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Info Service on UN Sustainable Development (Feb21/01) Geneva, 2 Feb (Kanaga Raja) – By relegating socioeconomic rights to second-tier, aspirational principles and optional targets, the European Union has all but declared poverty a necessary evil and, in doing so, is undermining its own efforts to make poverty history in the region, a United Nations human rights expert has said. In an end-of-mission statement issued at the end of an official visit to the EU (25 November 2020 to 29 January 2021), Prof Olivier De Schutter, the UN Special Rapporteur on extreme poverty and human rights, said that the European Union was built as a beacon of hope for social progress, but it is still failing too many. “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,” he said. He added that 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,” said Prof De Schutter. He said that 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. “While the EU has made recent progress in the eradication of poverty, it should not fall into complacency,” said Prof De Schutter. “Its own commitment to lift 20 million people out of poverty by 2020 was largely missed. Since the EU has experienced steady economic and employment growth until very recently, the only explanation for this failure is that the benefits have not been evenly distributed. This is a defeat for social rights,” he added. “The EU can play an important role in galvanizing Member States’ anti-poverty efforts, notably through the yearly recommendations it issues to its Member States. But instead of prioritizing investments in healthcare, education, and social protection, these recommendations have often imposed budgetary cuts in the name of cost-efficiency,” said the rights expert. “Since 2009, Member States have only decreased their investments in these areas critical for poverty reduction,” he noted. During his visit from 25 November to 29 January, Prof De Schutter met with representatives from the European Commission, the Council of the EU, the European Parliament, the European Labor Authority, the European Economic and Social Committee, the Fundamental Rights Agency, the European Central Bank and the European Investment Bank, as well as national or local representatives from France, Spain, Italy, and Romania. He also spoke with a number of civil society organizations and with social workers and social partners. The final report of the Special Rapporteur’s visit is expected to be presented to the UN Human Rights Council in June 2021. POVERTY IN THE EU According to the rights expert, 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, and the EU as a whole enjoys relatively low levels of inequality and income concentration. However, one in five people – over 92.4 million or 21.1% of the population – are still at risk of poverty in the EU-27, and inequality levels have remained virtually static or even worsened since the 2008 crisis. A total of 19.4 million children, representing 23.1%, are at risk of poverty across the Union, an exceedingly high number for developed country standards, said the rights expert. “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,” said Prof De Schutter. “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,” he added. 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, he noted. The risk of poverty is indeed much higher for those unemployed (at over 65.4%), said Prof De Schutter. But policies such as limiting social assistance in amounts or time-frames 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, he added. “In fact, unemployment rates have decreased in all Member States since they peaked in 2013, which suggests an uneven distribution of the benefits arising from labor market improvements.” According to the Special Rapporteur, poverty will not be ended with employment policies alone, but indeed with strong re-distributive measures. The faces behind the poverty numbers are also markedly gendered: women experience higher poverty rates than men (22.3% vs 20.4%), and this gap only grows wider with old age (22.3% vs 18.2%) as a result of inadequate pensions deriving from career interruptions to assume care responsibilities. 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. Women are also disproportionately represented among lone-parent families (85%), 40.3% of which have children and are at risk of poverty or social exclusion. “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,” said the Special Rapporteur. 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, he added. 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. According to the Special Rapporteur, 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. “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,” said Prof De Schutter. “Unless the EU designs a Union-wide poverty strategy, with ambitious new targets and coherent measurements, it is bound to repeat the same mistakes,” he cautioned. He noted that 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. “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,” said the rights expert. “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.” said Prof De Schutter. “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 multi-year timeline setting out measures to be adopted and allocating responsibilities, together with indicators allowing to monitor progress towards targets,” he added. “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 re-thinking 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,” said Prof De Schutter. The current crisis, with an expected 7% fall of the EU’s GDP in 2020, makes it even more urgent to re-balance 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, said the rights expert. He added that the constitution of the European Union, however, does not make the EU fit for the purpose of combating poverty. The re-definition 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. 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, he said. The Special Rapporteur also said that the EU’s constitution is ill-suited to combat poverty. He said 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. CONSTRAINTS FACED BY MEMBER STATES IN FIGHTING POVERTY The Special Rapporteur highlighted a number of constraints that EU Member States face in combating poverty. Among these, he noted that 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, 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.” 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, he said. 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, the EU’s ability to address this phenomenon remains limited. Similarly, tax competition has deprived Member States from public revenues necessary to provide public services and to finance social protection, he said. 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. In 2015, the losses in public revenue for States were estimated at around EUR 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 EUR 160-190 billion – an estimate provided in a study prepared for the European Parliament which the authors themselves consider conservative, said the rights expert. “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,” Prof De Schutter said. Given the strong interdependence of the EU Member States in the internal market, the requirement of unanimity in the area of taxation 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, he added. He said it also means that taxes such as the financial transactions tax or the digital services tax, which could raise respectively EUR 57 billion and EUR 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,” said the rights expert. The Special Rapporteur also said that macro-economic policy convergence rules in the EU, and in the euro-zone in particular, still represent an obstacle to the fight against poverty at Member State level. The Stability and Growth Pact (SGP), 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. Furthermore, 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, he said. The rights expert also drew attention to the EU’s response to the Covid-19 pandemic, saying that 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. In this context, Prof De Schutter highlighted the relaxation of rules on State aid, in order to allow Member States to support companies facing financial difficulties following the initial lockdowns; the activation of the general escape clause of the Stability and Growth Pact, to allow countries to respond to the pandemic; the European Stability Mechanism establishing a new facility, the Pandemic Crisis Support, to allow Member States to respond to the pandemic emergency for up to 2% of their GDP; and the European Central Bank resorting to quantitative easing measures, in the form of the Pandemic Emergency Purchase Programme (PEPP), for a total amount of EUR 1,350 billion. In addition, the European Commission proposed an ambitious recovery plan for the EU worth EUR 750 billion, NextGenerationEU, complementing the EU multi-annual financial framework 2021-2027. However, Prof De Schutter pointed to a number of challenges associated with the use of these tools. For instance, he said the relaxation of State aid rules primarily benefited the Member States, such as Germany, that could best afford to help their economic actors, increasing the risk of imbalances across the EU. Noting that the suspension of the SGP again puts its revision at the top of the political agenda, he said that 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), said Prof De Schutter. Noting that the Action Plan on the Implementation of the European Pillar of Social Rights should be presented by the European Commission in March 2021, the Special Rapporteur said that this provides a unique opportunity to strengthen the fight against poverty. 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, he added. 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. This poverty target should additionally be complemented by an inequality target that takes into account the latest developments in inequality indicators, he said. “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,” said Prof De Schutter.
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