Social Investment in an age of austerity

The EU Social Investment Package (SIP): risks and opportunities

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The Social Investment Package (SIP) is DG Employment’s main social inclusion contribution to Europe 2020. While a welcome opportunity to advance a European social model, consideration of social investment cannot be divorced by the context of austerity and the current framework for European economic governance. This short briefing first argues that SIP needs alignment with economic governance in the EU, it then discusses a number of fault lines in SIP before going on to discuss tangible example of how social investment can achieve better social outcomes. It ends by returning to issues of political legitimacy for EU initiatives such as SIP.

SIP anticipates that allocation of EU cohesion funding will be closely aligned with the European Semester and particularly with Country Specific Recommendations (CSR’s) in National Reform Programmes. However there are insufficient appropriate social CSR’s and Troika programme Member States (Ireland , Greece, Portugal and Cyprus) are particularly deficient in this regard1. Economic and Monetary Union (EMU) means austerity is a pre-condition for releasing social investment funding. To quote a competing vision of investment from MarioDraghi (Feb 20th 2012) A good consolidation is one where taxes are lower and where lower government expenditure is on infrastructure and other investments. There is a real danger that social investment will only be justified if it generates savings that can be used to deliver fiscal consolidation rather than improved social outcomes.2 There remains therefore the serious political challenge of mainstreaming a social Europe vision into a reshaped social EMU with inclusive, growth friendlytaxation to fund social investment and a stimulus initiative for quality jobs.

Some fundamental fault lines in the SIP analysis merit discussion. While Active Inclusion remains a central focus ‘work for those who can’ is given more priority than ‘social protection for those who can’t’. This is important and has serious gender implications. There are also tensions between competing functions of social policy and deciding the balance of allocation of resources between income support, social investment and social enterprise. At a macro level we see ex ante conditions which attach requirements for structural reforms to SIP funding, this has clear implications for shifts in power and consequences for subsidiarity and democracy. SIP proposals for micro behavioural conditionality has implications for fundamental rights. Progress funding will research making cash transfers conditional on Early Childhood Education and Childcare (ECDE) registration and claimants including mothers may be obliged to participate in precarious labour markets. There are dangers in using quantitative tools from economics (e.g. cost benefit analysis) without adapting them for wider social uses, they can play only a partial role in policy reform agendas. That said tools such as Social Return on Investment can can also be used to measure the effect of cuts in social policy.

Preventative investment does make sense.3 Taking homelessness as an example, streamlining and integration benefit administration means more than One Stop Shops 4and improving delivery, real integration at a high level in policy design can generate cost effective social outcomes. SIP offers the example of ‘housing-led’ social investment to reduce homelessness putin housing at the centre of the strategy. In The Netherlands € 1 saved € 2.20 in public expenditure and 2006 Social Housing evictions reduced to 70 % of the 2005 level. Scottish 2010 data shows temporary accommodation costs of £5300 per household per year could be avoided through successful eviction mediation costing £600. In Austria eviction prevention cost €370 per person compared to reintegration costs of €5520 per person. In Munich, a special unit was able to prevent 846 of 1001 evictions and in UK, anti-repossession measures reduced evictions by 25% (36,000 in 2010 compared to 46,000 in 2009). 30 ESF-funded projects directly targeted homeless people 2007- 2013, as well as funds SIP brings together a number of tools including European Commission guidelines on the best practice from institutions to community-based care, EU research and statistical data collection to enhance analysis of policies and trends, the opportunity of a common definition of homelessness and housing exclusion based on ETHOS, the Feansta consensual framework for measuring homelessness.

The recommendations and analysis on preventative investment in Early Childhood Education Care (ECEC) are particularly important. Preventative investment returns have been captured through various studies. In the US HighScope programme Perry showed a 16:1 ROI (Return on Investment), while in Chicago evaluations found an 11.1 ROI. In Ireland the Geary Institute found a 7:1 ROI. Heckman (2007) found the ROI is higher the earlier the investment in a child’s life cycle5. Apart from very welcome child outcomes which feed into higher human productivity, there are also more short term growth stimulus returns from such social investment. 2004 research in Cornell University showed significant stimulus multipliers associated with investment in ECEC with a growth multiplier of 2 and employment multiplier of 1.5 and that the higher the quality of childcare, the higher the multipliers. Finally making the link across child investment and homelessness Irish data shows that investment in ECEC at €2850 p.a has the potential to reduce costs €70,803 p.a for adult imprisonment (highly correlated with low education outcomes).

Social protection is a vital social floor and automatic stabilizer. Income support and social investment are complimentary rather than competing and SIP therefore needs to demand additional resources for social investment. A key focus for SIP is the relationship between income support and activation. Without additional resources there is a danger arguments for social investment will be used to justify targeting, conditionality and temporary supports. A number of safe guards are required to protect universality and fundamental rights. Policy decisions need to be evidence based rather than budget driven, so for example the balance between child cash income supports or in kind supports & services (such as school meals) needs to be determined by what delivers better child outcomes not what costs less. Reference budget standards at 60% risk of poverty rates offer a key EU wide tool in protecting the adequacy of income supports especially if developed in a EU Framework or Directive on adequate minimum income. Much of the problem associated with unemployment is not that people will not work, it is that available work means under- employment, labour market precarity and in-work poverty. Rather than over-focusing on activation conditionalities, SIP should enable quality jobs, new forms of employment rights and measures to support women balance work and care.

Finally it is crucial that the SIP reform agenda does not add to the process of undermining democracy already implicit in the process of determining National Reform Programs and Country Specific Recommendations. There are key issues of participation and governance at stake. The Code of Practice on Partnership has to elaborate new innovative approaches for bottom up participation and address the particular challenge of including people experiencing poverty in economic governance and new public spheres. Public participation and deliberation are necessary to overcome challenges of political legitimacy and to deliver a politics that is capable of addressing crisis and supporting an alternative sustainable European economic governance strategy


1 EAPN 2013 EAPN Assessment of 2013 Country-Specific Recommendations (CSRs) and proposals for Alternative CSRs (National and EO Members) EAPN Brussels

2 EAPN 2013 EAPN response to the Social Investment Package “Reason for hope or tool to reduce social spending EAPN Brussels

3 Coote A and M Harris (2013) The Prevention Papers London, The New Economics Foundation

4 One Stop Shops are a way of delivering social policy in an integrated fashion, so the end user of the public services only has to engage with a limited points of service provision.

5 Start strong 2012 The Economics of Children’s Early Years, Early Care and Education in Ireland: Costs and Benefits, Dublin, Start Strong