Published at a time when the EU’s full commitment to social issues is in doubt, the Letta Report’s proposals on the future of the Single Market and its implications for social Europe is worth focusing our attention on.
As Social Platform, we are seeing that the space given to social policies continues to shrink. The recently leaked EU strategic agenda for the next mandate puts a strong emphasis on defence, security, competition and industrial policies. Similarly, the La Hulpe declaration, though focused on social rights, places an added focus on industrialisation and productivity.
The Letta Report has identified three main challenges facing the EU in the years ahead: navigating the green and digital transitions, enlarging the EU and improving Europe’s security and defence. All fall against a wider objective to boost European competitiveness against China and the US and will necessitate major reforms. So what does all this mean for the social dimension of the single market?
The good news from the Report is that the social dimension will remain a key part of the single market going forward. The success of single market hinges on its impact on the lives of people to improve living standards and guarantee social progress. In the words of Jacques Delors “if European policies jeopardise cohesion and sacrifice social standards, the European project has no chance of winning the support of European citizens“.
The Report acknowledges that the single market should play a key role in tackling poverty and inequalities and ensure the economy isn’t a race to the bottom that reduces social standards. Indeed, the Letta Report acknowledges that the single market has, unintentionally, led to a growth agenda that has contributed to an increasing wealth gap that increased prosperity for some at the expense of others.
With 150 pages to cover, here are some key takeaways for what the main report findings mean for social policies.
Policies
Social Services & Services of General Interest
The report recognises the single market has facilitated a privitisation of social services, that has put greater focus on profit at the cost of quality services and the wellbeing of beneficiaries or workers.
More broadly the Letta Report proposes an action plan for Services of General Interest, with an overarching EU approach, rather than the current national approach which has led to fragmentation. The action plan would ensure the affordability of SGI, address barriers to accessing services and contribute to social protection and greater social inclusion.
Housing:
The affordability of housing is a significant social challenge which the single market should work towards addressing. In addition to proposing an EU taskforce on housing, the single market should address higher building costs, increased mortgage costs and tackle institutional investors. Housing must be reframed as a public good, not an instrument for wealth generation or investment. Specifically on social housing the report recommends broadening the definition of social housing within Services of General Economic Interest, as the current definition is too narrow and constrains public authorities capacity to invest in social housing.
Social Protection Systems:
There needs to be greater attention to robust social protection systems, supported with targeted policies that can address social inequalities. While the report details the importance of social protection, and wider social cohesion, there isn’t specific proposals made.
Education & Skills:
A key theme of the report is the establishment of a fifth freedom, freedom to stay. Freedom to stay is the counter-weight to freedom of movement, and enables people to make a choice to move or stay, rather than being forced to move due to a lack of opportunities or poor cohesion. Education and skills are rooted in this freedom, calling for better integration of education, research and skills at EU level, to create opportunities and effectively address brain-drains.
Social Economy
Social Economy actors should have greater access to financing, including adapting the general block exemption regulation for state to social enterprises.
Taxation:
All companies in Europe should pay their fair share, with a minimum effective tax rate of 15% as agreed by the OECD. Alongside taxation, the EU and member states are specifically advised to clamp down on tax avoidance and tax evasion.
Reforms
The report mentions additional reforms to the single market, including broadening the scope of the single market to include defence, energy and electronic telecommunications. Proposed reforms include the following.
Savings & Investments Union:
Europe is lagging in much needed investments for green technologies, clean energy and defence, in order to bridge those investment gaps a greater focus will have to be given to mobilising private funds. A Savings and Investment Union aims to better use the nearly EUR33 trillion in European savings account.
The starting position for investments in the EU is on private funds, which will later be complemented by public funding.
EU Bonds:
To complement the use of private funds for investment the EU should issue bonds to enable borrowing for EU wide investments and infrastructure projects. While conditionality of such EU funds is referenced, there is nothing specific on the social dimension. However, Social Platform is clear that EU funds should do no significant social harm, ensuring EU funds are used for betterment of environment, people and wellbeing.
State Aid:
Broadly state aid rules are not proposed for a re-negotiation, as they prevent distortions across the single market, however there is a proposal for an EU wide mechanism to support financing of infrastructure projects that are pan-European, noting that current rules make international investments in infrastructures more difficult. Additional recommendations are made to support social economy actors in relation to the General Block Exemption Regulation (GBER).
Public Procurement:
The report is quite clear in proposing an over-haul on public procurement. Competition for bids is falling, and a disproportionate number of bids are winning on cost alone which is not conducive to quality and prevents the development of strategic supply chains in Europe, and often sacrifice quality to compete with cheaper of goods and services from countries with lower quality standards.
Public procurement should promote social values, enhance social capital and align with EU ambitions in the green and digital transitions. The Letta Report proposes a “High Road” to procurement that prevents races to the bottom and undercuts wages or working conditions and promotes social advancements and economic inclusivity. Although social services not mentioned in relation to public procurement, the report specifies the importance in support social economy actors, through the social economy action plan, when reforming public procurement.
Implications for Social Policy
Within this political context here are some first impressions of the direction we are moving in.
Social Priorities within Single Market:
The single market will provide a new avenue to address housing, social protection, social services, social economy and services of general interest. The social dimension, and the importance of social progress is made clear, and should be an opportunity for civil society to advocate in the coming years. How these topics emerge in Strategic Agenda of the EU and the next political guidelines of the European Commission will be critical, but certainly give an insight into how policies are currently being framed.
The Wider Context of the Single Market:
However, the social policy space continues to shrink. While the social dimension is mentioned, the clear focus is on Europe’s competitiveness. The over-arching vision for the single market is on defence, energy and electronic telecommunications. Although 10% of Europeans are living in energy poverty, the focus of energy is linked to reducing energy costs for industries. Social Platform, and our members, will have to advocate strongly to ensure social policy isn’t phased out in the name of competition.
Investments
The report places a big focus on improving investments in Europe, with new means for public and private financing of much needed investments. However, such investments are on green infrastructures, defence spending, weapon manufacturing, digital technologies and improving energy infrastructures. Despite the significant social investment gap we have in Europe, we must ensure they are not sidelined for defence spending. Mobilising financing for social investments will be key to guarantee the social dimension of the single market.
