Opinion of the Economic and Social Committee on the 'Communication from the Commission on modernizing and improving social protection in the European Union` (98/C 73/22)

On 18 March 1997 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for Social, Family, Educational and Cultural Affairs, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 13 November 1997. The rapporteur was Miss Maddocks, and the co-rapporteur, Mr Chevalier.

At its 350th plenary session (meeting of 10 December 1997), the Economic and Social Committee adopted the following opinion by 76 votes to 38, with nine abstentions.

1. Introduction

1.1. International competition?

Social protection and competitiveness can be mutually reinforcing. Neither should undercut the other, be it in the internal market or in the world trade organization. Together, they can form a cohesive and durable base, along with macro-economic policy, to promote growth and employment, underpinned by solidarity, enterprise and inclusion.

Social protection expenditure accounts for 28 % of EU total GDP. In the United States, net expenditure is 27 % of GDP. 'When account is taken of private as well as public spending, total household expenditure on social protection, health care and pensions`, in the Commission's words, 'is at relatively similar levels across a range of developed industrialized countries` ().The Communication clearly states that 'It is important to realize that the reasons for a reform of social protection systems is not competition from third countries` ().

1.2. Current trends?

EU social protection expenditure increased in the 1980s and 1990s at a slower rate in relation to GDP than it did in the 1970s. Increases in relation to GDP occurred mainly during economic recessions, when GDP expanded slowly or not at all. Some Member States also increased spending in order to develop their social protection systems towards the levels of more developed states in the Union (). Taken as a whole, EU social protection expenditure has been relatively stable, except during cycles of poor economic performance. The Commission has concluded, 'there is little sign of any underlying acceleration in the growth of social protection spending` (). At the same time, EU social protection expenditure is credited with maintaining social cohesion and stability in periods of major macro-economic shocks, industrial change process and restructuring.

1.3. Future sustainability of EU social protection?

1.3.1. In order to preserve their social protection systems, while taking account of demographic and economic trends, many Member States will seek to adapt their social protection systems over the next decade, according to their individual circumstances and cultures. However these adaptations ought to take place through cooperation in the EU framework.

1.3.2. The Commission Communication considers that the real 'reasons for a reform are internal`. Two major problems are highlighted: 'big public deficits and the lack of real success in social integration` ().

1.3.2.1. It can be argued that the first problem is not caused by, but does have an effect on, social protection. Mass unemployment and the corresponding transfers to pay for income compensation for people out of work are problems chiefly relating to economic slowdowns and the performance of the labour market. Likewise, the demographic 'timebomb` and fears of an unsustainable dependency ratio in the near future as regards the numbers of retired people receiving old-age benefit vis-à-vis the number of the active workforce, can also be considered as a major distributional problem, relating more to the replacement ratio on the labour market than to any inherent failure of social protection. At the same time, it can also be argued that the economic and labour market adjustments judged necessary can be bolstered and supported by certain adaptations of our social protection systems. The key to progress on both points would seem to be based around the twin concepts of flexibility and security, taking into consideration the 'changing nature of work` and the importance of coordinating economic and structural policies as set out in the Dublin Summit declaration on employment and outlined in the Commission's report on 'Europe as an Economic Entity`.

1.3.2.2. The second problem, 'the lack of real success in social integration`, is one more intrinsic to social protection in the EU, especially in relation to mass unemployment and accompanying social exclusion, the estimated economic and social costs of which are huge. There is a general consensus that a major shift is necessary from (passive) income maintenance to (active) employment-friendly social protection systems.

1.3.3. Two additional and important challenges are highlighted in the Commission Communication: 'adapting social protection to the new gender balance` and 'improving social protection for people moving within the Union`. The Committee has endorsed all major proposals in these fields ().

2. Specific proposals?

2.1. Social protection as a productive factor

2.1.1. The Committee has consistently upheld the view that social protection can help stimulate and reinforce economic performance, and has drawn attention to the beneficial effects of an integrated and coordinated approach at both European and national levels between social and economic policies (). The Commission communication also points out, 'Members States with a strong safety net often perform better in terms of GDP per capita or external balance than Member States with a weaker safety net.` () The negative, downward spiral, of bad economic performance being transposed into social protection cut-backs and therefore lower consumption and reduced demand, can be turned around into a positive integrated approach, concentrating on transforming passive into active expenditure, generating jobs, services and growth. As pointed out in the Delors White Paper, this would require 'restructuring national government income support schemes in ways which enable income from work to be topped up with income from social security, by developing integrated taxation and income support systems with appropriate safeguards.` () In this regard, among the further studies on the links between social and economic policies which the Commission will develop, it could undertake studies to establish comparable indicators of the employment potential of the care sector and of the preventive capacity of social protection. In this framework, a recent study highlights the costs of not having a developed social model (). Lastly, as the Commission points out, 'a central question (...) is how to combine obligations and opportunities` (). The Commission rightly points out that 'the urgent need to consolidate public finances ... is not in contradiction with a high degree of social protection nor does it dismantle the principle of solidarity. On the contrary, it strengthens solidarity between different generations, since it reduces the burden on future generations` (). The Committee is aware that the Commission will submit a study on this issue to the Member States and would wish to be involved in this debate.

2.2. Making social protection more employment-friendly

2.2.1. Developments on the labour market, such as the increasing participation rates of women and the spread of flexible forms of work, coupled with the emerging of new forms of work organization and of flexible leave arrangements throughout working life are shaping the world of work towards more varied individual working patterns (). Social protection can back up such developments by facilitating the different forms of labour market transitions. Various Committee opinions upheld the view that these new developments must be taken into account in the organization of social protection (). The Dublin Declaration on Employment also called for the 'developing social protection systems capable of adapting to new patterns of work and of providing appropriate social protection to people engaged in such work`.

2.2.2. The potential growth areas for such a turn-around in making social protection more employment-friendly are predominantly in the sectors where public-private partnerships can be nurtured. For example, the care sector, transport, energy and the environment are all areas where investment, through the use of non-wage income support mechanisms and accompanying safeguards, could enable other pressing needs (such as those of the elderly) to become more economically sustainable and could be beneficial to growth and jobs. The high public sector profile of such schemes lends them considerable importance; hence the Delors white paper suggestion to maximize the job generation potential of such measures by their operation through a 'single government agency` is logical (). The involvement of the social partners, of the social economy and relevant NGOs and of local and regional government within such a framework could also help promote practical schemes, and ensure proper safeguards and positive incentives to assist the shift from 'welfare to work`. Many long-term recipients of benefit over prolonged periods have become locked in to their situation and find it increasingly difficult to break out. This could be overcome by a positive campaign directed towards the betterment and improvement of the individual's situation as well as a (non-detrimental) adjustment of the relationship between tax and benefits. Such incentives could include a higher income ceiling in terms of benefit entitlement.

2.2.3. Similar public/private partnerships, based on part work experience and part income support, and subject to collective agreements, could be envisaged as regards the training and re-skilling of unemployed people seeking to qualify, requalify and enter or re-enter the labour market. Efforts to promote flexible transitions between school, training and employment are important. Again, the involvement of the social partners in negotiating the framework for such job-training schemes topped up by income support could ensure incentive-based rather than compulsory 'workfare` schemes, with appropriate safeguards against job substitution through cheap subsidized labour. Particular attention is also needed to ensure that such schemes are designed and based on criteria effectively conducive to employment. As the Committee has previously pointed out, 'by themselves, education and training are not enough to construct an adequate policy against unemployment. General and specific policies aimed at job creation will also be necessary` ().

2.2.4. These policies should be pursued:

- with due respect for the principle of subsidiarity and, in particular, the 'acquis` of each Member State based on prior negotiations and their different 'social cultures`;

- in close collaboration with the players to define the projects, ensure that they are carried out and evaluate the results;

- avoiding the creation of a social stratum with artificial and underpaid jobs.

2.2.5. Employment-friendly social protection also includes proposals to reduce non-wage labour costs. The Delors White Paper proposed the lowering or exemption of employers' social security contributions for less skilled, low-wage labour, with costs being off-set by compensatory measures such as environmental taxes, excise duties on consumer products that are damaging to health, and taxes to make productive investment more attractive (). The Committee's Opinion of November 1996 on the 'future of social protection` took a similar line on compensatory measures, but advocated that employers could enjoy a partial exemption on their social security contributions on all wages and salaries and apply it to those beneath an agreed level (). The Committee Opinion of 9 July 1997 on taxation in the EU also endorsed such alternative sources of finance (). The Commission Communication points out that 'Several Member States have introduced various measures to reduce non-wage labour costs (but that) some studies have shown that they have not led to significant effects on overall employment levels because they trigger substitution effects between subsidized and non-subsidized labour and dead-weight losses. At the same time, these studies show that the positive effects will be greater if measures are carefully designed and linked to job creation` ().The Committee urges the Commission to continue to work on this issue and would wish to be involved in this exercise. It is clear that such schemes should not lead to insecure jobs substituting secure ones, nor should they undermine the rights of social security beneficiaries. The subsidiarity principle should be observed.

2.2.5.1. In order to promote employment, there is a widespread agreement on the 'need to reverse the trend in taxation structures towards an increasing burden on labour compared to other tax bases` (). This is why the Committee acknowledges the importance of the global view of the whole area of taxation undertaken by the High Level Tax Policy Group set up by the Dublin European Council. Moreover, the interplay between tax and benefits structures could be made more neutral with respect to labour market dynamics.

2.2.6. Proposals in the Commission Communication in favour of a more flexible transition from work to retirement, especially through the use of voluntary part-time pre-retirement schemes, have been consistently supported by the Committee, subject to legislative safeguards and a strong framework of collective agreements adapted to the sectors concerned. 'Individuals would progressively reduce their working hours (increasingly part-time activity) whilst simultaneously extending their working life (a gradual shift in retirement age.` (). Such individualized, part-time working arrangements, subject to collective agreements, could be designed to help free-up jobs for the young unemployed, with consequent savings in social security and unemployment benefits. However, any such arrangements must not be to the detriment of older workers. Such savings, plus a more gradual and staggered recourse to pensions, could more than off-set income support to top-up the part-time pre-retirement schemes. The overall costs and benefits of such arrangements would need to be evaluated, and examples of good practices across the European Union discussed between the social partners. The question of pro-rata rights and the legal status of part-time workers would also need to be resolved.

2.2.7. The Committee has also consistently advocated the need for social protection to promote inclusion. This requires a guaranteed minimum level of income security, linked to integration, stability and re-skilling. Jobs and activity are the best means to sustain social inclusion. This can include 'non-market` jobs in which the vast savings to public expenditure can easily off-set top-up allowances, benefits or tax exemptions.

2.3. Adapting social protection to the demographic ageing of European societies

2.3.1. The combination of a falling birth rate and increased longevity means that the ratio of elderly people to the working population will double over the next fifty years. This will make it increasingly difficult to finance pension payments if there is not an adequate level of contributors in the active workforce. The development of common forecasting models of long-term social protection expenditure would help increase understanding of the challenges posed by the demographic changes across the Union. The demographic 'timebomb` and resulting pressures on and doubts about the sustainability of pension schemes is in any case a major distributional problem relating to the replacement ratio on the labour market, as is also highlighted by the Commission in its Demographic Report 1997 (). Various labour market adjustments can help off-set some of the problems. For example, the Commission Communication indicates 'The trend of increased female participation in employment will continue during the years to come and will make a valuable contribution to countering an impact of the ageing workforce ()`. Flexible transition to retirement with voluntary shifts in retirement age, as indicated above, could also lower the dependency ratio. Moreover, at a time when more than 18 million people in the EU are unemployed, it would seem rather paradoxical to panic over the lack of an active workforce. The key issue is not the overall demographic structure of society, but the share of people involved in generating GDP. The problem is jobs more than pensions. Questions arising concerning the sustainability of pensions, be they 'pay-as-you-go` (PAYG) schemes or ('funded`) capital-stock schemes, are in the final event inextricably linked to economic performance. Moreover, as the Commission points out 'a radical transformation of the public schemes from PAYG to funded schemes is not realistic because of the huge transition costs` ().

Providing a 'secure environment` for supplementary pension schemes needs to be tempered by policies relating to economic performance. PAYG schemes depend on policies enabling people actively to engage in creating GDP. Funded schemes are subject to inflation, investment and capital speculation risks. Irrespective of the way in which pension insurance is organized - public, supplementary, or private - there must be adequate guarantees on their coexistence. Expenditure involved must in any case be generated by the current state of national economies and by accompanying policies on monetary stability and capital investment. Within such economic constraints, the Committee has already endorsed proposals in favour of portable supplementary pension schemes.

2.3.2. The Committee has already supported the ideas set out in the Commission Communication as regards meeting new care needs for older people, especially enabling older people who so wish to stay if possible in their own homes, rather than in 'institutionalized` care. Enabling conditions, such as home-help, medical and paramedical care, and access to social services, all possibly in partnership with the voluntary sector, are preferable to, and indeed less expensive than, having to depend on private insurance with possible risks of 'adverse selection` and 'moral hazard` (). Additional measures have been proposed by the Committee, including an inter-generational solidarity levy to finance structures and assistance for old people as a means of reducing dependence. Positive social protection measures to cover new risks can also be achieved, even during periods of recession.

2.3.3. The protection and restoration of health are an essential aspect of social protection. This chapter should not be approached solely in terms of the elderly, but should be studied in its own right. Health care expenditure, especially for the very old, can be partially offset by preventive medicine, guidance and home care. In order to improve health outcomes, and to equip health care systems to address the factors influencing the health status of the population, Member States could pursue a more consistent approach to health policy along the lines indicated by the WHO (). Moreover, a better evaluation of cost-effectiveness of new technologies and of the impact of Community policies could be carried out. The Commission also draws attention to the need to improve awareness of the health aspects of the changes in work organization (). The Committee's Opinion of November 1996 on 'the future of social protection` highlighted that 'by adopting the 1992 Recommendation on the convergence of social protection objectives and policies, the EU Member States have endorsed the objective of ensuring that all persons legally resident in a Member State have access to necessary health care, as well as the maintenance and development of a high quality health-care system. The concern over containing health care costs must be tempered by concern to ensure equitable access to high-quality health care for all. Measures allowing the selection of risks (cream-skimming) would endanger solidarity and jeopardize the provision of effective care` ().

2.4. Adapting social protection to the change in the gender balance: towards an individualization of rights

2.4.1. The Committee has supported proposals for reconciling working and family life and for progressively implementing an individualization of rights, without thereby jeopardizing the economic situation of women. The Commission states 'the idea of a basic old-age pension supplemented by an occupational pension might be able to accommodate this very complex problem` by taking better account of the current position of women on the labour market and to more varied patterns of working life (). However, taking into account the differences between the national systems, the effects that the Commission's idea could have on contribution-and-income-related social security systems should be thoroughly researched. It would be useful if the Commission issued a Communication on the individualization of rights, in which these problems would be covered.

2.4.2. The Committee has also consistently endorsed proposals for equal treatment in statutory and occupational social security schemes.

2.5. Improving social protection for people moving within the Union

2.5.1. The Committee has endorsed all up-dates of Regulation (EEC) No 1408/71, enabling closer coordination of statutory social security arrangements for people moving within the EU. It is also drawing up an Opinion on the recently published Green Paper on 'Supplementary Pensions in the Single Market` (). The Committee has already specifically called for similar provisions for occupational pension schemes, including a legal framework safeguarding assets and individual rights, comparable EU-wide transfer values, and an EU coordination framework for occupational pension schemes, perhaps based on Article 51 of the Treaty, analogous to that already in existence for statutory schemes (). It has also draw attention to fiscal anomalies for frontier workers.

3. Supporting the adaptation process through action at European level

3.1. The Committee has called for an EU regulatory framework on pro-rata rights for part-time workers and for the coordination of occupational pension schemes. It has also called for a European poverty and social exclusion observatory and for European-wide data on the costs of poverty and social exclusion. EU provisions on equal treatment for women and men in statutory and occupational social security schemes have been endorsed. EU-wide measures in favour of growth, competitiveness and employment, upon which sustainable social protection depends, have been proposed or endorsed in numerous Committee opinions. The fundamental interdependence of social policy and economic performance in the EU remains paramount. This is why the Committee agrees with the Commission that 'The reforms of social protection systems have to be seen in the context of the European employment strategy and the "Broad Economic Policy Guidelines", agreed at the Florence European Council` (). It is also why the Committee welcomes the Commission's intention to pursue the debate with the social partners and through the civil dialogue, as well as with the European institutions, in the knowledge that 'modernizing and improving social protection in the Union cannot be achieved without the active participation of all involved` (). The Committee is also aware that the exchange of experience between Member States represents important added value at EU level () and wishes to see this 'catalyst` role pursued. In this framework benchmarking can represent a valuable tool in order to identify particularly effective practices with respect to the objectives set out in the 1992 Recommendation on the convergence of objectives and policies of social protection.

3.2. However, the Committee notes from the communication that the Commission has set itself a very busy and tight schedule and plans to carry out numerous studies and draw up several documents.

For instance:

- analyses: taxation, unemployment benefits, forecasting methods, relationship between market and health care, care of children and elderly dependants ...;

- assessments: costs and benefits of social protection, impact of policies and means for combating unemployment, minimum income, wage costs, retirement and pension schemes, prevention- health, cost of heath;

- the Green Paper on supplementary pension schemes (see point 2.5.1 above).

3.2.1. For its part, the Committee suggests including a study in order to establish comparable indicators on the employment potential of the care sector and of the preventive capacity of social protection. The Commission's schedule is very tight: 'Amsterdam Summit, end of June 1997, first half of 1997 ...`. Therefore, several documents will not have been examined by the Committee. Furthermore, it will be difficult to consult the bodies concerned. Considering the scope, nature and seriousness of the subjects involved, the Committee would wish to issue its opinion in good time, when the texts are being prepared and not after their publication.

Brussels, 10 December 1997.

The President of the Economic and Social Committee

Tom JENKINS

() COM(97) 102 final, point 1.2, 2nd paragraph. Data available on public and private social protection spending in Sweden and in the United States expressed as a percent of private household expenditure, show that, in 1990, Swedish households devoted 4,4 % of their income to private health, education, pensions and day care, and 36,8 % to taxes, for a total of 41,2 % . Their American counterparts devoted 29,2 % of their income to private health, education, pensions and day care, and 10,4 % to taxes, for a total of 39,6 %. Gosta Esping-Andersen, «The Double Problem of Coordination in Contemporary Welfare States», paper prepared for the Conference on Social Policy and Economic Performance, Amsterdam, 23-25 January 1997.

() Ibid., 3rd paragraph. 'Extra-EU exports of goods account for 8 % of EU GDP - a level which has persisted over two decades. That means that 92 % of the demand is met with production in Europe, while 8 % is met through imports from countries outside the EU`, Commission report 'Europe as an Economic Entity`, CSE(96) 8 final, 4.12.1996, p. 8.

() 'Social Protection in Europe` COM(95) 457 final, Chapter 3, page 59.

() COM(95) 457 final, op. cit., summary, p. 12, penultimate paragraph.

() COM(97) 102 final, op. cit., point 1.2, last paragraph.

() COM(97) 102 final, op. cit., executive summary, points 4 and 5.

() ESC Opinion on Social policy and economic performance, OJ C 287, 22.9.1997, points 2.3 and 3.

() COM(97) 102 final, op. cit., point 1.2, 2nd paragraph.

() White Paper on 'Growth, Competitivity and Employment: the challenges and ways forward into the 21st century`, EC Bulletin, Supplement 6/93, p. 131, point 8.8, c(iii).

() German Unemployment and the European Social Model, Commission Services.

() COM(97) 102, point 2.1, 2nd paragraph.

() Ibid., point 1.2, 4th paragraph.

() Green Paper on 'Partnership for a New Organization of Work`, COM(97) 128/9.

() See Opinions on 'The future of Social Protection`, OJ C 66, 3.3.1997 and on 'Working Time`, OJ C 18, 22.1.1996.

() Ibid., point 8.8 c (iii).

() ESC Opinion on 'Social Exclusion`, OJ C 352, 30.12.1993, point 5.2.2.

() White Paper, op. cit., points 9.4, 9.5.

() OJ C 66, 3.3.1997, point 5.

() OJ C 296, 29.9.1997, point 2.2.3.

() COM(97) 102 final, op. cit., point 2.2.3, 4th paragraph.

() Commission Communication 'Taxation in the European Union. Report on the development of tax systems`, COM(96) 546 final, point 6.12. Available data on the taxation structure according to the economic function as % of GDP show that for the EU 15, in 1993, tax burden bore 11 % on consumption, 21,2 % on employed labour, 7 % on capital and 2,1 and 0,6 % on, respectively, energy and environment. Structures of the taxation systems in the EU, Eurostat report, 1997.

() OJ C 66, 3.3.1997, op. cit., point 6.4.1.7.

() European Commission, Demographic Report 1997, p. 3 and passim.

() COM(97) 102 final, op. cit., point 1.2.3, 1st paragraph.

() Ibid., point 2.3.1, 7th paragraph.

() COM(97) 102 final, op. cit., point 2.3.3, 3rd paragraph.

() WHO, Health for all in Europe: an Epidemiological Review, Copenhagen, 1990.

() Green Paper on 'Partnership for a New Organization of Work`, COM(97) 128/9, points 62 and 63.

() OJ C 66, 3.3.1997, point 8.5.

() COM(97) 102 final, op. cit., point 2.4, last paragraph.

() COM(97) 283 final.

() ESC Opinion on 'Supplementary Social Security Schemes`, 26.5.1992 - OJ C 223, 31.8.1992.

() COM(97) 102 final, point 2.1, 2nd paragraph.

() Ibid., point 3, 2nd paragraph.

() Ibid., point 3, 1st paragraph.

APPENDIX I to the opinion of the Economic and Social Committee

The following members, present or represented, voted for the opinion:

Mr/Mrs/Miss: ABEJÓN RESA, ANDREWS, ANGELO, ATTLEY, Dame Jocelyn BARROW, BASTIAN, BETELU BAZO, BØGH, BRIESCH, van den BURG, BURKHARD, Vasco CAL, CASSINA, CEBALLO HERRERO, CHAGAS, CHEVALIER, CHRISTIE, COLOMBO, DANTIN, DELAPINA, van DIJK, DRIJFHOUT-ZWEIJTZER, DRILLEAUD, ENGELEN-KEFER, ETTY, zu EULENBURG, FORGAS I CABRERA, FRERICHS, FUCHS, GAFO FERNÁNDEZ, GEUENICH, GLATZ, HAGG, HERNÁNDEZ BATALLER, JASCHICK, KALLIO, KANNISTO, KIENLE, de KNEGT, KONITZER, KONZ, KORYFIDIS, KUBENZ, LEMMETTY, LIVERANI, LYONS, LÖNNBERG, MADDOCKS, MANTZOURANIS, MARGALEF i MASIÁ, MENGOZZI, MERIANO, NILSSON, NYBERG, PELLARINI, POMPEN, QUEVEDO ROJO, RAMAEKERS, REUNA, SÁNCHEZ MIGUEL, SANTILLÁN CABEZA, SANTOS, SCHMITZ, SEPI, SEQUEIRA, SKOUBY, STOKKERS, STÖLLNBERGER, STRASSER, TSIRIMOKOS, TWIST, VOGLER, WAHROLIN, WESTERLUND, WRIGHT, ZUFIAUR NARVAIZA.

The following members, present or represented, voted against the opinion:

Mr/Mrs/Miss: ANDRADE, BAGLIANO, BARROS VALE, BEALE, BOUSSAT, BREDIMA SAVOPOULOU, BURANI, BYRNE, DE NORRE, DOCK, DONOVAN, FRANZ, GARDNER, GAUDER, GIESECKE, HAMRO-DROTZ, HORNUNG-DRAUS, JOHANSEN, KIELMAN, KONTIO, LEHNHOFF, LEVITT, LINSSEN, LITTLE, MALOSSE, MEGHEN, MOBBS, MORELAND, MORGAN, NOORDWAL, PIETTE, RAVOET, REGNELL, REITERER, SIMPSON, SIRKEINEN, WALKER, WHITWORTH.

The following members, present or represented, abstained:

Mr/Mrs/Miss: BENTO GONÇALVES, BOISSERÉE, BROOKES, DECAILLON, HAGEN, LERIOS, NIELSEN, RETUREAU, SOLARI.

APPENDIX II to the opinion of the Economic and Social Committee

Following the recorded vote on the opinion as a whole, the following members of the Employers' Group, who had voted against the opinion, issued the following statement:

'The Employers' Group believes that the Committee's opinion fails to recognize the problems inherent in current social protection regimes and understates the necessity for modernization and improvement.

The group fully supports the concept of effective social protection for all our citizens as a key factor in economic performance but equally affirms that strong economic performance is essential to affordable social protection regimes.

Current problems in many Member States may be summarized as follows:

1. Social benefit systems have grown piecemeal and are geared to out-dated living standards and employment patterns.

2. A dependency culture has been created as not enough is done to help long-term recipients to break out of their situation.

3. Member States are concerned about spiraling costs in the face of their efforts to control budget deficits.

4. The old-age dependency ratio (65+ as % of 15-64) is estimated to double by the time those starting work today come to retire.

The group welcomes the Commission's analysis. It generally supports the proposals for action and hopes that they will be of help to Member States in their efforts to overcome the problems. In particular the group believes that the following aspects should be the subject of detailed consideration:

- the benefit structure and the relationship of benefits to one another;

- the targeting of benefits to those in greatest need;

- helping long-term recipients to equip themselves for employment;

- the interface between tax and benefits for the lower paid with better incentives to accept employment;

- encouraging individual responsibility;

- a gradual move towards long-term funding of at least a portion of retirements benefits;

- an increasing partnership between public and private provision.

Finally the group applauds the efforts which the Commission is making to remove remaining obstacles to free movement in the field of social protection.`

Mr/Mrs/Miss: ANDRADE, BAGLIANO, BARROS VALE, BEALE, BOUSSAT, BREDIMA SAVOPOULOU, BURANI, BYRNE, DE NORRE, DONOVAN, FRANZ, GARDNER, GAUDER, GIESECKE, HAMRO-DROTZ, HORNUNG-DRAUS, JOHANSEN, KIELMAN, KONTIO, LEHNHOFF, LEVITT, LINSSEN, LITTLE, MALOSSE, MEGHEN, MOBBS, MORGAN, NOORDWAL, RAVOET, REGNELL, REITERER, SIRKEINEN, WALKER, WHITWORTH.