamental rethinking of the exclusionary impacts of the economy (especially labour and housing markets), poverty reduction continues to depend on growth, which creates a tension both between social and environmental objectives (including to achieve climate neutrality by 2050), and within EU socio-economic governance itself, between the objective of fiscal consolidation on the one hand, and stimulating GDP growth on the other hand. To escape these dilemmas, it is urgent to refocus efforts on the reduction of inequalities and on creating the conditions of an inclusive economy – one that truly ensures equal opportunities for all, even (and especially) in times of economic recession or stagnation.

It is this macroeconomic policy framework that is now under scrutiny. This is, in that sense, a time of opportunity. The current crisis, with an expected 7% fall of the EU’s GDP in 2020, makes it even more urgent to rebalance socio-economic governance in the EU in order to strengthen its social dimension, and to design tools to make the eradication of poverty less dependent on growth. The constitution of the European Union, however, does not make the EU fit for the purpose of combating poverty (IV). The redefinition of the EU’s socio-economic governance toolkit following the Covid-19 pandemic provides only a very provisional and partial response to the structural challenges facing the EU (V). Preparing the future is therefore more essential than ever: the Action Plan on the European Pillar of Social Rights provides an important opportunity in this regard (VI). 

IV. The constitutional framework

The EU’s constitution is ill-suited to combat poverty. It institutionalizes competition between Member States and increasingly encourages economic policy convergence, but it still fails to ensure proper social and fiscal convergence. EU Member States are asked to be competitive and lean: they are pardoned for not being social enough.

1. Constraints Member States face in combating poverty

Competing through wages and social contributions

Member States’ choices in setting wages and levels of social contributions are still driven by the perception that any increase in wages or social contributions could negatively affect their external cost competitiveness and lead to unemployment. Yet there is little to no evidence of a negative impact of minimum wages on unemployment,¹⁷ and the ILO has shown that in fact minimum wages can contribute to higher labour productivity, both at the enterprise level and across the economy, which can in turn strengthen competitiveness.¹⁸ On the other hand, the race to the bottom in the field of wage-setting and worker protections, known as social dumping, damages enterprises, workers, and Member States alike.

Despite increases of in-work poverty and part-time and precarious work across the Union, including 20.4 million workers living at risk of poverty only in 2019,¹⁹ the EU’s ability to address this phenomenon remains limited. Social dumping, combined with the historic decline of unionization rates, weakens the ability for unions to defend workers’ right to an adequate standard of living, as well as the role of collective bargaining. Although debate exists about the competence of the EU in this area, agreeing on common thresholds to ensure workers’ right to a decent standard of living would protect vulnerable workers who have been particularly hit by the Covid-19 crisis, including self-employed, non-standard, and precarious workers, among whom women and migrant workers are disproportionately represented.²⁰

Some action has been taken to combat the worst instances of social dumping. The Posted Workers Directive was revised in 2018, imposing the “equal pay for equal work in the same place” principle,²¹ and the European Labour Authority was established to support enforcement efforts at domestic level, building on the 2014 Enforcement Directive.²² The Commission also proposed a directive on adequate minimum wages in the EU, requiring that Member States set minimum wages “guided by criteria set to promote adequacy with the aim to achieve decent working and living conditions, social cohesion and upward convergence”.²³ These are commendable improvements, but they remain short of what would be required to protect workers’ bargaining position in the internal market. States still compete on wages and, especially, on social contributions paid by employers.

More systematic references to international human rights standards could significantly help improve the process of upward social convergence. For instance, consensus on the proposal for a directive on adequate minimum wages in the EU could be facilitated by a reference to the criteria derived from article 7 of the International Covenant on Economic, Social and Cultural Rights, as clarified by the Committee on Economic, Social and Cultural Rights.²⁴ And encouraging Member States to better align their international commitments would go a long way towards creating a more level playing field and combating the worst instances of social dumping. For example, only 7 EU Member States have ratified ILO Convention (No. 189) on Decent Work for Domestic Workers, despite the overrepresentation of women and migrant individuals in this category, and none have ratified the International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families.

Competing through taxation

Similarly, tax competition has deprived Member States from public revenues necessary to provide public services and to finance social protection: over the past 20 years, statutory corporate income tax rates have declined by an average of 11%, and competition among States to attract particularly mobile profits has been magnified by arrangements such as patent boxes, tax rulings, and “special purpose entity” statuses.²⁵ In 2015, the losses in public revenue for States were estimated at around €50-70 billion per year, merely as a result of corporate tax avoidance (i.e., profit shifting by companies within the EU); once other tax regime issues are included, such as special tax arrangements, inefficiencies in collection, and other practices, the losses amount to around €160-190 billion – an estimate provided in a study prepared for the European Parliament which the authors themselves consider conservative.²⁶

All Member States end up losing out from such competition: they now face the choice between lowering the levels of public services provided in areas such as healthcare or education, or shifting the tax burden on less mobile tax bases, such as labour or consumption.²⁷ Given the strong interdependence of the EU Member States in the internal market, the requirement of unanimity in the area of taxation²⁸ does not protect national sovereignty: rather, it impedes their ability to act collectively and thus more effectively, and it operates to the detriment of workers and consumers, as well as of local businesses who cannot, as multinational corporations do, rely on aggressive tax avoidance strategies through base erosion and profit-shifting.

It also means that taxes such as the financial transactions tax or the digital services tax, which could raise respectively €57 and 5 billion per year, cannot be adopted at EU level, and thus still depends on Member States taking action either individually or (as considered since 2013 for the financial transactions tax) through the enhanced cooperation procedure. It is hoped that advances will be made in this regard as the EU will have to mobilize resources to pay back its debts in the period 2028-2058, by increasing its own resources.

The EU has not remained inactive in this area. Various instruments were adopted to address the most serious abuses related to tax avoidance,²⁹ and aggressive tax planning has occasionally been addressed in country-specific recommendations (CSRs) under the European Semester, including by encouraging implementation of the OECD Multilateral Convention to Prevent Base Erosion and Profit Shifting. The heads of EU Member States’ tax administrations meet under the TADEUS (Tax Administration EU Summit) framework, to favor cooperation.

The unanimity requirement blocks more significant progress, however. Even the proposals of the European Commission on the common consolidated tax base (CCCTB)³⁰ remain stuck within the Council, despite the advantages of allowing consolidated taxable profits across the EU being shared between the Member States concerned according to an objective apportionment formula, and although this approach, while useful to combat aggressive tax avoidance strategies by large companies, would still leave it to each State to define its own tax rates.

The more significant problem is that, leaving aside the room it provides for aggressive tax planning, the principle according to which EU Member States may seek to improve the competitiveness of the companies they host by lowering corporate tax rates remains unchallenged.

Member States agreed in 1997 on a Code of Conduct for business taxation to address the most harmful forms of tax competition, and the European Code of Conduct Group reviews national tax measures and issues guidelines to favor compliance with the Code; in exceptional cases, State aid rules may serve to challenge taxation schemes that favor certain companies. These mechanisms have failed so far to stem the gradual erosion of the capacity for States to tax corporate profits, particularly as a result of digitalization and the reliance on letter-box companies or “special-purpose entities”. This form of unhealthy competition between States has until now been compensated in part by a broadening of the tax base, but there is little room left for expanding the tax base further.

Future CSRs should address specifically both the issue of corporate income taxes and that of the progressivity of the personal income tax. A failure to act on this would result in a situation in which the tax liability of the most mobile actors – corporations and the wealthiest individuals — will be gradually reduced, and in which the burden will be shifted on to labour and consumers.

Macroeconomic convergence

Macro-economic policy convergence rules in the EU, and in the eurozone in particular, still represent an obstacle to the fight against poverty at Member State level. The Stability and Growth Pact, initially adopted in 1997 as part of the pathway to the monetary union, in effect has prohibited Member States that have joined the single currency to rely on demand-driven growth. And the new social and economic governance established in the EU following the public debt crisis of 2009-2012 at first entirely ignored the impacts of fiscal and budgetary measures on social rights: social rights initially played a role neither in the European Semester,³¹ nor in the implementation of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG),³² nor in the “enhanced surveillance” procedure for States threatened by serious economic and budgetary difficulties,³³ nor in the workings of the European Stability Mechanism, established in 2012 to ensure financial stability within the EU.³⁴

The neglect of social rights in the macroeconomic adjustment programmes adopted under Regulation No. 472/2013 is illustrated for instance by the third Greek Rescue Package³⁵ adopted in July 2015, and the 2013 Cyprus bail-out programme.³⁶ Some reference is made to the need to minimize harmful social impacts of adjustment programmes,³⁷ especially as regards impacts on disadvantaged people and vulnerable groups;³⁸ the third rescue package for Greece also emphasized its ambition to promote growth, employment, and social fairness³⁹ as well as to involve social partners and civil society in the adoption and implementation of the adjustment programme^.40 The reforms however, which were met with strong resistance from workers’ unions and from public opinion in both Cyprus and Greece, and affected sectors such as healthcare, education, social security, pension or public administration, were mainly driven by financial consolidation and competitiveness concerns; fundamental social rights were ignored. Moreover, both on the expenditure and the revenue side, most of the burden fell on the middle class (the main beneficiaries of the affected social programmes), an unfair sharing of the burden that is particularly blatant in the case of Cyprus.⁴¹

2. The “socialization” of the European Semester

Against this background, considerable hopes have been placed in the “socialization” of the European Semester process, a process strengthened with the adoption in 2017 of the European Pillar of Social Rights (EPSR). The employment and social performance of the EU Member States is now assessed on the basis of a Social Scoreboard, comprised of 35 social, educational and employment indicators, grouped into three dimensions corresponding to the broad areas covered by the EPSR (equal opportunities and access to the labour market; dynamic labour markets and fair working conditions; and public support, social protection and inclusion). This is intended to support a process of gradual upward convergence in the social area in the EU.⁴²

Yet, major deficiencies remain. First, neither the country-specific recommendations adopted as part of the European Semester process, nor the Memoranda of Understanding agreed with countries benefiting from the intervention of the European Stability Mechanism, are accompanied by proper human rights impact assessments. While the Commission has pledged since 2014⁴³ to pay greater attention to “the social fairness of new macroeconomic adjustment programmes to ensure that the adjustment is spread equitably and to protect the most vulnerable in society”,⁴⁴the guidance published by the European Commission concerning Impact Assessments still suggests that in the field of economic governance, including “recommendations, opinions and adjustment programmes”, impact assessments are not a priori necessary, since (it is said) such “specific processes are supported by country specific analyses”.⁴⁵

In other terms, the promise was not kept. Indeed, even the social impact assessment accompanying the third rescue package adopted for Greece in July 2015, to examine “how the design of the stability support programme has taken social factors into account”,⁴⁶ remains short of an impact assessment based on human rights, taking into account the full range of fundamental social rights; and it was not participatory by design.  As regards the European Stability Mechanism, the recent reform of the ESM Treaty does not include a reference to social considerations, let alone to social rights: although the Court of Justice of the European Union expressed the view that the requirement to “promote the application” of the Charter⁴⁷ may imply a duty on the Commission to proactively take into account fundamental rights in the design of memoranda of understanding with States being provided with financial assistance,⁴⁸ neither the ESM, nor the Commission itself, appear to have adopted the tools that would allow them to effectively discharge this obligation.

This neglect is surprising, not only considering the pledges referred to above, but also because the Court of Justice of the European Union takes into account, when assessing measures adopted to remove excessive budget deficits, whether the sacrifices imposed on the population are equally shared,⁴⁹ and because the Guiding Principles on human rights impact assessments of economic reforms⁵⁰provide a useful starting point to prepare such assessments. I welcome in this regard the willingness expressed by my interlocutors to examine whether social impact assessments guided by human rights could be systematized in the future.

Secondly, the proclamation of the European Pillar of Social Rights cannot be seen as a substitute for the recognition of social rights. While the EPSR draws its inspiration from a range of international human rights instruments, including the European Social Charter and ILO instruments, it is not a new catalogue of rights. Neither was it meant to complement the EU Charter of Fundamental Rights in areas insufficiently covered by this instrument. As stated by the Commission itself: “Given the legal nature of the Pillar, for these principles and rights [listed in the EPSR] to be legally enforceable, they first require dedicated measures or legislation to be adopted at the appropriate level.”⁵¹ The Pillar remains for now a policy instrument: it provides useful guidance, but it does not create legal guarantees enforceable before courts of other independent bodies. This is also why the efforts developed within the EU legal order to strengthen the protection of social rights as enforceable entitlements should be pursued.

This points to a broader problem: the weak status of social rights in the EU’s constitutional architecture. The EU Charter of Fundamental Rights for instance,⁵² which since 2000 has played such an important role in introducing a fundamental rights culture within the EU institutions, presents some significant gaps in comparison for instance to the Council of Europe’s European Social Charter. In areas such as the right to healthcare, to social assistance as a means to combat social exclusion, or the right to housing, the Charter of Fundamental Rights guarantees no enforceable entitlements. While this cautious approach may be explained by the fact that these areas are primarily regulated by the Member States,⁵³ the underlying premise is incorrect. Guaranteeing a right does not necessarily equate having the power to take measures to implement it: it may imply, more modestly but at the same time importantly, that the Union commits not to restrict the ability of Member States, within there own sphere of competence, to adopt such measures aiming at the realization of the right in question. In order to respect a social right, there is no need for the EU to have the power to take measures that fulfil the said right: all that is required is that it abstain from taking or supporting measures that might affect its implementation.

V. The response to the Covid-19 pandemic

Following the outbreak of the pandemic on the European continent in March 2020, EU institutions have acted with remarkable swiftness, placing public health considerations above economic orthodoxy: their reaction was nothing short of remarkable. The rules on State aid were relaxed, in order to allow Member States to support companies facing financial difficulties following the initial lockdowns.⁵⁴ The general escape clause of the Stability and Growth Pact was activated on 23 March 2020, to allow countries to respond to the pandemic, and the Commission confirmed on 20 May 2020 that it would not place any country under the excessive deficit procedure, despite the high levels of public deficit in almost all EU Member States. The European Stability Mechanism established a new facility, the Pandemic Crisis Support, to allow Member States to respond to the pandemic emergency for up to 2% of their GDP. The European Central Bank resorted to unconventional measures, known as quantitative easing, as it did in 2014 with the financial asset repurchase programme (APP), this time in the form of the Pandemic Emergency Purchase Programme (PEPP), for a total amount of €1350 billion. Finally, and most significantly, the European Commission proposed an ambitious recovery plan for the EU worth €750 billion, NextGenerationEU, complementing the EU multiannual financial framework 2021-2027.

A number of challenges are associated with the use of these tools. I would like to highlight the following issues in particular:

State aid to companies

The relaxation of State aid rules primarily benefited the Member States, such as Germany, that could best afford to help their economic actors: this increases the risk of imbalances across the EU. The Commission has recommended that States make financial support conditional on the absence of links to jurisdictions featuring on the EU list of non-cooperative jurisdictions.⁵⁵ However, quite apart from the ability of the Commission to effectively follow up on this recommendation, this list has been challenged due to its flawed methodology – for instance, zero-tax rates jurisdictions or jurisdictions that impose only minimal taxes, such as Bahamas, Bermuda, British Virgin Islands, Jersey, Guernsey and Isle of Man, are not black-listed, as such tax rates are treated merely as a ‘risk indicator’ for the purposes of the EU blacklist; and EU jurisdictions are not blacklisted, although as noted by Oxfam, five EU countries (Cyprus, Ireland, Luxembourg, Malta, and the Netherlands) would fail the EU’s own criterion on fair taxation and would be blacklisted were it not for this automatic exemption.⁵⁶

Revising the Stability and Growth Pact

The suspension of the SGP again puts its revision at the top of the political agenda. If social investments (in education and training, but also in health and active labour market policy spending) were seen not as costs, but instead as investments that (just like those in research and development) ensure long-term productivity gains, this would not only create fiscal space for countries concerned with improving their competitiveness in the 21st century knowledge economy, as noted by the European Fiscal Board in its 2020 Annual Report: it would also alleviate any tension between the fulfilment of social rights such as the right to health, the right to education, or the right to an adequate standard of living, and the objective of stabilising the level of public debt below 60% of GDP. There is therefore a strong human rights rationale for allowing a deductible net social investment (for instance, up to 2% of GDP).⁵⁷

Supporting Recovery and Resilience

The centerpiece of NextGenerationEU is the new Recovery and Resilience Facility (RRF) accounting for €672.5 billion in loans (€360 billion) and grants (€312.5 billion).⁵⁸ In order to receive support from the RRF, Member States should submit national recovery and resilience plans (NRRPs) by 30 April 2021. The fight against poverty and the integration of disadvantaged groups are mentioned in the Preamble,⁵⁹ and three of the six pillars that NRRPs should address are social in nature.⁶⁰

Nevertheless, since the NRRPs are expected to be consistent with, and support the implementation of, the 2019 and 2020 country-specific recommendations addressed to States under the European Semester, some of my interlocutors saw this as a potential limitation to their ability to deliver on social objectives, due to what they perceive as the focus of CSRs on mid-term fiscal sustainability (although recent CSRs increasingly have incorporated social components). This fear is reinforced by the possibility under the draft RRF regulation to suspend payments where questions arise about “sound economic governance”.⁶¹

The fear is also supported by recent assessments of the content of CSRs over time. A member of the European Parliament commissioned a study that calculated that between 2011 and 2018 there were 63 CSRs recommending cuts on or privatization of healthcare, 50 recommending suppression of wage growth, 38 reducing job security, and 45 reducing support of unemployed, vulnerable or people with disabilities.⁶² Trade unions have also found many instances of CSRs recommending reforms of health systems to increase fiscal sustainability and cost-efficiency, with no references to allocating further investments in this sector.⁶³ Academics have traced similar findings.⁶⁴ Ensuring that future CSRs address tax competition, and indeed support tax justice, would be a step in the direction of avoiding the “permanent rise in poverty and inequalities” that the European Commission wants to prevent.⁶⁵

Whereas the NRRPs will have to include a minimum of 37% of expenditure related to climate and other environmental objectives, in line with the European Green Deal, and a minimum of 20% will have to be devoted to fostering the digital transition. No comparable target is defined for social cohesion. It is therefore even more essential that Member States be encouraged to adopt a reliable methodology to assess the contribution of their national plans to social cohesion, measuring the impacts on the reduction of poverty and inequalities.

Fears that the NRRPs will not be sufficiently focused on social cohesion should constitute a powerful encouragement to the Commission to ensure that the said plans will be based on meaningful engagement of stakeholders, including unions and civil society, and local governments: the network of European Semester officers in EC representations can play a useful supportive role in this regard.⁶⁶ Indeed, I was troubled by the fact that, despite the essential role they play in areas such as healthcare, education or housing, which are key to social cohesion, and the unique potential for social innovation resulting from the alliances they can build with civil society, cities or local governments were not involved in designing the NRRPs. In addition, some interlocutors highlighted that the perspective of people living in poverty had not been taken into account in the elaboration of the national plans, which is essential in order to ensure that “no one is left behind” in the economic recovery. 

In the long term however, only a revision of the SGP and a more fundamental rebalancing of the economic and social components of the EU’s socio-economic governance will ensure commitments to ending poverty and reducing inequalities in the Union do not end up hollow.

VI. Beyond the crisis: liberating Europe from poverty

The Action Plan on the Implementation of the European Pillar of Social Rights should be presented by the Commission in March 2021. This provides a unique opportunity to strengthen the fight against poverty. I wish to highlight here three priorities:

Setting targets

The lack of a comprehensive EU strategy to fight poverty and social exclusion with binding targets hinders the progress of EU Member States towards the eradication of poverty. An EU poverty strategy, which would be the cornerstone of the Action Plan, should include a target percentage of 50% poverty reduction by 2030, including child poverty, that applies equally across Member States based on the EU AROPE indicator. This poverty target should additionally be complemented by an inequality target that takes into account the latest developments in inequality indicators, in addition to the EU S80/S20 indicator.

Integrated within an overarching EU poverty strategy, ambitious targets on poverty and on inequality would showcase the seriousness of the EU’s commitment towards the Agenda 2030 and SDGs 1 and 10.

The Child Guarantee

To deliver on the pledge made in Principle 11 of the Pillar,⁶⁷ the Action Plan should include a roadmap for the Child Guarantee, a long-standing request of the European Parliament.⁶⁸ As noted above, one in four children in Europe are at risk of poverty or social exclusion, with lifelong consequences for the child concerned; and only 16% of all children under 3 are in formal childcare.⁶⁹

Building on the 2013 Commission Recommendation on Investing in Children (2013/112/EU), the Child Guarantee should adopt a rights-based approach to ensure effective access to the five priority areas listed by the European Parliament – free healthcare, free education, free childcare, decent housing, and adequate nutrition. Guaranteeing entitlements that parents and children may claim before independent bodies can significantly reduce the rates of non-take-up, which is largely attributable to the stigmatisation and shame experienced by people in poverty; universal guarantees, rather than means-tested support schemes, also have proven to be more effective.

The Child Guarantee should also ensure that families facing poverty are protected from institutional abuse. Since children living in poverty are particularly at risk of being separated from their families,⁷⁰ it should reiterate explicitly that, as emphasized by the Committee on the Rights of the Child, “economic reasons cannot be a justification for child removal”.⁷¹

Finally, consistent with the first pillar of the 2013 Recommendation on access to adequate resources and as reiterated by the Fundamental Rights Agency in its 2018 study on combating child poverty,⁷² support to children cannot be disassociated from support to parents’ access to employment and to a decent standard of living: as noted by the Eurocities network, “[t]o break the vicious cycle of the inheritance of poverty, it is not enough to focus on children in isolation from their parents; the family as a whole must be considered … Improving the situation of children depends on improving the situation of their family, whether by getting them out of debt, helping parents get a good job with fair pay, or by heating or renovating their homes”.

The Framework Directive on an adequate minimum income

Providing support to families is also consistent with the pledge made in Principle 14 of the EPSR on minimum income. The European Anti-Poverty Network notes that today, only the Netherlands and Ireland have a minimum income guarantee that provides a minimum income above the poverty line, and in 7 Member States, the minimum income is below 40% of the average household income. The Council of the EU itself deplored the high discrepancies between the Member States on the adequacy and coverage of existing minimum income schemes, as well as on beneficiaries’ access to enabling services, and requested that the Commission make proposals to “effectively support and complement the policies of Member States on national minimum income protection”.⁷³

I strongly encourage the presentation of a proposal for a framework directive on minimum income schemes in the EU.⁷⁴ It would set out a set of common human rights principles on the adequacy, universal unlimited access and coverage (including coverage of undocumented migrants,⁷⁵ and of youth⁷⁶), and enabling character of minimum income schemes, taking as minimum requirements the criteria following from the International Covenant on Economic, Social and Cultural Rights,⁷⁷ the ILO Social Security (Minimum Standards) Convention, 1952 (No. 102), and ILO Recommendation (No. 202) on Social Protection Floors. Minimum income schemes, however, should not be conflated with unemployment protections that incorporate incentives to work; while active labor policies are an important instrument to promote effective inclusion and while social services can play an important role in bringing people back to work, the imposition of conditionalities in access to minimum income is as damaging as it is ineffective. In attempting to assuage political fears of chronic dependency on social assistance, such conditionalities may end up leading to higher rates of non-take-up and to worsening the poverty trap. Minimum income schemes should uphold the principles of universality and equality in protection that are at the core of any system of guaranteed income.

The framework directive on minimum income schemes should set out a set of common characteristics that all EU countries must abide by, including participation of civil society, social partners, and people with direct experience of poverty in the design of such schemes; transparency in Member States’ budgets and implementation; compatibility with work to prevent in-work poverty; non-retrogression; accountability mechanisms so individuals can claim the benefits to which they are entitled. It should identify obstacles to the take-up of benefits and remove such obstacles to ensure effective access, paying particular attention to homeless people who face multiple hurdles in exercising their rights.

* * *
The report based on the visit to the EU will be presented at the 47th session of the Human Rights Council, to be held in Geneva in June 2021. The report will include the recommendations of the Special Rapporteur to the EU institutions, building on the preliminary findings presented in this end-of-mission statement. The Special Rapporteur looks forward to his future collaboration with the interlocutors he met during his visit.

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1 With an average value of 0.90 (EU-28). UNDP Human Development Reports 2020 http://hdr.undp.org/en/content/download-data

2 Gini 0.302 for EU-27, 0.307 when including the UK, Eurostat, EU-SILC Survey 2019 (tessi190); Palma 1.14 for 2018, OECD (2021), Income inequality (indicator). doi: 10.1787/459aa7f1-en; S80/S20 5.09 Eurostat, Income quintile share ratio S80/S20, EU-SILC Survey 2019 (ilc_di11)

3 Eurostat, EU-SILC Survey 2019 (ilc_peps01)

4 This holds true for Gini coefficient and the Palma and S80/S20 ratios, but there are notable exceptions. Marked declines in Gini coefficients between 2013 and 2018 are noticeable in Estonia (from 0.35 to 0.30), Greece (0.34 to 0.30), and Slovakia (0.27 to 0.24). OECD, Income inequality (indicator). doi: 10.1787/459aa7f1-en for Palma and Gini. Eurostat, Income quintile share ratio S80/S20, EU-SILC Survey 2019 (ilc_di11), for S80/S20.

5 Eurostat, EU-SILC Survey 2019 (ilc_peps01)

6 Eurostat, Labor Force Survey 2019 (une_rt_a)

7 Eurostat, EU-SILC Survey 2019 (ilc_peps01)

8 Eurostat, EU-SILC Survey 2019 (ilc_peps01)

9 European Institute for Gender Equality, Area A – Women and poverty: women at greater risk, Mar.10, 2020, p.2, https://op.europa.eu/s/oIyD

10 European Commission, Pension Adequacy Report, Volume 1, 2018 (latest), https://op.europa.eu/s/oIDV

11 European Institute for Gender Equality, Poverty, gender and lone parents in the EU, Apr.27, 2017, p.1 https://op.europa.eu/s/oIDH

12 Eurostat, EU-SILC Survey 2019 (ilc_peps03)

13 Eurostat, General government expenditure by function, 2018 (tepsr_sp110) https://ec.europa.eu/eurostat/databrowser/bookmark/1c86bc98-a979-4568-8945-892a37696718?lang=en; See also S.Spasova, T.Ward, Social protection expenditure and its financing in Europe, 2019, European Social Policy Network, https://op.europa.eu/s/oIHi

14 Including an increase of 21.8 points in Greece or 5.5 in Luxembourg, and a 10-point decrease in Romania. Eurostat, Living conditions in Europe – poverty and social exclusion, Oct.2020, p.14, https://ec.europa.eu/eurostat/statistics-explained/pdfscache/67012.pdf; see, for a similar assessment within the OECD, Crisis squeezes income and puts pressure on inequality and poverty, May 2013, p.5-6, https://www.oecd.org/els/soc/OECD2013-Inequality-and-Poverty-8p.pdf

15 Communication from the Commission, The European Green Deal, COM (2019) 640 final, 11.12.2019, p. 3.

16 A/75/181.

17 P.Heimberger, Does employment protection affect unemployment? A meta-analysis, Oxford Economic Papers, gpaa037, Nov.28, 2020 https://doi.org/10.1093/oep/gpaa037

18 ILO, Minimum Wage Policy Guide, p.75, https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_508566.pdf

19 This number, moreover, is likely an underestimation because the EU Labour Force Survey indicator for employment only covers those aged between 20-64 and those in formal and regular work. Eurostat, EU-SILC and ECHP surveys (ilc_li04), and LFS (lfsi_emp_a), 2019

20 Eurofound, Living, working and COVID-19, Nov.2020, https://www.eurofound.europa.eu/publications/report/2020/living-working-and-covid-19

21 Directive (EU) 2018/957 of 28 June 2018 amending Directive 96/71/EC concerning the posting of workers in the framework of the provision of services, OJ L 173, 9.7.2018, p. 16.

22 Directive 2014/67/EU of 15 May 2014 on the enforcement of Directive 96/71/EC concerning the posting of workers in the framework of the provision of services and amending Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System, OJ L 159 of 28.5.2014, p. 11.

23 COM(2020) 682 final of 28.10.2020 (art. 5(1)).

24 General Comment No. 23 (2016) on the right to just and favourable conditions of work (E/C.12/GC/23), paras. 18-24

25 Tax policies in the European Union 2020 Survey (European Commission, DG Taxation and Customs Union, 2020), p. 46.

26 R.Dover et al., Bringing transparency, coordination and convergence to corporate tax policies in the European Union, European Parliamentary Research Service, PE 558.773 (Sept. 2015).

27 Commission Communication, Towards a more efficient and democratic decision making in EU tax policy, COM(2019) 8 final of 8.1.2019, p. 7.

28 Arts. 113, 115, 192(2) and 194(3) of the Treaty on the Functioning of the European Union.

29 Anti-Tax Avoidance Directive Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market, OJ L 193, 19.7.2016, p. 1;Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries, OJ L 144, 7.6.2017, p. 1; Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements, OJ L 139, 5.6.2018, p. 1.

30 COM(2016) 685 final, of 25.10.2016 (on a common corporate tax base); COM(2016) 683 final, of 25.10.2016 (on consolidation).

31 Article 2a(2) of Council Regulation (EC) No. 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies, as amended by Regulation (EU) 1175/2011 of the European Parliament and of the Council of 16 November 2011 (OJL 306 of 23.11.2011, p. 12).

32 Under chapter II of the TSCG, in force since 2013, 22 States (the 19 euro area States plus Bulgaria, Denmark and Romania) commit to seek to maintain balanced public budgets, or even to strive to having a surplus, and to internalize the balanced-budget rule and the automatic correction mechanism in rules of constitutional rank in the domestic legal order (art. 3(2)).

33 Regulation (EU) No. 472/2013 of the European Parliament and of the Council on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (O.J. L 140, 27 May 2013, p. 1).

34 The ESM Treaty was signed on the 2 March 2012, and entered into force on the 1 May 2013.

35 Council Implementing Decision (EU) No. 2015/1411 of 19 August 2015 approving the macroeconomic adjustment programme of Greece (OJ L 219, 20 August 2015, p. 12).

36 Council Implementing Decision (EU) No. 2013/463 of 13 September 2013 on approving the macroeconomic adjustment programme for Cyprus and repealing Decision 2013/236/EU (OJ L 250, 20 September 2013, p. 40).

37 Article 1(3) of Decision 2013/463, Article 1(3) of Decision 2015/1411.

38 Article 2(2) of Decision 2013/463, Article 2(2) of Decision 2015/1411.

39 Recital 7 of Decision 2015/1411.

40 Recital 16 of Decision 2015/1411.

41 See Decision No. 2013/463, Article 2(8) to 2(14).

42 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Monitoring the implementation of the European Pillar of Social Rights, COM(2018) 130 final of 13.3.2018.

43 See the 2014 Political Guidelines of the European Commission: J.-C. Juncker, A New Start for Europe: My Agenda for Jobs, Growth, Fairness and Democratic Change, Political Guidelines for the next European Commission, Strasbourg, 15 July 2014.

44 European Commisssion, Communication from the Commission to the European Parliament, the Council and the European Central Bank: On Steps Towards Completing Economic and Monetary Union, COM(2015)600 final, 21.10.2015, p. 5; European Commission, Commission Work Programme 2016, COM(2015)610 final, 27.10.2015.

45 See the Better Regulation Toolbox, Tool #5: When is an IA necessary?,  http://ec.europa.eu/smart-regulation/guidelines/tool_5_en.htm

46 Commission Staff Working Document, Assessment of the Social Impact of the New Stability Support Programme for Greece, SWD(2015) 162 final, 19 August 2015.

47 Art. 51(1) of the Charter of Fundamental Rights.

48 Ledra Advertising Ltd, et al., Joined Cases C-8/15 P to C-10/15 P, judgment of 21 September 2016, EU:C:2016:701, para. 59 and 67.

49 Escribano Vindel, Case C-49/18, judgment of 7 February 2019, para. 67.

50 A/HRC/40/57.

51 SWD(2018) 67 final of 13.3.2018, p. 4.

52 OJ C 303 of 14.12.2007, p. 1.

53 Although Art. 153(1)(j) TFEU does mention the ‘combating of social exclusion’ among the fields in which the action of the Union may complement and support that of the Member States, this is an area in which the treaties have not provided for the adoption of EU legislation (see Art. 153(2) TFEU).  

54 Communication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak C/2020/1863, OJ C 91I, 20.3.2020, p. 1 (amended on a number of occasions since).

55 C(2020) 4885 final, of 14.7.2020.

56 Oxfam, “EU tax haven blacklist review” (Feb. 2020).

57 Proposals are made in this regard by A. Hemerijck and R. Huguenot Noel in a Science for Policy report commissioned by the Joint Research Center, currently in draft form.

58 The other components are the Recovery Assistance for Cohesion and the Territories of Europe (ReactEU), providing a total of 47.5billion euros in support of  the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the European Fund for Aid to the Most Deprived (FEAD); support going to rural development for 7.5 billion euros, channelled through the European Agricultural Fund for Rural Development (EAFRD) and contributing to social cohesion objectives in rural areas; the Just Transition Mechanism, including the Just Transition Fund, the InvestEU Just transition scheme, and the European Investment Bank (EIB) public sector loan facility; InvestEU, accounting for 5.6 billion euros, which aims to encourage private investment by reducing risks; RescEU (1.9 billion euros); and Horizon Europe (5 billion euros).

59 Annex to Council doc. 14310/20 (21 Dec. 2020), Recital 6da.

60 They concern social and territorial cohesion; health, and economic, social and institutional resilience; and education and skills (Id., Recital 6a).

61 In addition, a Member State may request that the European Council examine a national situation where “serious deviations [occur] from the satisfactory fulfilment of relevant milestones and targets”.

62 E.Clancy, Discipline and Punish (Feb.2020), p.28 https://emmaclancy.files.wordpress.com/2020/02/discipline-and-punish-eu-stability-and-growth-pact.pdf

63 ETUC, “COVID19: the impact of health care cuts,” (May 2020) https://www.etuc.org/en/document/covid19-impact-health-care-cuts

64 N.Azzopardi-Muscat et al., EU Country Specific Recommendations for health systems in the European Semester process: Trends, discourse and predictors, Health Policy, 2015, 119:3, https://www.sciencedirect.com/science/article/pii/S016885101500010X

65 2020 European Semester: Country-specific recommendations, 20.5.2020, COM(2020) 500 final, p.3

66 While the setting up a consultative process for the design of NRRPs is not, as such, obligatory, the draft RRF regulation, as provisionally agreed at the European Council on 21 December 2020, provides in its Preamble that Member States should include “a summary of the conducted consultation process with relevant national stakeholders”. Annex to Council doc. 14310/20 (21 Dec. 2020), Recital 21.

67 “Children have the right to affordable early childhood education and care of good quality. Children have the right to protection from poverty. Children from disadvantaged backgrounds have the right to specific measures to enhance equal opportunities.”

68 European Parliament resolution of 24 November 2015 on reducing inequalities with a special focus on child poverty, para. 46.

69 Eurostat, EU-SILC Survey 2019 (ilc_peps01), (ilc_caindformal)

70 Council of Europe, Parliamentary Assembly, Report, Doc. 13730, Social services in Europe: legislation and practice of the removal of children from their families in Council of Europe member States, 13March 2015, p.10.

71 Committee on the Rights of the Child, General comment No. 14 (2013) on the right of the child to have his or her best interests taken as a primary consideration (art. 3, para. 1),

72 Fundamental Rights Agency, Combating child poverty: an issue of fundamental rights (2018), section 3.1.

73 Council Conclusions on Strengthening Minimum Income Protection to Combat Poverty and Social Exclusion in the COVID-19 Pandemic and Beyond (9 October 2020), para. 22.

74 Based on a combination of articles 153(1)(c) (social security and social protection for workers), 153(1)(h) (integration of people excluded from the labour market) and 175 (strengthening of economic, social and territorial cohesion) TFEU.

75 Committee on Economic, Social and Cultural Rights, Statement on the Duties of States towards refugees and migrants under the International Covenant on Economic, Social and Cultural Rights (E/C.12/2017/1, 13 March 2017); Committee on Economic, Social and Cultural Rights, General Comment No. 19 (2007): The right to social security (E/C.12/GC/19), para. 37.

76 Certain minimum income schemes do not extend to the youth, an especially shocking discrimination since this category is overrepresented among individuals who are unemployed or in precarious employment.

77 Committee on Economic, Social and Cultural Rights, General Comment No. 19 (2008): The right to social security (art. 9) (E/C.12/GC/19).