COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS - JOINT REPORT ON SOCIAL INCLUSION summarising the results of the examination of the National Action Plans for Social Inclusion (2003-2005) {SEC(2003)1425}

Executive summary

Introduction

PART I - The European Union

1. Social Inclusion - the EU situation

2. Key trends and new and emerging challenges arising from the NAPs/Inclusion

3. Strategic approaches adopted in the NAPs/inclusion (including targets)

4. Key policy approaches for objective 1.1. 'Promoting employment'

5. Key policy approaches for objective 1.2. 'Promoting access to resources, rights, goods and services'

5.1. Social protection systems

5.2. Housing and basic services

5.3. Access to health care

5.4. Access to education

5.5. Access to culture

5.6. Access to justice

5.7. Access to sport and leisure

5.8. Access to transport

6. Key policy approaches for objective 2. 'Preventing the risks of exclusion'

6.1. Promoting e-inclusion

6.2. Preventing and tackling over-indebtedness

6.3. Preventing and tackling homelessness

6.4. Preserving family solidarity

7. Key policy approaches for objective 3. 'Helping the most vulnerable'

7.1. Promoting the integration of people facing persistent poverty

7.2. Eliminating social exclusion among children

7.3. Promoting comprehensive actions in favour of areas marked by exclusion

8. Key policy approaches for objective 4. 'Mobilising all relevant bodies'

8.1. Promoting the participation of people suffering exclusion

8.2. Mainstreaming the fight against exclusion

8.3. Promoting dialogue and partnership

9. Gender mainstreaming

10. Use of indicators

11. Identification of examples of good practice

PART II - The Member States

BELGIUM

DENMARK

GERMANY

GREECE

SPAIN

FRANCE

IRELAND

ITALY

LUXEMBOURG

THE NETHERLANDS

AUSTRIA

PORTUGAL

FINLAND

SWEDEN

UNITED KINGDOM

Executive summary

Overall assessment and key conclusions

A renewed political commitment

The Lisbon European Council of March 2000 asked Member States and the Commission to take steps to make a decisive impact on the eradication of poverty by 2010. It also agreed that Member States should co-ordinate their policies for combating poverty and social exclusion on the basis of an open method of co-ordination combining common objectives, national action plans, common indicators with the aim of promoting more ambitious and effective policy strategies for social inclusion.

The importance of achieving the Lisbon aim of a significant reduction of poverty should not be underestimated. Success will critically depend on how Member States translate the strategic ambitions set out in their NAPs/incl into concrete actions to improve the living conditions of the most vulnerable people. It is also crucial that the EU economies return fast to a trajectory of sustainable economic growth. In this connection, and in the context of the development of a knowledge-based society, Member States should ensure a consistent link between their inclusion strategies and their policies in the economic and employment fields.

The present report identifies key trends and challenges across the Union and good practice and innovative approaches of common interest. It will form the basis for the Joint Council/Commission Report on social inclusion to be presented to the Spring European Council of 2004. It assesses progress made towards meeting the Lisbon objective for poverty reduction and maps out the policy agenda for the future EU social inclusion process in a context which is set to change radically. The process will, from 2004, have to take account of the accession of 10 new Member States where the nature and extent of poverty and social exclusion are often sharply different. From 2006 onwards, it will form part of the new streamlined structure for EU-level policy co-ordination on social protection as proposed by the Commission in May 2003 and endorsed by the Council in October 2003.

A still worrying background of poverty and exclusion

Despite an overall improvement since 1995, the numbers affected by relative income poverty are still very significant with more than 55 million people or 15 % of the EU population living at risk of poverty in 2001. More than half of them lived persistently on low relative income. Across the Union there are considerable differences in the severity of the problem. For instance, the overall risk of poverty ranged in 2001 between 10% in Sweden and 21% in Ireland. In Southern countries, as well as in Ireland, poor people not only benefit comparatively less from the overall prosperity of their respective countries, but also are more likely to be subject to more persistent forms of poverty and deprivation. The risk of poverty tended to be significantly higher for particular groups such as the unemployed, single parents (mainly women), older people living alone (also women mainly) and families with numerous children.

A particular risk of poverty and social exclusion is faced by young people deprived of sufficiently solid skills to get a firm grip on the labour market. In 2002, almost 19% of the people aged between 18 and 24 had exited the school system too early and were not following any training. Also children are in a vulnerable situation. They tend to experience levels of income poverty that are higher than those of adults (19% in 2001), and material deprivation in the early years may affect negatively their development and future opportunities. A particular concern arises when children are living in jobless households, without almost any links to the world of work (10% of all children in the Union, in 2002).

The eradication of poverty and social exclusion requires further steps

Against this background, the second generation of NAPs Inclusion constitutes a strong political acknowledgement, three years after the Lisbon Summit, of the challenge to ensure social inclusion across the European Union. Member States have reiterated that modernisation of the economy should go hand in hand with efforts to reduce poverty and fight against exclusion.

This is demonstrated by the main positive strategic developments in this second generation of NAPs Inclusion:

* The new NAPs are generally broad in scope, reflecting the multi-dimensional nature of poverty and exclusion and covering a wider range of policy fields, notably the provision of basic services like lifelong learning, health, and housing. They also better reflect the diversity of national strategies and the different degrees of development of social protection systems.

* There is a clear effort on the part of a majority of Member States to set quantitative targets for poverty reduction. Others have set quantified intermediate targets which nevertheless can serve to lend more ambition to policy and to facilitate monitoring of the NAPs.

* Many Member States have significantly strengthened their institutional arrangements for mainstreaming poverty and social inclusion into national policy making. There is also much greater emphasis on extending this process to regional and local levels.

* The process of encouraging the participation of key stakeholders of civil society (NGOs, social partners and business community) in the preparation of the NAPs has been improved. This should strengthen the relevance of the NAPs and the Nice objectives as a reference tool for national policy making.

However, while real progress has been made, it should also be noted that more needs to be done, in particular:

* A truly multidimensional approach will require further attention to issues such as housing, lifelong learning, culture, e-inclusion, and transport.

* The setting of targets needs to be developed further so that targets are increasingly specific, quantified and ambitious.

* More emphasis should be put on achieving and monitoring the efficiency and quality of measures designed to tackle poverty and social exclusion.

* The progress made in mainstreaming social inclusion through strengthening institutional arrangements needs to be further deepened, particularly to ensure that social inclusion goals be borne in mind in setting overall expenditure priorities.

* The increased participation of civil society must be extended beyond the preparation of the NAPs to their implementation and monitoring.

* More needs to be done to ensure that economic, employment and social policies are mutually reinforcing.

Six key priorities

Taking into account the diversity of the NAPs Inclusion 2003-2005, the Member States are urged to give particular attention, over the course of the next 2 years, to the six following key priorities. These are especially relevant in the context of a continuing uncertain global economic and political climate:

1. Promoting investment in and tailoring of active labour market measures to meet the needs of those who have the greatest difficulties in accessing employment;

2. Ensuring that social protection schemes are adequate and accessible for all and that they provide effective work incentives for those who can work;

3. Increasing the access of the most vulnerable and those most at risk of social exclusion to decent housing, quality health and lifelong learning opportunities;

4. Implementing a concerted effort to prevent early school leaving and to promote smooth transition from school to work;

5. Developing a focus on ending child poverty;

6. Making a drive to reduce poverty and social exclusion of immigrants and ethnic minorities

Keeping the momentum ahead

In order to keep up the momentum of the positive developments evident in the NAPs until the assessment of the open method of co-ordination for fighting poverty and exclusion, which will take place in 2005, Member States and the European institutions should:

* continue to promote the mobilisation and participation of all stakeholders from civil society as well as the marginalised persons themselves in the implementation and monitoring of the NAPs/inclusion 2003-2005 and ensure greater visibility of the NAPs/inclusion as a tool for encouraging political debate and support for national strategies

* ensure that the inclusion and employment strategies are implemented in a consistent and mutually reinforcing way and that a good interaction is ensured between the different components of the upcoming streamlined social protection process ;

* ensure that the social inclusion priorities identified in the NAPs are reflected in the mid-term review of the Structural Funds and in the strategic orientations for their future after 2006;

* take full account of gender issues and the increasingly significant issue of exclusion among immigrants and ethnic minorities;

* maintain the efforts to develop the commonly agreed indicators or, where appropriate and with a complementary role, national indicators for the monitoring of national policy targets, with a view to facilitating the assessment of the achievement in reducing poverty and exclusion in 2005;

* continue to develop the national statistical base in order to be able to monitor effectively the social inclusion strategies and to ensure that they support the implementation of EU SILC so that this instrument may deliver more timely and reliable statistics to underpin the common indicators;

* make full use of the pool of good practices already displayed by the NAPs/inclusion, by intensifying the process of exchange of best practice by ensuring effective dissemination of learning and by supporting this through by EU funding programmes such as EQUAL or the Community Action Programme to combat social exclusion;

* promote the progressive phasing in of the candidate countries into the overall process, based upon the forthcoming Joint Inclusion Memoranda (JIMs) and upon the adoption of national action plans for the new Member States in 2004;

* ensure that the Union's social inclusion goals are reflected during the course of the preparation of and the follow up to the next Spring European Council, and in particular that there is consistency between such goals and the Broad Economic Policy Guidelines and the European Employment Strategy.

Introduction

Purpose and structure of the report

The present report assesses progress made in the implementation of the open method of co-ordination, sets key priorities for urgent action and identifies good practice and innovative approaches of common interest to the Member States. It aims at promoting more ambitious and effective policy strategies for social inclusion through mutual learning. It draws extensively from the National Action Plans for social inclusion 2003-2005, that all Member States submitted in July 2003. The report is intended to provide the basis for the Joint Report on social inclusion that the Commission and the Council will present to the Spring European Council of 2004, as a key step in the periodic assessment of progress towards the social and economic goals defined by the Lisbon strategy.

The focus of the report is on policies and strategies implemented by Member States in combating poverty and social exclusion, and therefore promoting greater social inclusion. It highlights examples of good practice in several policy domains, on the basis of indications and information provided in the NAPs/inclusion for the period 2003-2005. It is not the purpose of this report, neither of the NAPs/inclusion, to present a general description of how national social protection systems are organised or what impact such systems as well as policies in other domains have had on social cohesion. Therefore, the report will tend to privilege recent action and may neglect more structural policies or institutions that concur in a decisive manner to promote social inclusion. For this reason, references to Member States in the text of the report cannot be interpreted as exhaustive, in the sense that they will highlight examples of recent policy action, while disregarding those cases where similar policies exist for long.

In order to provide the necessary context information, the report starts by analysing the key features and trends as regards social inclusion in the EU. This analysis is carried out in a comparative framework, on the basis of the set of commonly agreed indicators endorsed by the Laeken European Council. The report then moves to a description of the main challenges as perceived by the Member States in their NAPs/inclusion, on the basis of which it is possible to set a policy agenda for the Union over the period covered by the Plans (2003-2005) in the form of a concise list of six key priorities, taking into account the diversity of initial situations and of social systems.

The report further assesses how Member States are translating the EU common objectives into national strategies to combat poverty and social exclusion. This role of the report is of special significance given that the NAPs/inclusion 2003-2005 were expected to bring out significant improvements as regards the multidimensionality, the coherence and the ambition of national strategies. The experience gained with the first series of NAPs/inclusion as well as the setting of national targets for the reduction of poverty, as requested by the Barcelona European Council, should be of considerable help here.

Throughout the report, frequent use is made of the expressions "poverty", "social exclusion " and "social inclusion". For ease of reference, the following definitions are given [1]:

[1] These definitions are intended to complement and reinforce the understanding of poverty and social exclusion which is reflected in the common objectives and commonly agreed indicators which under pin the open method of co-ordination.

Poverty: People are said to be living in poverty if their income and resources are so inadequate as to preclude them from having a standard of living considered acceptable in the society in which they live. Because of their poverty they may experience multiple disadvantage through unemployment, low income, poor housing, inadequate health care and barriers to lifelong learning, culture, sport and recreation. They are often excluded and marginalised from participating in activities (economic, social and cultural) that are the norm for other people and their access to fundamental rights may be restricted.

Social exclusion: Social exclusion is a process whereby certain individuals are pushed to the edge of society and prevented from participating fully by virtue of their poverty, or lack of basic competencies and lifelong learning opportunities, or as a result of discrimination. This distances them from job, income and education opportunities as well as social and community networks and activities. They have little access to power and decision-making bodies and thus often feeling powerless and unable to take control over the decisions that affect their day to day lives.

Social inclusion: Social inclusion is a process which ensures that those at risk of poverty and social exclusion gain the opportunities and resources necessary to participate fully in economic, social and cultural life and to enjoy a standard of living and well-being that is considered normal in the society in which they live. It ensures that they have greater participation in decision making which affects their lives and access to their fundamental rights [2].

[2] As defined in the Charter of the Fundamental Rights of the European Union.

Background

Following the recognition under Articles 136 and 137 EC of the Amsterdam Treaty of combating social exclusion as one of the fields where the Community had an active role in supporting and complementing the activities of Member States, the Lisbon European Council of March 2000 agreed on the need to take steps to make a decisive impact on the eradication of poverty by 2010. It also agreed that Member States should co-ordinate their policies for combating poverty and social exclusion on the basis of an open method combining common objectives, National Action Plans and a Community action programme.

In December 2000 the Nice European Council decided to launch the new method in the field of combating poverty and social exclusion and defined a common set of four objectives:

1. To facilitate participation in employment and access to resources, rights, goods, and services for all;

2. To prevent the risks of exclusion;

3. To help the most vulnerable;

4. To mobilise all relevant bodies.

National Action Plans for social inclusion (NAPs/inclusion for short) play a key role in the EU process, to the extent that they translate the common objectives into national policies, while taking into account their individual national circumstances and the particular nature of national social protection systems and social policies.

All Member States submitted their first NAPs/inclusion in June 2001. Their preparation provided an opportunity for wide information and consultation of the most concerned stakeholders and to review the bases of the national strategies to fight poverty and social exclusion. It also represented an opportunity to develop a more strategic and integrated approach to combating poverty. Moreover, the information provided in the NAPs/inclusion provided a good basis for the exchange of learning and best practice across the Union.

The main findings of the examination of the NAPs/inclusion carried out by the Commission and the Member States were presented in the Joint Report on social inclusion, which was endorsed by the Laeken European Council in December 2001.

A solid basis for monitoring progress and assessing the effectiveness of policy efforts was established with the endorsement of 18 commonly agreed indicators to measure poverty and social exclusion also at Laeken. A variety of domains is covered - income poverty, as well as long-term unemployment, health and lifelong learning - reflecting the widespread perception that poverty and social exclusion in Europe have a multi-dimensional nature and cannot be reduced to one single variable. These indicators should serve as a basis for the EU and each individual Member State to assess objectively progress of the multi-annual process on the basis of verified outcomes. National indicators should continue to have a role, in particular in those fields (e.g. housing) where it was not yet possible to define a significant common ground.

Another achievement in 2001 was the adoption of the first Community action programme to encourage co-ordination in the fight against social exclusion. The programme, which will be implemented in 2002-2006, is intended to support policy analysis and statistical improvements, the exchange of good practice and the promotion of networking across Europe among NGOs active in fighting poverty and social exclusion. The programme, which is part of the Open Method of Co-ordination, should be closely combined with the NAPs/inclusion.

During the first two years, the implementation of the EU social inclusion process was smooth and is regarded by the Commission, the Council and other stakeholders as a positive step. Reflecting a wide consensus about the usefulness of the new process and the robustness of the common objectives adopted in Nice, the Council decided in December 2002 to ask Member States to prepare a second round of NAPs/inclusion for July 2003 on the basis of common objectives where just a few substantive changes were introduced:

(a) An invitation to Member States to include national targets in their NAPs/inclusion (in fulfilment of the conclusions of the Barcelona European Council);

(b) An emphasis placed on gender differentiation in the analysis of social exclusion and in assessing policy impact;

(c) The highlighting of the special difficulties facing immigrants as regards their social inclusion.

The future of the EU social inclusion process

In line with the Lisbon strategy, the Open Method of Co-ordination on social inclusion should be seen in close connection with other processes contributing to economic growth and greater social cohesion. Particularly relevant for the fulfilment of the goals of the social inclusion process are the economic and the employment policy co-ordination processes, underpinned respectively by the Broad Economic Policy Guidelines and the European Employment Strategy. Also increasingly relevant is the Open Method of Co-ordination on pensions that was launched in 2002 and the co-operative exchange on health and long-term care for the elderly. It is vital that at national level, Member States ensure coherence between their strategies for social inclusion and their policies in these areas.

Equally at the EU level, there is a need to improve the consistency between the policy messages arising from the different co-ordination processes, while avoiding a multiplication of processes with different rules and often overlapping objectives. These are the main reasons why the Commission has set out in a recent communication [3] a proposal aimed at streamlining and simplifying policy co-operation in the field of social protection based on the Open Method of Co-ordination. This will involve the creation of a streamlined process, on the basis of a common set of objectives encompassing healthcare, pensions and social inclusion, which fit more effectively other policy co-ordination processes, notably the Broad Economic Policy Guidelines and the Employment Strategy, thereby giving more visibility to the social dimension in the implementation of the overall Lisbon strategy. Reporting arrangements will be simplified, with one single strategic report every three years alternating with light updates in the intervening years from 2006 onwards. The Commission has further proposed that a Joint Report on social protection and social inclusion be issued for the first time in 2005, with the aim of analysing major policy developments against the background of recent social and economic trends and forecasts and providing the basis for the delivery of key policy messages to the Spring European Council.

[3] COM(2003)261 of 27th May 2003.

In moving gradually to this new streamlined process of policy co-ordination, it is crucial not to lose the momentum that the preparation and monitoring of the NAPs/inclusion has set off in many Member States. Throughout the consultation following the publication of the communication of May 2003, this point was well stressed by many stakeholders and Member States. The visibility of the different elements of the process and in particular of the NAPs/inclusion has to be therefore ensured in the future within a context leading to increased consistency in the formulation of strategies at both national and EU level. Furthermore, the goals and the monitoring tools of the EU social inclusion process will need to be adequately and consistently reflected in the Sustainable Development Strategy.

The impact of enlargement

With enlargement, the Union will have to face new and comparatively greater challenges in promoting social inclusion. It is possible to infer from comparative social indicators based on national data, as well as studies, that large sections of the populations in the applicant countries live on low income and lack access to some basic services and facilities. In most applicant countries unemployment is high and social protection systems are not sufficiently developed in order to provide secure income to elderly, sick or disabled people. In some, the social situation of ethnic minorities, of children and of mentally ill persons raises serious concerns. On the other hand, income inequality is generally lower and lifelong learning performance is better than in many present Member States. In a general context where the concept of social exclusion as defined above is still rather recent and where there is a risk that the promotion of social inclusion may be seen as a secondary goal subordinate to competitiveness or economic growth, it will be essential to emphasise the complementarity between policies and strategies aiming for economic growth and social cohesion.

However, enlargement should also be seen as a positive opportunity for a more widespread two-way exchange of experience and good practice, and more intense networking between associations, local and national authorities facing broadly similar challenges. The greater diversity of social situations and systems in the Union after enlargement will act as a powerful stimulant for driving forward the open method of co-ordination in the area of social protection and social inclusion.

For these reasons it was crucial to involve all Acceding Countries in the EU social inclusion process, well before the date of formal enlargement. DG EMPL and each of the Acceding Countries agreed in 2002 to initiate a bilateral co-operation process centred on the drafting of Joint Inclusion Memoranda (JIMs) with the aim of identifying the key social challenges in each country, setting out the major policies in place or envisaged and highlighting a few key policy issues for further review. The JIMs will be finalised and signed jointly by the Commission and each of the 10 acceding countries before the end of the current year. This process is expected to prepare the accession countries for their full participation in the social inclusion process which will start in mid-2004 with the submission of their first NAPs/inclusion for the period 2004-2006.

PART I - The European Union

1. SOCIAL INCLUSION - THE EU SITUATION

After setting the economic and demographic context, this chapter provides a synthetic comparative analysis of the situation and trends over recent years of social inclusion in the Union. It does so on the basis of a selection of the EU common indicators of poverty and social exclusion. A description of the common indicators, together with background information on their adoption process, the methodological framework for their selection and the statistical sources used, is included in chapter 10 and in the Statistical Annex. The latter also contains tables showing the results of the indicators on the basis of common EU sources.

The economic and demographic context

The situation of social inclusion since the launch of the EU inclusion process must be seen in the context of deteriorated overall macroeconomic conditions, with the EU continuing to feel the impact of the prolonged economic slowdown. EU GDP growth averaged only 1.1% in 2002, down from a brisk annual growth rate of 3.5% in 2001. According to the Commission's Autumn Economic Forecasts, the sluggishness in the EU economy is expected to continue in 2003 and there is unlikely to be a vigorous rebound. GDP growth is expected to average a mere 0.8% in 2003 before picking up to a modest 2% in 2004 and approach 2.5% only in 2005.

Although during the initial stage of the economic slowdown EU labour market performance remained quite resilient, employment growth in the EU slowed down in 2002, after growing by well over 1 percentage point per year on average since 1997, and unemployment has started to rise again after half a decade of steady decline. Employment contraction has been a worrying feature in Belgium, Denmark and Germany. The average unemployment rate for the EU as a whole rose to 7.7% in 2002, and is projected to rise to 8.1% in 2003. Despite progress in the immediately preceding years, unemployment rates remain particularly high in Finland, Greece and Spain, and especially so for women in the latter two countries. It is expected to rise beyond the 9% level in France and Germany.

Notwithstanding these disappointing developments, the EU has continued to make progress towards reaching the Lisbon and Stockholm employment targets, although at a much slower pace compared to recent years. In 2002, the employment rate in the EU is estimated at 64.3%, almost one percentage point higher than in 2001, when it stood at 63.4%. The employment rate for women has risen more noticeably to 55.6%, up from 54.1% in 2001, while for men it fell slightly over the last year to 72.8%. The gender gap in employment rates is thus narrowing, but large differences of between 27 and 29 percentage points remain in Greece, Italy and Spain. For the older age group (55-64 years of age) the employment rate for the EU as a whole stood at just over 40%, with Belgium recording the lowest rate (at just under 27%) and Sweden the highest (68%). Over recent years the employment rate for older people has risen substantially in all Member States except Austria, Germany, Greece and Italy.

Meanwhile, the long-term societal consequences of ageing of the European population are becoming clearer. Soon the century-long growth in the size of Europe's working age population will come to a halt, and in less than a decade the impact of the retirement of the baby-boomers will begin to be fully felt. Although fertility increased slightly from 1.45 children per woman in 1999 to 1.47 in 2001, it is still well below the replacement level of 2.1. Life expectancy is growing - it increased by two years for both men and women over the past decade - and mortality is increasingly concentrated in old age. Today, people aged 65 and over represent 16% of the total population while those below 15 represent 17%. Already by 2010 these shares will be inverted. The most dramatic increase will occur in the number of 'very old' people (aged over 80), which will rise by almost 50% over the next 15 years.

The rising old age dependency rates will increase demands on society to cope with caring needs. At the same time, developments in household structures slowly undermine the objective conditions for inter-generational solidarity within the family. There are fewer and later marriages, and also more marital breakdowns. The trend towards smaller households, with more people living alone at all ages, is continuing. There is also a striking rise in the number of children living with only one adult, and a fall in the number of couples with children. In 2000, 10% of children aged 0-14 years were living with just one adult compared with 6% in 1990. The overwhelming majority of these single parents are women.

Income poverty risk: cross-country comparisons in 2001

In the absence of a fully developed set of indicators reflecting the multi-dimensional nature of the issue, the analysis of poverty and social exclusion in the EU is largely based on available, primarily income-related indicators. There is a primary focus on indicators showing the relation to the average level of prosperity in a given country and point in time. An absolute notion is less relevant for the EU for two basic reasons. First, the key challenge for Europe is to make the whole population share the benefits of high average prosperity, and not to reach basic standards of living, as in less developed parts of the world. Secondly, what is regarded as minimal acceptable living standards depends largely on the general level of social and economic development, which tends to vary considerably across Member States.

The proportion of individuals living in households where income is below the threshold of 60% of the national equivalised median income is taken as an indicator of the risk of poverty. In 2001, 15% of the EU population were classified as being at risk of poverty, corresponding to more than 55 million individuals in the EU. This average value for the EU masks considerable variation across Member States, with the share of the population at risk of poverty ranging from 10% in Sweden to 21% in Ireland.

The longer the length of time someone has to live on low income the greater the risk of deprivation and exclusion from social, cultural and economic activity and the greater the risk of extreme social isolation. In all countries, half or more of those at risk of poverty in 2001 have been living on low income for an extended period of time, that is, they had an equivalised income below the 60% threshold in the current year and at least two of the preceding three years (i.e., 1998-2000). In Greece and Portugal, where the at-risk-of poverty rate is very high, as many as two out of three of those with an income below the poverty threshold in 2001 have been persistently at risk of poverty. On average in the EU, 9 % of the population have been persistently poor in 2001.

Figure 1. At-risk-of-poverty rate, total and persistent share - 2001

>REFERENCE TO A GRAPHIC>

Note: Data on persistent poverty risk are not available for Sweden.

Source: Eurostat, ECHP-UDB, version June 2003

The relative median poverty gap - i.e., the difference between the median equivalised income of the poor and the 60% threshold, expressed as a percentage of this threshold - measures how far below the threshold the income of people at risk of poverty is. This is an important indicator to complement the headcount measure of poverty risk, as it provides information on "how poor are the poor".

In 2001, the median poverty risk gap was 22% at EU level. This means that half of those at risk of poverty had an equivalised income below 78% of the at-risk of poverty threshold, or 47% of the median equivalised income.

Figure 2. The median at-risk-of-poverty gap, 2001 (%)

>REFERENCE TO A GRAPHIC>

Source: Eurostat, ECHP-UDB, version June 2003

The comparative analysis of the national thresholds helps to illustrate the relative dimension of the poverty measure that is being used. This comparison is important for the understanding of the different level of economic well-being across countries [4]. Figure 3 shows the monetary value of the national at-risk of poverty thresholds in Purchasing Power Standards for a single adult household. The values for Portugal and Greece are particularly low. At the other extreme, Luxembourg stands out for having a value of the threshold which is 170% of the EU average.

[4] Such comparison will be all the more important in the context of an enlarged Union, since in Accession countries relatively narrow income distributions result in rates of poverty risk that are not too dissimilar from those recorded in the current Member States, in spite of their very low levels of average national income.

Figure 3. Illustrative value of the at-risk of poverty threshold for a single adult household, in PPS, 2001

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Source: Eurostat, ECHP-UDB, version June 2003

From the analysis above it appears that the income poverty risk manifests itself in various forms simultaneously. The countries with the highest exposure to poverty risk in terms of headcount ratio, both when measured in one point in time and over a longer period, often also display the highest relative poverty gap. This is the result of wide income distributions at the bottom, combined with relatively low overall living standards.

The focus of the poverty risk measure is on the bottom part of the income distribution. It is also interesting to look at the overall income distribution, for example as measured by the relative position of the bottom quintile to that of the top group. In 2001, the total equivalised income received by the top income quintile was 4.4 times greater that received by the poorest income quintile group. Ratios range from 3.1 in Denmark to 6.5 in Portugal (see Table 6 in the Statistical Annex). The ranking of countries is quite similar if one looks at the Gini coefficient, which is a summary measure of the overall distribution of income (Table 7). It is notable that income inequality appears to have decreased (or at least remained stable) over the period 1995-2001 in all except the Nordic countries which have traditionally been characterised by low income inequality anyway.

Incidence of poverty risk by gender, household type and age

Women are generally at greater risk of living in a poor household: in 2001, 16% of adult women (aged 16 years or more) had an income below the threshold, against 13% of men in the same age group [5]. This pattern is consistent across all Member States, with the widest differences being recorded in Austria, Finland and the United Kingdom. Austria and Finland, together with Ireland, also display the largest gender gaps in terms of persistent poverty risk (Table 3), whereas the gender gap for the EU as a whole for this indicator is small. Evidence concerning the median gap by gender is mixed (Table 4), as in many countries the gap is higher for men than for women. The risk of poverty is comparatively greater for women in specific age groups, in particular for older women (aged 65 years and over: 21% as compared to 16% for older men for the EU as a whole).

[5] Except for single person households, gender gaps in poverty risk need to be interpreted with caution, since they rely on the assumption of equal sharing of income within the household.

Figure 4. At-risk-of-poverty rate for individuals aged 16 years and over by gender, 2001

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Source: Eurostat, ECHP-UDB, version June 2003

By household type, the risk of poverty is highest among single parent households (35% for the EU average), most of whom are headed by women. In the United Kingdom, the exposure to the poverty risk for single parent households, which represent a relatively high proportion of all households, is particularly high (50%, see Table 9). Also those living in large households with three or more dependent children are particularly exposed to income poverty risk, with Ireland, Italy, Spain and Portugal displaying the highest risk (between 34% and 49%, against a EU average of 27%).

As a consequence, in most countries children experience levels of income poverty that are higher than those for adults. Material deprivation among children must be a matter of serious concern, as it is generally recognised to affect their development and future opportunities. In 2001, rates of poverty risk for children were of 24% or more in Spain, Ireland, Italy, Portugal and the United Kingdom. Differences in the persistence of child poverty relative to adults are also significant (12% as against 9% for the EU as a whole), which suggests that specific factors shape the risks of poverty faced by children relative to those faced by the entire population.

Figure 5. At-risk-of-poverty rate for children (aged 0-15 years), 2001

>REFERENCE TO A GRAPHIC>

Source: Eurostat, ECHP-UDB, version June 2003

At the other extreme of the age scale, people aged 65 years and over (Table 2) suffer from a relatively high risk of poverty as well, especially in Denmark, Greece, Ireland and Portugal. On the other hand, in Italy, Luxembourg, the Netherlands and Sweden, the elderly are less affected by the risk of poverty than the total population.

The analysis of the income situation of the elderly can suffer from the fact that the data source used to calculate income poverty rates takes no account of imputed rent, i.e., the money that one saves on rent by living in one's own accommodation. This is likely to result in underestimated living standards of older households, who are generally more likely to be living in their own accommodation than younger households. Furthermore, the omission of interest payments will tend to overestimate the income of those (generally younger) households who are still paying a mortgage. All this will also tend to affect comparisons of the overall poverty risk across countries, as long as the share of owner-occupiers in the total number of people at risk of poverty varies a lot across countries. This is actually the case, and this share is highest in the Southern European countries, with a maximum of 93% in Greece, and lowest in Germany and the Netherlands (35% of the total number of those at risk of poverty). Therefore, if imputed rent were taken into account, the distribution of the poverty risk across countries would likely be flatter than Figure 1 suggests.

Analysis of income data may also suffer from not taking into account benefits in kind (social housing, home care, free services, e.g.), which are particularly relevant for assessing the net income situation of elderly persons.

Trends in income poverty over the most recent years

Determining trends in income poverty risk since 2001 remains problematic due to delays inherent in compiling and validating statistics [6], although recent investment in statistical capacity-building are expected to bring some improvement in timeliness in the future. It is therefore not possible to establish a clear picture of the impact on income poverty made by the new EU co-ordination process. The years immediately preceding the set-up of the new strategy have witnessed a trend reduction of the level of relative poverty, with the EU average declining from 17% in 1995 to 15% in 2001.

[6] Another problem is the lack of confidence interval estimates for changes over time. Trends over time must, therefore, be interpreted with caution.

The relative nature of the measure of poverty risk under consideration must be kept in mind when interpreting changes over time. A decrease (increase) in the proportion of the population at risk of poverty means that there are less (more) people with an income below the threshold, which itself varies over time since it refers to a central value of the income distribution of the year in question. If the level of the poverty threshold increases, namely as a result of economic and employment growth, and at the same time the at-risk of poverty rate decreases, then the income of some of those below the poverty threshold in the starting year will have grown at a faster pace than the level of the threshold.

In all countries, the value of the poverty threshold has grown by more than just inflation, reflecting the growth in the overall level of prosperity. How do the results of poverty risk rate observed for 2001 relate to this improvement? Figure 6 below shows the percentage point change over the period 1998-2001 of both the standard poverty risk rate and the "poverty risk anchored in one moment in time", which is calculated with reference to the value of the threshold in 1998 uprated only by inflation. In all countries, the at-risk of poverty rate anchored in 1998 has decreased over the three years to 2001, especially in Spain and Ireland. However, in Ireland, the proportion of the population with an equivalised income below the current threshold has increased: this means that the income conditions of some of those who were at-risk of poverty in 1998 have improved, but not enough to keep pace with the overall increase in living standards in the country.

Figure 6. Changes between 1998 and 2001 in the at-risk-of-poverty rate and the at-risk-of-poverty rate anchored in one moment in time (1998)

Percentage point changes

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Source: Eurostat, ECHP-UDB, version June 2003

Measuring the impact of social protection

One important methodological principle for the selection of the common indicators is that they must measure social outcomes rather than the means by which they are achieved. This is in the respect of the very nature of the open method of co-ordination, whereby Member States agree on objectives but are left free to choose the policies by which these objectives are to be met. Furthermore, an indicator that measures policy effort is of little help if there is no way of knowing whether the effort is achieving its goal. One indicator that makes a partial exception to this rule is the indicator of at-risk of poverty rate before social cash transfers, which when compared to the risk rate after social transfers can be seen as an indicator of impact of social transfers in reducing poverty.

In the hypothetical situation of absence of all social cash transfers and pensions, the poverty risk for the population of the EU would be considerably higher than it is in reality (39% instead of 15% in 2001). It can be argued that the prime role of old age pensions is not to redistribute income across individuals but rather over the life-cycle of individuals. If, therefore, pensions are considered as primary income rather than social transfers, the at-risk-of poverty rate would be 24%, 9 percentage points higher than the poverty risk measured after social transfers.

Figure 7 below shows the percentage drop (in absolute value) of the at-risk of poverty rate calculated before and after cash transfers [7], both excluding and including pensions from the notion of "social cash transfers". When pensions are excluded and considered as primary income, the drop is lowest in Greece, Italy, Portugal and Spain. It is highest in Denmark, the Netherlands, Luxembourg and especially Sweden, reflecting both the higher level of social protection expenditure in these countries as well as its focus on income re-distribution. When pensions are included, the picture changes significantly. The contribution of social transfers to the reduction of income poverty risk remains highest in Sweden, followed by Germany, and becomes much higher in Italy and Greece. This reflects the structure of social protection expenditure in these countries, as a large share of it is devoted to pensions, as well as the structure of the population by age.

[7] This indicator must be interpreted with some caution, for a number of reasons. First, no account is taken of interventions that, like social cash transfers, can have the effect of raising the disposable income of households and individuals, namely transfers in kind as well as tax credits and tax allowances. Second, it compares the poverty risk before and after transfers keeping "all other things equal".

Figure 7. Impact of social transfers (excluding and including pensions) on the at-risk-of poverty rate, 2001.

% reduction in the total at-risk-of-poverty rate

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Source: Eurostat, ECHP-UDB, version June 2003

The impact of social cash transfers on the poverty risk rate differs across age groups and by gender (Table 12). For the EU as a whole, social cash transfers excluding pensions have the highest poverty risk-reducing effect on children (in 2001, the drop was of 39%, as against 32% for people aged 16 years and over). In the Nordic countries, the drop in the poverty risk rate for children was as high as 65% or more; on the other hand, in Greece, Spain and Italy, children are the group who benefit least from poverty relief allowed by social benefits (the percentage drop was of less than 15%). Among adults, social benefits (excluding pensions) reduce the poverty risk more for men than for women in all countries (with the sole exceptions of the Netherlands and Sweden; the drop for the EU as a whole was of 35% for men and 33% for women). When pensions are included, however, differences by gender are less marked, and are in favour of women in a few countries.

In interpreting the indicator of poverty risk before social transfers, it must be kept in mind that social protection can provide a relief to poverty but does not per se' help individuals and families durably elude poverty. If they are to be effective in the fight against poverty and social exclusion, social transfers in cash must be accompanied by adequate health care, education, social services and integration into the labour market for those capable of working. This is why many Member States are increasingly focusing their policies on promoting individual self-sufficiency through an employment-friendly social protection system that fosters participation in the labour market.

Low income is just one of the dimensions of poverty and social exclusion, and in order to measure and analyse this phenomenon more at length, it is necessary to take into account other equally relevant aspects such as access to employment, education, housing, healthcare, the degree of satisfaction of basic needs and the ability to participate fully in society. Many of these aspects are in reality very difficult to measure, especially at the level of the EU. The rest of this chapter discusses the evidence based on the EU common indicators of poverty and social exclusion, which do not cover other important aspects like adequacy of housing, mortality and access to health care by socio-economic status and social participation.

The labour market dimension of poverty and social exclusion

Employment is a key factor for social inclusion, not only because it generates income but also because it can promote social participation and personal development.

Long-term unemployment is very closely associated with social distress, as people who have been jobless for a long time tend to loose the skills and the self-esteem necessary to regain a foothold in the labour market, unless appropriate and timely support is provided. In 2002, long-term unemployment affected 3% of the EU labour force (and 39% of the unemployed). Almost two thirds of them had in fact been unemployed for a very long time (at least 24 months, see Table 19). Within the EU, according to 2002 figures, Austria, Denmark, Luxembourg, Netherlands and Sweden have long-term unemployment rates of 1% or below. Long-term unemployment remains high in Greece and Italy, where more than 5% of the labour force is affected. These two Member States, along with Spain, also display the greatest disparity between genders. For the EU as a whole, long-term unemployment rates are higher for women than for men, although in Finland, Ireland, Sweden and the UK the opposite applies.

At the EU level, long-term unemployment has declined gradually from its peak level of 4.9% in 1995 to 3% in 2002. The most evident gains are recorded in Ireland and Spain: between 1995 and 2002, Spain more than halved its long-term unemployment rate to just below the 4% level, while in Ireland it decreased from 8% to 1.3%.

Figure 8. Long-term unemployment rate, 1995 and 2002

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Source: Eurostat, EU-LFS

The fact that being in employment is by far the most effective way to secure oneself against the risk of poverty and social exclusion is clearly borne out by the evidence shown in Figure 9 according to which only 7% of the employed population (and 6% of wage and salary employees) in the EU lived below the risk of poverty line in 2002, as against 38% of the unemployed and 25% of the inactive. In Ireland, Italy and the United Kingdom, around one in two unemployed persons are at risk of poverty. The retired are particularly exposed to the risk of poverty in Greece and Ireland, whereas in Denmark, Ireland and the United Kingdom other economically inactive people display a high poverty risk.

Figure 9. Risk of poverty rate and most frequent activity status, 2001

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Source: Eurostat, ECHP-UDB, version June 2003

Even if people in employment are less exposed to the risk of poverty than other status groups, they represent a large share of those at risk of poverty, since a large part of the adult population is at work. In the EU, around a quarter of the people aged 16 years and over at risk of poverty are in employment; in Luxembourg, the Netherlands and Portugal this share is of 40% or higher. The in-work poor, therefore, must raise policy concern. Low pay is obviously an important risk factor of in-work poverty, but being low-skilled and remaining in unstable and often part-time employment [8], can also lead to poverty as well as to inadequate pensions in the future. Other, equally important factors relate to the household situation of workers: clearly, lone parents or sole earners in a household with children are particularly vulnerable to poverty risk (see Table 14).

[8] The evidence shows self-employment as being another "risk factor". Reliability of income data for the self-employed, however, is not guaranteed, given the problem of under-reporting of income.

Indeed, the notion of in-work poverty only partly refers to the situation of individuals, since the poverty risk is measured at the household level. Thus, the economic well-being of the unemployed, the inactive or the low paid depends on the sum of all the resources contributed by all the members of their households. Increasingly, therefore, the absence of employment at the level of households is recognised as a key risk factor for poverty.

In the EU as a whole, in 2002, around one in ten individuals aged 18 to 59 years were living in jobless households (Figure 10). This share was highest in Belgium (14%), followed by the United Kingdom (11%). Invariably, women are more likely to live in a jobless household than men.

There is some evidence of progress in this area. The proportion of working age adults living in jobless households has declined between 1995 and 2002/2003 in most countries, with particularly large falls in Ireland, the Netherlands and Spain.

Figure 10. People aged 18-59 years living in jobless households, 2002

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Source: Eurostat, EU-LFS

Particular concerns are raised when children are growing up in a jobless household, as the absence of a working adult as a role model could be a factor affecting educational and future labour market achievements of children. In 2002, the share of children living in jobless households was slightly higher than for prime age adults (9.9%) but variations across countries are more marked, with less than 3% of children living in jobless households in Luxembourg and more than 17% in the United Kingdom.

The share of children living in jobless households has decreased in many countries, and considerably so in Ireland and Spain.

Figure 11. Children living in jobless households, 1995 and 2002

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Source: Eurostat, EU-LFS

Regional cohesion

All the indicators that have been examined so far are calculated at the national level. Yet, territorial differences matter not only across but also within countries. A clear understanding of the nature and situation of poverty and social exclusion at the sub-national level is important for the design and implementation of effective policies to fight against them. It may be particularly relevant, for instance, to distinguish between rural and urban areas. Unfortunately, however, considerations of statistical reliability hinder a breakdown by region of most of the EU common indicators. Furthermore, there is no accepted definition, at EU level, of regions other than those based on administrative and political criteria (i.e. the NUTS classification).

A proxy measure of social cohesion across regions is represented by the dispersion (coefficient of variation) of employment rates at NUTS2 level. Regional cohesion is lowest in Italy, followed at some distance by Spain. The former country also shows little improvement since 1996, whereas for the EU as a whole there appears to be some convergence of regional employment rates. Objective 1 regions have seen their employment rates increase at a faster pace than in others: between 1996 and 2002, the number employed in the former rose by over 5% of the working-age population, as against 4% in the rest of the EU. Still, the proportion of the working-age population in employment remains markedly lower in Objective 1 regions (56.2% in 2002) than in others (66.7%).

The skill dimension of poverty and social exclusion

The lack of basic competences and qualifications is a major barrier to inclusion in society and this is even more the case in an increasingly knowledge-based society and economy. There is thus a growing danger of new cleavages in society being created between those having access to lifelong learning for employment and adaptability, personal development and active citizenship and those who remain excluded. "Making a European Area of Lifelong Learning a Reality" [9] therefore still remains a major challenge for a socially inclusive society.

[9] (COM (2001) 678 final)

2002/2003 LFS data show that around 19% of all 18-24 years old had only lower education (i.e., less than upper secondary qualification) and had not attended education or training in the four weeks preceding the survey. Values ranged from 10% or less in Austria, Finland and Sweden to 41% in Portugal. In all countries, young males are more likely to leave the education system with low educational qualifications than young females (Table 20).

Trends over time can be observed by looking at different cohorts of people: the difference between the share of people with low educational attainment among youth (18 to 24 years) and the elderly (aged 65 years and over, Table 21) is striking: in the EU as a whole, as many as 70% in the latter group have attained less than upper education, as opposed to the 19% of all 18-24 year olds noted above. Major gains appear to have been recorded in Southern countries, which all started with low educational attainment rates for the older cohorts of well over 80%.

Health

An indicator in the area of health that can be seen as expressing the health status as well as the general well-being of nations is the life expectancy at birth (Table 22). This is a complex indicator reflecting several dimensions; apart from the health status of individuals, it reflects access to and utilisation of health services, as well as socio-economic factors more at large.

The EU population is characterised by high life expectancy at birth: national figures are between just below 77 years (in Denmark, Ireland and Portugal) and 79 years (Spain, Italy and Sweden). Although life expectancy is about six years higher for women than for men, due to persistently higher male mortality throughout the entire life cycle, the gap is starting to narrow as life expectancy has increased more for men than for women in the last decade in the majority of the Member States.

There is a widespread understanding that poor health is both a cause and a consequence of wider socio-economic difficulties. Accordingly, the overall health status of the population tends to be weaker in lower income groups. The percentage of people claiming their health to be bad or very bad is significantly higher for those below the risk of poverty line than for those above it in the Union as a whole (16% and 7% respectively), as well as in all Member States (Table 23).

2. KEY TRENDS AND NEW AND EMERGING CHALLENGES ARISING FROM THE NAPS/INCLUSION

Trying to identify current trends from the NAPs/inclusion is made difficult due to the absence of recent data, even at national level, and the very different approaches taken in the analytical chapters. In general, however, the NAPs/inclusion of 2003 reflect a less optimistic climate for tackling poverty and social exclusion than was the case at the time of the first NAPs in June 2001. Most Member States fear that the current economic slow-down, accompanied by rising long-term unemployment and less chances for getting jobs, may put more people at risk of poverty and social exclusion and worsen the position of those already affected. However, this perception varies significantly from country to country In spite of the more difficult world economic situation a number of countries, while still with relatively high numbers at risk of poverty and social exclusion, remain broadly confident that they will sustain recent positive economic trends and that these will contribute to a reduction in poverty and social exclusion (EL, E, IRL, I, UK). Others, while highlighting some increased pressures, appear confident that they will be able to maintain their existing relatively high levels of social inclusion and cope with increased demands on the basis of their existing well developed systems, but with perhaps some additional attention being given to particularly vulnerable groups (B, DK, FIN, L, NL, A, S). However, a number of other Member States appear more pessimistic and note an increased challenge, particularly in relation to growing unemployment (D, F, P).

Significant efforts have been made over the past two years in a number of countries to strengthen their efforts in several areas. As a result some positive trends are beginning to emerge. In some countries (IRL, UK) there appears to be real progress in reducing the numbers at risk of persistent or long-term poverty. Significant steps forward can also be seen in reducing child poverty (IRL, UK).

On the negative side there are a number of trends that seem to be increasingly common in several countries. Unemployment levels are increasing overall. In some countries in spite of more positive developments in relation to unemployment relatively high income gaps have persisted (IRL, UK). The numbers dependent on minimum income schemes tend to increase. In terms of accommodation there are indications that housing waiting lists have grown and there is a tendency for homelessness to increase. While overall health standards have been largely maintained there has been some indication of an increase in mental health problems and in problems related to addiction.

The major structural changes identified in the 2001 Joint Report continue to be recognised as important factors which are impacting on poverty and social exclusion, sometimes positively and sometimes negatively. These are:

- the impact of the major structural changes in the labour market as a result of rapid economic change and globalisation;

- the impact of the rapid growth of the knowledge based society and Information and Communication Technologies;

- the effect of an ageing population and the resultant higher dependency ratios and greater demands on care services;

- the impact of increased migration and growing ethnic diversity;

- the continuing changes in household structures with continuing high levels of family break ups, growing numbers of lone parent families and the trend towards the deinstitutionalisation of family life;

- the trend to greater equality between men and women and in particular higher labour market participation by women.

The risk factors associated with poverty and social exclusion which were identified in 2001 are confirmed in the 2003 NAPs. These are: long-term dependence on low/inadequate income, long-term unemployment, low quality or absence of employment record, low level of education and training and illiteracy, growing up in a vulnerable family, disability, health problems and difficult living conditions, living in an area of multiple disadvantage, housing problems and homelessness, immigration, ethnicity, racism and discrimination.

However, while the range of risks and barriers remain constant the 2003 NAPs paint a more nuanced and complex picture and some situations emerge more strongly than before as particularly associated to social exclusion: living in a jobless household, inadequate income, over indebtedness, mental illness, alcohol or drug misusing, disability, depending on long term care, asylum seekers, refugees and migrants, living in urban and rural disadvantaged areas.

In relation to the link between unemployment, poverty and social exclusion three aspects are particularly noteworthy. The first is the increased recognition that the unemployed are not a homogeneous group and the reasons people have difficulties in accessing the labour market vary significantly from person to person. This is especially the case for the long-term unemployed, who tend to suffer from a cumulative series of disadvantages which may include functional illiteracy, outdated competencies, lack of linguistic competencies, disability or poor health, addiction, too long absence from the world of work and other factors. These, if not countered by adequate and timely support, may lead to permanent exclusion from the labour market. In addition, such disadvantages can be exacerbated by negative objective factors such as lack of jobs, lack of child care, lack of transport, living in a region of high unemployment, lack of housing, lack of open and flexible learning opportunities meeting their needs and interests, prejudice and discrimination (e.g. against immigrants, ethnic minorities, ex-prisoners, people with learning difficulties, women or men due to their sex). Secondly, there is more emphasis on the very vulnerable situation of jobless households but also the greater poverty risks for households where one rather than two people are working. Thirdly, vulnerability of three particular groups is repeatedly stressed: older male and female workers whose skills became redundant, young men and women in the 16-25 age group without formal competencies or accredited qualifications and immigrants and ethnic minorities.

In relation to low income and poverty five aspects receive more attention. First, there is some evidence that even in those countries where the incomes of the poorest have increased in real terms they have done so more slowly than the rest of society and thus relative income poverty may have increased (UK, IRL). The second is an increased emphasis on the very high risk faced by people who are surviving long-term on a low income (FIN, UK). The third is a concern in some countries to avoid any growth in in-work poverty. The fourth is the recognition of the extent that over indebtedness can trap people in poverty (A, B, FIN, F, IRL and UK). Finally, there is particular concern in several countries (e.g. UK, IRL, D, I, L, P, S) over the situation of children growing up in families on low incomes.

The importance of disadvantage in education and training as a barrier to social inclusion and the knowledge economy and society was already well emphasised but the new NAPs draw particular attention to three aspects. The first is the issue of functional illiteracy not only among pupils, but also in the whole adult population (D, F), the second is the particular problem of early school leaving (D, FIN, IRL, NL) and the third is the growing importance of life long learning and the acquisition of new basic skills like learning to learn, languages, social competencies, ICT and a sense of enterprise.

In relation to poor health and disability there is recognition that the nature and degree of the risk varies widely depending on the type of disability (S). In general there is more emphasis given in the NAPs to the particularly high risk of long-term poverty and exclusion for people with a disability (A, IRL, NL, DK).

The higher risk of poverty and social exclusion linked to immigration or as a result of coming from an ethnic minority is highlighted far more in the 2003 NAPs by many Member States. However, the complexity and diversity of situations is also stressed. Particular aspects that are mentioned are difficulties in finding accommodation, acquiring a well-paid job (F, FIN, S,) barriers in access to lifelong learning, especially of languages. More attention is also given to older immigrants (D), to forced/arranged marriages, to poorer health (S) and lower educational levels (NL, DK). Gender differences are also highlighted in some NAPs (IRL, S). The particular problems faced by Roma and many Travellers (IRL) are highlighted by several Member States. A number of Member States (UK, S, F, FIN, B and IRL) make a direct link between discrimination and social cohesion issues.

Generally the 2003 NAPs emphasise the need to take more into account the situation of people facing multiple risks or an accumulation of problems as they can become trapped in poverty and social exclusion (S, FIN). In particular the following groups are regularly highlighted: ex-prisoners, homeless, people leaving institutions, alcohol and drug abusers, mentally ill, prostitutes.

An important feature of the 2003 NAPs is the increased attention given to regional and local variations in the levels of poverty and social exclusion and how the underlying causes of poverty and social exclusion can vary from region to region (B, F). In particular declining regions with negative migration, high unemployment and increasing dependency ratios (FIN, P) contrast with problems of congestion in growing regions where issues of accommodation feature more highly. Also the issue of marginal rural areas with ageing populations, poor services and higher dependency levels is highlighted (IRL, EL, P, UK). The particular concentrations of poverty and multiple deprivation in specific communities in cities is regularly highlighted. In this regard the problem of a decline of social capital is noted. In communities facing multiple disadvantage there has often been a decline in the networks of relationships, support systems and organisations that facilitate the active participation of people in the community in which they live and which are a necessary part of a strong and vibrant civil society.

Another issue that features more prominently in the 2003 NAPs is the significant role that gender inequalities can play in poverty and social exclusion. However it is less clear that this reflects an increase in the actual impact of gender of just a greater awareness of the issue. The gender dimension is particularly raised in the context of lone parents, domestic violence, the problems created by flexible working and diminished pension rights. Gender differences among the most disadvantaged groups are also emphasised, for example in relation to homeless, ex-prisoners and addicts (DK).

The recognition of the extent to which poverty and social exclusion can be passed on from one generation to the next is not new in the 2003 NAPs. However, there is an increased recognition of the extent to which those who grow up in poverty are at high risk of becoming the next generation of poor and unemployed. More attention is given to the ways in which the intergenerational transfer of poverty takes place and on the particular dimensions of child poverty that need to be addressed to break this cycle.

Another important dimension of poverty and social exclusion that is given more attention is the movement in and out of poverty. A few NAPs/inclusion highlight the need to understand better what is it that traps some people in long-term poverty or why some are regularly in and out of poverty while others (the majority) may only be poor for relatively short periods.

Core Challenges

The overarching policy challenge that emerges from the NAPs is the need for Member States to ensure that there is a strong integration of economic, employment, lifelong learning, cultural and social policies and that a concern with preventing and eradicating poverty and social exclusion is mainstreamed across all these policy areas. This is essential if an integrated and co-ordinated approach to eradicating poverty and social exclusion is to be achieved. It is also clear that countries that combine high levels of social protection with highly productive economies and continuously high levels of employment are most able to sustain socially inclusive societies. Effective policies in areas such as social protection, lifelong learning, health, housing, transport and culture, sport and recreation that result in accessible services for all are vital. However, for more vulnerable persons such universal provision often needs to be complemented by targeted and tailored supports which will help them to overcome particular barriers to participation in society.

The first joint report identified 8 core challenges that to a greater or lesser degree need to be addressed by all Member States. Analysis of the 2003 NAPs as well as the analysis carried out in the previous chapter suggest that these continue to provide a robust framework for Member States. However, a number of dimensions of these overall challenges have gained more emphasis.

Developing an inclusive labour market and promoting employment as a right and opportunity for all: Without exception Member States stress the importance of a job in preventing and lifting people out of poverty. A broad range of policies and approaches are emphasised many of which are also reflected in their NAPs/employment. However, the NAPs/inclusion particularly highlight the challenge of developing tailored and individualised supports to those who are most disadvantaged and distant from the labour market (e.g. immigrants, ex-prisoners, persons who left institutions, people with disabilities) and the need to give special attention to the situation of jobless households and the young unemployed lacking basic competencies or formal qualifications.

Guaranteeing an adequate income and resources to live in human dignity: While employment is stressed as being, for most people, the key way of ensuring an adequate income the importance of effective systems of income support for those who cannot earn their living or are retired remains a key challenge and several Member States need to do more in this regard. Linking income support systems closely with policies to increase people's ability to access the labour market and to end long-term dependency is also seen as very important. Equally important is to ensure that tax, income support and minimum wage policies are carefully integrated so that work pays sufficiently to lift people out of poverty.

Tackling educational disadvantage by prevention and lifelong learning opportunities: Within this overall challenge four particular challenges now stand out: developing co-ordinated and integrated responses to prevent early dropping out from school; learning opportunities for all of those who suffer from functional illiteracy; increasing access to lifelong learning for all marginalised persons with a particular focus on the older workers, the ageing population and groups at high risk of exclusion; increasing the focus on early childhood education and early and flexible individual support in all formal education and training (including universities) to break the cycle of educational disadvantage and to open up doors for second chances throughout life. It is also important to recognise that lifelong learning is not only important to facilitate people moving into employment. Given that over 50% of people over 25 are outside the labour market more attention needs to be paid also to preparing people for a meaningful life in dignity outside the labour market. A lack of competencies is stated for both men and women in areas like managing a household, in parenting, in dealing with money or debts, with health risks in the household and competent care for ill persons or the elderly, in culture and active citizenship. As neither schools nor families reliably transfer these essential competencies, a new challenge for opening up lifelong learning opportunities for all is clear.

Preserving family solidarity while promoting gender equality and protecting the individual rights and benefits of family members and the rights of the child: The changing nature of the family and the implications of this for the provision of support and care are of major concern in a number of Member States. Nearly all Member States continue to face the challenge of higher levels of poverty and social exclusion for lone parent and larger families. The importance of maintaining equity during times of economic difficulty is also highlighted, as these groups are even more at risk. There is also a high recognition that if poverty and social exclusion are to be reduced in the long-term then the cycle of child poverty needs to be broken. All the Plans acknowledge the importance for families of managing the balance between work and family life and in this regard more attention is given to the need to ensure that low income groups benefit from efforts to reconcile work and family life. The challenge of supporting particularly vulnerable families and especially of addressing domestic violence is frequently highlighted.

Ensuring good accommodation for all: The challenge of developing integrated strategies that will prevent and reduce homelessness is one that seems to be increasingly shared by Member States. In addition economic change is leading to new pressures on housing and some Member States face the challenging of providing an increase in affordable housing in some cities in order to tackle increasing waiting lists and overcrowding. There is a particular challenge to recognise that the market on its own is not meeting all housing needs and that some groups such as those with disabilities and immigrants face particular difficulties.

Guaranteeing equal access to quality services (health, transport, social, care, cultural, recreational, legal): Ensuring the provision of quality services which are adequate, accessible and affordable for all citizens is still a major challenge for some Member States. In particular the challenge of increasing access to health services and care services especially for the elderly and the mentally ill or suffering as well as the importance of access to transport are given a new prominence in many NAPs. The need for greater recognition to be given to access to culture as both a core dimension of social inclusion and as a means of helping people to overcome social exclusion is evident.

Improving delivery of services: The challenge of providing services in a flexible way which responds to local and individual needs and which takes on board the particular needs of excluded groups and communities is a common one. For some Member States the challenge is to maintain good services at a time of economic slow down while for others the challenge is to continue to invest in the development and the quality of services when resources are tight. A growing challenge is to guarantee to low income families equal access to core services such as electricity, water and transport in a context when there is an increasing liberalisation of these basic services. A common challenge is to ensure a better access to and a much closer co-ordination and sharing of information between different services and between the different levels of governance thus facilitating multipurpose initial reception and better-integrated support. With an increasing emphasis in some Member States on targeting or tailoring services for persons at risk it will be important to avoid people experiencing continued exclusion from the mainstream, for instance in separate education and training "measures", by ensuring that all public services mainstream social inclusion in their own concept, management and procedures thus demonstrating their corporate social responsibility.

Regenerating areas of multiple deprivation: Developing local partnerships between all relevant actors and developing integrated economic, social and employment responses to tackle the problem of multiple deprivation in some communities is a widely shared challenge. Within this increased attention is also given to the task of rebuilding social capital and mobilising local people themselves through community development and "learning cities and regions" or "social city" approaches which help to empower people to change their lives. In the process of regeneration a particular challenge is to tackle crime and to reduce drug abuse. However, it is striking that while the issue of urban areas of multiple deprivation is well covered only a few Member States address the problems of poverty and social exclusion in rural areas. Those that do emphasise the need for more emphasis to be given to multi-dimensional and integrated approaches that will address the interconnected range of problems such as out-migration resulting in depopulation and ageing populations, diminishing economic base with limited employment opportunities, small unviable farms, low income and dependence on social welfare and non availability or withdrawal of key services. This in area that will merit more attention in the future development of the social inclusion process.

6 Key Priorities

It is clear from the preceding analysis that an effective strategy to significantly reduce poverty and social exclusion needs a multi-dimensional and long-term approach tackling in particular the 8 core challenges identified above. However, in the context of the continuing uncertain global economic and political climate, Member States are urged to give particular attention over the course of the next two to three years to the 6 key priorities outlined below. These priorities are especially important if the momentum towards the Lisbon goal of achieving a decisive impact on the eradication of poverty and social exclusion by 2010 is to be maintained and if those most at risk are not to suffer disproportionately the impact of the slowdown in economic growth or the controls of the budgetary deficits.

1. Promoting investment in and tailoring of active labour market measures to meet the needs of those who have the most difficulty in entering the labour market and a better linkage between social protection, lifelong learning and labour market policies so that they are mutually reinforcing.

2. Ensuring that social protection systems, including minimum income schemes, are adequate for all to have a sufficient income to live life with dignity and that they provide effective work incentives for those who can work.

3. Increasing the access of the most vulnerable and those most at risk of social exclusion to decent housing conditions, to quality health and long term care services and to special and regular mainstream lifelong learning opportunities, including to cultural activities.

4. A concerted effort to prevent early leaving from schools and other areas of formal education and training and to tackle the continuing problem of the transition from school to work in particular of young people leaving school with low qualifications.

5. A focus on ending child poverty as a key step to combat the intergenerational inheritance of poverty with a particular focus on early intervention and early education initiatives which identify and support children and poor families.

6. A concerted drive to reduce the levels of poverty and social exclusion and to increase the labour market participation of immigrants and ethnic minorities to the same levels as the majority population.

In pursuing these key priorities it will be important for Member States to develop integrated and co-ordinated strategies at local and regional levels and especially in communities facing multiple disadvantages. Such strategies should adapt policies to the local situation, facilitate the mobilisation and involvement of all actors and ensure more accessible and quality services for poor and socially excluded citizens. It will also be essential to ensure that gender is mainstreamed all through these priorities with a view to promoting gender equality.

3. STRATEGIC APPROACHES ADOPTED IN THE NAPS/INCLUSION (INCLUDING TARGETS)

The fundamental reason for Member States to develop National Action Plans is to enable them to review and further strengthen their policies and programs with a view to moving them on to a new level of effectiveness. Member States approach this task from very different starting points both in terms of the level of poverty and social exclusion, in terms of their very different welfare traditions and in the light of different structures of governance. Member States also differ significantly in the extent to which they already focus on access to rights, including social rights, as a core principle underpinning their approach to the development of policies and programmes. All these factors influence how they approach the task of preparing a National Action Plan. Indeed there is a noticeable trend in several of the 2003 NAPs/inclusion for Member States to adapt the framework drawn up on the basis of the Common Objectives and to prepare a plan that fits more closely with their own national policy making tradition. To some extent this "nationalisation" of the plans can be seen as a positive step towards mainstreaming the preparation of plans into national policy making processes. However, it runs the risk of some important dimensions of poverty and social exclusion identified in the Common Objectives being neglected.

Whatever the starting point adopted by Member States, it is clear that developing effective strategic plans for tackling poverty and social exclusion in the context of the common objectives agreed by all Member States require three critical dimensions:

- first, plans need to be comprehensive and multidimensional - that is they should reflect all the different policy domains (economic, employment, social and cultural) that affect people's lives and they should ensure that actions and policies across these different areas are, as far as possible, integrated and are thus mutually reinforcing;

- secondly, plans need to be coherent and logically planned thus moving from an in depth analysis of the situation, to setting clear objectives and priorities and then proposing specific actions to meet those objectives;

- thirdly, they must set clear targets that need to be achieved if significant progress is to be made towards the overall goal of eradicating poverty.

The NAPs and not the systems in each Member State are assessed below in relation to each of these three areas.

Multidimensional Approach

National Plans mostly highlight the multidimensional nature of poverty and social exclusion. However, the extent to which they go on to address the broad range of policy domains outlined in the common objectives in an integrated and comprehensive manner varies significantly.

Some countries made a real start in the development of a multidimensional approach to combating poverty and social exclusion. Belgium, for example, develops a quite genuine multidimensional approach to social inclusion, while attempting to adopt measures on specific areas (justice, culture, education and training, sports and leisure, family policy) and to tackle the problems of the most vulnerable (homeless, children in care, victims of human trafficking, illiterate persons). The French Plan is also quite comprehensive, and covers a broad range of actions in the different policy areas affecting social inclusion. However, an interaction and integration of these actions it is less evident. The Irish Plan also presents a well-balanced and broad-ranging strategic approach. While it sees employment as the major route out of poverty, it recognises that not everyone can use the labour market as a way out of poverty. Therefore, a number of targets are set in relation to the provision of adequate income support structures and special programmes are targeted at specific groups who have particular difficulties (people with disabilities, Travellers, ex-prisoners, homeless, migrants and ethnic minorities). The United Kingdom strategy to tackle problems of poverty and social exclusion is broad and comprehensive. It is based on the improvement of employment opportunities and on a longer-term investment in public services with a view to enhancing the quality of these services. A key objective is the eradication of child poverty. Portugal adopted a systemic strategy, guided by implementation principles, and through transversal strategic intervention areas, and based on a quite strong analysis of the main trends in poverty and social exclusion. An overall aim is the recovering of the gap which separates Portugal from the other European countries in the space of a generation. Greece considers social protection as a building block of the overall development path. It combines general policies, especially in the area of economic growth and structural change, aimed at sustaining the pace of increase in social spending while at the same time developing specific policies to address problems of poverty and social exclusion.

In other countries, multidimensionality of poverty and social exclusion and targeting are combined in a strategy which seeks an effective inclusion policy through setting limited and appropriate political objectives. While many measures are planned to continue and reinforce a universal social welfare system, there are measures on specific areas and attempts to tackle the problems of the most vulnerable people. In this respect, the revised common objectives and the Common Outline for preparing the NAPs seem to have contributed to a thorough reflection on priority groups such as the homeless, people with disabilities, migrants and ethnic minorities, children in care, illiterate persons. The German Plan builds on the multidimensional approach adopted in the first report on poverty in 2001. It sets its objectives in the context of its political target to achieve a more active participation of all citizens in social life through lifelong learning and employment policy, better work-life balance, as well as appropriate social protection services. Luxembourg sets 5 spheres of activity, arising from the 4 Nice objectives and representing the overall goals of its strategic framework: activation and participation in employment; conciliation between family life and professional life; access to housing; reinforcement of the mechanism to fight social inclusion of young people under 25; access of vulnerable people to resources, rights and services. The Finnish plan responds to the common objectives with a number of concrete measures, aiming in particular at improving the universal system. Targeted special actions are, at the same time, being reinforced. Sweden is following a mainstreaming approach combining the overall aim of including the total population in a universal social welfare policy system and health services (and to avoid targeted systems) with a stronger awareness of the need to ensure that the most vulnerable groups are fully integrated into the regular system.

Some other countries, whether or not they have universal social welfare systems, adopt a more individualised approach directed towards those most at risk, or justified on the basis of an analysis of their specific situation and the challenges to be faced. Denmark has adapted its first plan's main objective of the creation of a more inclusive labour market, through a more specific focus on the most disadvantaged groups (drug abusers, families with alcohol abuse, the mentally ill, the homeless and prostitutes). Social policies in Spain continue to be highly structured around specific groups. This has allowed the beneficiaries to be highly involved in the planning and implementation stages, but makes the introduction of a more integrated approach difficult. Italy bases its strategic approach following closely the White Paper on Welfare, which identified two basic issues: the demographic situation (effects of low fertility rate combined with a high rate of ageing population) and the role of the family as a pillar of the Italian social model. Netherlands sets a sharper demarcation of poverty and social inclusion issues and puts a stronger focus on the most vulnerable people, for the identification of whom, an innovative risk model has been developed. The Austrian Plan sees the risk of social exclusion and poverty as being particularly concentrated on a number of specific groups characterised by one or more risk features.

Despite clear progress, there is still a lack of a comprehensive and strategic approach in a number of important areas, notably access to lifelong learning opportunities, access to culture, access to transport and eInclusion. Indeed in many cases significant and important work that is often happening on the ground is not well reflected. The potential that a focus on access to social rights and their interdependence can bring to ensuring a multi-dimensional approach is evident in some plans such as those of Belgium and France. However, this remains an area for further development. In this regard the recent work by the Council of Europe on how to strengthen access to social rights is helpful.

Coherent and Planned Approach

In assessing the extent to which Member States have in their Plans framed their policy measures in a coherent and planned approach, three criteria have been applied: first, the quality of analysis and the diagnosis of key risks and challenges to be addressed by the Plans; secondly, the extent to which the Plans have taken into account this analysis and their past experience in setting clear and detailed priorities and goals; and, thirdly, the extent to which specific policy measures and actions are detailed which link with the preceding analysis and setting of objectives.

Overall, the 2003 plans tend to be more coherent than the first round of plans. They contain more extensive analyses and a more in-depth identification of those who are at greatest risk and reflect wider consultation in their preparation. Many have clearer objectives, more focussed priorities and more specific targets which provide the basis for introducing concrete new actions. More plans link better to national policy making. However, some plans still remain more reports than action plans. While documenting well the situation and describing existing programmes and local or nation wide actions they tend to lack ambition and lack clear and precise details of what actions will be undertaken to further enhance the effectiveness of national policies.

A number of NAPs set out clear and coherent plans, consisting of good analysis, the development of strategic objectives and priority goals which follow logically from the analysis and the formulation of policy measures to achieve these. The Netherlands NAP is a striking example, with planned policy measures and actions closely linked to achieving the goals. The coherence of the plan is facilitated by its relatively narrow focus. Sweden, Denmark and Finland also achieve a coherent approach within focused plans, as, to some extent, also do Austria and Germany. Ireland takes a broader approach covering more fully the range of common objectives, but also manages to achieve a coherent approach where the actions described link well to the analysis and objectives as, to some extent, do Luxembourg and the UK. In certain plans, there is an interesting and detailed analysis followed by a broad range of policy actions, but the connecting link between the two dimensions - strategic objectives and goals - is less evident in the NAPs of France, Belgium, Italy and Portugal. There is good analysis and priorities and goals have been clearly set in the case of Greece and Spain, but policy measures to achieve these goals are less developed.

In addition to the above-mentioned criteria, it is also necessary to consider a further dimension reflecting the extent to which responsibilities in the fight against social exclusion are distributed between the central, regional and local authorities. Given the increasing tendency towards a decentralisation of competence for some social policies to the sub-national level, the issue of the balance to be struck between the different levels of authority arises widely in the NAPs. In several of the countries with devolved structures (Belgium, Germany, Spain, Italy, France, United Kingdom) considerable emphasis is put on developing integrated strategies in this regard. However, co-ordination of inclusion policy with a view to create a strategic approach is often difficult between the different levels.

Setting Targets

The conclusions of the Barcelona European Council invited Member States "to set targets, in their NAPs, for significantly reducing the number of people at risk of poverty and social exclusion by 2010". This was subsequently included in the revision of the Common Objectives that was agreed by Member States in December 2002. This invitation was elaborated on in the Common Outline that was agreed for the 2003/2005 NAPs/inclusion by the Commission and Member States. This stated that: "Quantified targets should be set for reducing the number of people at risk of poverty and social exclusion. These should draw as appropriate on the commonly agreed indicators but also take into account other issues identified in the report on indicators such as deprivation, housing and homelessness and literacy and numeracy. When necessary they should also draw on national data which better reflects those aspects of poverty and social exclusion that are a priority for a Member State. Targets should be disaggregated by sex whenever data is available and this is relevant." An Appendix was also included giving suggestions on approaches to setting targets.

There are many non-quantified and broad targets set throughout the NAPs. However, only a few Member States have set ambitious, achievable and time specific quantified targets for the reduction of the number of people at risk of poverty and social exclusion across a range of relevant policy domains. A more common approach has been to set either intermediate outcome targets that are indirectly linked to the reduction of poverty and social exclusion or to set input targets related to policy effort (see table below).

Table 1. Use of Quantified Targets in the NAPs/inclusion

>TABLE POSITION>

1. Direct Outcome Targets are those targets that directly indicate a reduction in poverty and social exclusion in a key policy domain (i.e. unemployment, low income, poor housing/homelessness, educational disadvantage, poor health). They are subdivided into targets based directly on Laeken indicators and targets based on other national measurements.

2. Intermediate Outcome Targets are those outcome targets which may indirectly contribute to a reduction in poverty and social exclusion (e.g. reduction in number of people depending on assistance payments; general increase in employment levels; reduction in level of sick leave)

3. Input Targets are those targets which aim at an increase in policy effort (e.g. increasing the number of homeless assisted; ensuring that all immigrants can participate in an integration programme)

The setting of clear overall targets for the reduction of people at risk of poverty and social exclusion is most developed in the NAPs of Greece, Spain, Ireland and Portugal. Greece