EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 2.7.2008 
SEC(2008) 2179 
  
COMMISSION STAFF WORKING DOCUMENT 
Biennial Report on social services of general interest 
{COM(2008) 418 final} 
EN 2   EN Biennial Report on social services of general interest 
TABLE OF CONTENTS 
Executive summary .............................................................................................................. ...... 7 
1. Introduction................................................................................................................ 10 
1.1. The debate on SSGIs at EU level............................................................................... 10 1.2. The structure of the BR.............................................................................................. 13 2. Health and social services from an employment and economic perspective............. 14 
2.1. Employment trends .................................................................................................... 14 2.1.1. Employment trends in the health  and social services sector...................................... 14 
2.1.2. Structural changes in the EU  employment and the role of health and social services18 
2.1.3. Features of employment in health and social services............................................... 21 
2.1.4. Conclusions............................................................................................................. ... 25 
2.2. Social expenditures .................................................................................................... 27 2.2.1. Public and private social expenditure ........................................................................ 27 2.2.2. Social expenditure by function: a shif t from cash benefits to services...................... 28 
2.2.3. The relationship between employment  and social protection benefits ...................... 31 
2.2.4. Conclusions............................................................................................................. ... 33 
3. Trends in long-term care, labour market  services for disadvantaged persons and 
childcare ..................................................................................................................... 3 4 
3.1. Long-term care........................................................................................................... 3 5 
3.1.1. The role of long-term care services in an ageing Europe........................................... 36 3.1.2. Overview of service provision ................................................................................... 37 3.1.3. Overview of expenditure............................................................................................ 41 3.1.4. Modernisation trends in long-term care ..................................................................... 43 3.2. Labour market services for disadvantaged people..................................................... 45 3.2.1. The role of labour market services............................................................................. 46 3.2.2. Overview of service provision ................................................................................... 46 3.2.3. Overview of expenditure............................................................................................ 47 3.2.4. Modernisation trends in labour market  services for disadvantaged people ............... 49 
EN 3   EN 3.3. Childcare ................................................................................................................. ... 51 
3.3.1. The role of childcare services .................................................................................... 51 3.3.2. Overview of service provision ................................................................................... 52 3.3.3. Overview of expenditure............................................................................................ 55 3.3.4. Modernisation trends in childcare services................................................................ 57 3.3.4.1. Diversified forms of childcare ................................................................................... 58 3.3.4.2. New forms of delegation and financial support ......................................................... 58 
3.3.4.3. Outcomes of the modernisation process .................................................................... 59 4. Modernisation and the Quest for Good Governance.................................................. 60 4.1. Modernisation in SSGI organisation and management.............................................. 62 4.1.1. Performance management.......................................................................................... 62 4.1.2. User orientation and ac cess to social rights ............................................................... 63 
4.1.2.1. User orientation...................................................................................................... .... 63 
4.1.2.2. Access to social rights............................................................................................... . 64 
4.1.3. Integration of services................................................................................................ 6 4 
4.1.4. Decentralisation........................................................................................................ .. 65 
4.2. Changing forms of regulation and governance of SSGIs........................................... 66 4.2.1. The increased role of market-based regulation .......................................................... 66 4.2.1.1. Public programming regulation vs market-based regulation ..................................... 66 
4.2.1.2. The shift towards market-based regulation................................................................ 66 4.2.1.3. Market-based instruments and corrective methods.................................................... 67 4.2.2. The introduction of new forms of  public-private partnership.................................... 68 
4.2.3. The development of new governance practices ......................................................... 69 4.3. Consequences of national modernisati on processes in terms of applicable 
Community law.......................................................................................................... 70 
4.3.1. The strategy put in place by the Comm ission to provide practical guidance............. 71 
4.3.2. The follow-up by the Social Protection Committee (SPC)........................................ 72 
4.4. Answers already brought to concrete questions raised by stakeholders .................... 74 
4.4.1. Scope of Community rules......................................................................................... 74 4.4.2. Provision of SSGIs..................................................................................................... 7 4 
4.4.3. Financing of SSGIs .................................................................................................... 79  
EN 4   EN LIST OF FIGURES  
Figure 2.1:  Change in the employment rate from 2000 to 2007 ................................... 15 
Figure 2.2:  Employment in health and social work as % of total employment, 2007 ... 16 
Figure 2.3:  Trend of employment in health and soci al services as a percentage of total 
employment ................................................................................................ 16 
Figure 2.4:  Share and absolute growth in health and so cial services by field of activity 
(2001 and 2006) ......................................................................................... 17 
Figure 2.5:  Change in sectoral employment for the EU-27 from 2000 to 2007 (in 
thousands with gender breakdown) ........................................................... 19 
Figure 2.6:  Change in sectoral employment fo r the EU-15, 2000 to 2007 (in thousands 
with gender breakdown) ............................................................................ 20 
Figure 2.7:  Employment creation in health and so cial services by age group (1995* to 
2007) .......................................................................................................... 21 
Figure 2.8:  Skill levels and working patterns in health and social work, 2006 ............ 22 
Figure 2.9:  Part-time working in health and social work, 2007 ................................... 22 
Figure 2.10:  Temporary contracts in he alth and social work, 2007 ............................ 23 
Figure 2.11:  Wage evolution in the health and social work sector, 1995-2005 ........... 24 
Figure 2.12:  Public and private social protection spending, 1995 and 2003 ............... 27 
Figure 2.13:  Trend in social protection benefi ts for the EU-15 from 1995 to 2005 ..... 29 
Figure 2.14:  Expenditure on social protection benefits by broad social policy area, in 
percentage of GDP, in 2005 ..................................................................... 30 
Figure 2.15:  Social protection benefits in  kind excl. health care, 2005 ....................... 31 
Figure 2.16:  Employment in health and social work  vs social protect ion benefits excl. 
pensions, 2005 .......................................................................................... 32 
Figure 3.1:  Long-term care recipients in institutions, 2004 ......................................... 39 
Figure 3.2:  Long-term care recipients in the co mmunity (including people receiving 
care allowances), 2004 ............................................................................. 39 
Figure 3.3:  Expenditure on long-term ca re (in % of GDP), 2003/2004 ....................... 42 
Figure 3.4:  ESF breakdown 2000-2006 (as a percentage of total ESF budget of 70 bn 
euros) .......................................................................................................... 48 
EN 5   EN Figure 3.5:  Employment rates for mothers with children under 3 and access rates for 
children under 3 to licensed ECEC services .............................................. 53 
Figure 3.6:  Public expenditure on ECEC services (0-6 years) ..................................... 56 
LIST OF TABLES  
Table 2.1:  Migrants in the health and social work sector ............................................. 24 
Table 2.2:  Social protection benefits as % of GDP in the EU-15 and the EU-25 ........ 29 
Table 3.1:  Estimated expenditure on long-te rm care and projections up to 2050 ........ 41 
Table 3.2:  Drivers of modernisation in long-term care ................................................ 44 
Table 3.3:  Public expenditure on labour market po licy, by category, as a % of GDP 
(2006) ........................................................................................................... 47 
Table 3.4:  Drivers of modernisation in labour -market services for disadvantaged 
people ........................................................................................................... 50 
Table 3.5:  Drivers of modernisation in childcare services ........................................... 57 
Table 4.1:  User involvement in  social services. Various st rands of thinking, elements 
and tools ....................................................................................................... 63 
EN 6   EN EXECUTIVE SUMMARY  
In line with the commitment of the Commissi on to establish a monitoring and dialogue 
tool on social services of ge neral interest (SSGIs), this first Biennial Report (BR) 
provides an overall picture of these services in the European Union. It covers the scope 
of these services, the situation in some releva nt sectors, the way in which they adapt to 
evolving needs and face up to socio-econom ic challenges, and the impact of these 
changes on the organisation, financing and provi sion of SSGIs in terms of the application 
of Community rules. 
Overall, evidence presented in this BR confirms that the significance of SSGIs is 
growing in modern social policies and that SSGIs create opportunities for all within a 
framework of general access and solidarity. SS GIs therefore play a central role in the 
implementation of the Renewed Social Age nda on Opportunities, Access and Solidarity1. 
The BR also confirms that the modernisation of  these services primarily aims to secure 
the highest quality of services for all with in financial and human resource constraints. 
While there are wide differences between the different sectors and the approaches in the 
Member States, there are common commitment s and challenges across the EU. The BR 
confirms that there is a need, not to chan ge the applicable Community rules, but to 
provide stakeholders in the SSGI field with practical guidance and support, and that the 
strategy put in place by the Commission has good results. Striking the right balance 
between ensuring financial sustai nability and the commitment to provide quality services 
for all is emerging as a centra l issue not for policy makers at  both national and EU levels. 
The BR starts by restating the objectives pu rsued by SSGIs, which are reflected in the 
way these services are organised, financed  and delivered. The BR highlights how crucial 
these services are in promoting an inclusiv e society and in enhancing the capacity of 
individuals to participate fully in soci ety. The contribution of SSGI to meeting 
fundamental EU objectives, including a high le vel of employment, social inclusion and 
economic growth, is confirmed and illustrated by the analysis carried in the BR.  
SSGIs are an important delivery mechanism for social policies fo cusing on promoting 
opportunities for all. This requires, as highlighted in the Renewed Social Agenda, access for everyone to social services, including health services, to help to br idge inequalities in 
starting points. By ensuring that all ci tizens can have access to the opportunities 
presented to them, SSGIs put into practice th e principle of solidarity. The recent growth 
in demand for these services reflect deep-ro oted trends in the European economies and 
societies resulting from demographic agei ng, changes in gender roles and family 
structures as well as technological change and globalisation. An increasing number of 
people need efficient services that are ad apted to diversified needs and choices.  
Social and health services as major dri vers of employment and social development… 
Social and health services re present a major part of the EU economy, particularly in 
terms of employment, as most of them ar e labour-intensive. They have contributed 
significantly to job creation in the EU, especially among women and older workers. 
While workers in these services are generally better skilled, wage levels have declined 
relatively, and are now below the EU economy  average and well below other non-market 
                                                
 
1 COM (2008) 412 
EN 7   EN services. Working conditions are very demandi ng and job satisfaction is below that of 
other economic sectors. Part-time work is  widespread, which could explain why the 
sector continues to attract workers. Not surp risingly, turnover is hi gh, staff shortages are 
frequent, and the influx of workers fr om non-EU countries has increased.  
In view of structural changes in European economies and societies and of an expected 
strong increase in the demand for some of th ese services, it is no t clear whether human 
resource needs will be met in the future. Th is situation contributes to tensions and 
reinforces pressures on these services to reorganise.  
…. require major financial resources 
Financial resources on social and health services account for around 9% of the EU GDP 
and seem to have increased over time. While the private share is slowly increasing, these 
funds mostly come from the public sector. This makes these services particularly 
sensitive to short-time financial constraints in  public finances whereas service provision 
requires long-term stability to obtain quality in services and quality in work. Short-time 
financial constraints might also explain th e incidence of temporary employment and 
pressure on working conditions. At the same time, financial constraints may explain the 
search for complementary financing and for increased efficiency which are two of the driving forces behind the modernisation of  these services. As Member States are 
committed to providing services in line with th e values of universality, equity, solidarity 
and quality in a period of in creasing and diversifying demand, they will be looking for 
modern pro-active welfare strategies to ensu re effectiveness and efficiency of social 
spending. These policies, including promoting inclusive labour mark ets, prevention and 
rehabilitation, may require more funds init ially, but should lead to cost-savings and 
improve quality of delivery in the longer term. 
Trends in long-term care, labour market services for disadvantaged persons and 
childcare 
The way in which adaptation and reorganisatio n of these services are taking place varies 
between Member States, which is reflected in differences in national institutional 
frameworks.  
The adaptation process is influenced by the inner logic of each policy field and by socio-
economic factors that impact more on certain services than others. The BR looks at three 
sectors where the impact of so cio-economic factors is particul arly strong: long-term care, 
labour market services for disadvantaged pers ons, and childcare. These three sectors also 
illustrate the contribution of SSGIs to empl oyment growth in the EU. The BR analyses 
the role of these services in European societ ies, presents an overvie w of service provision 
and expenditure, and describes the modernis ation process in these three sectors. 
Long-term care  systems have undergone major changes over the past decade in terms of 
planning, provision and financing as well as qua lity development. The expected increase 
in demand is a major policy challenge for many Member States, as supply already is 
considered to be insufficient to meet pres ent needs. The sector  relies heavily on the 
participation of private households, which s till provide the bulk of care in all Member 
States and often have to shoulder a large financial burden in cases where out-of-pocket 
payments and co-payments for formal care are required. 
EN 8   EN Labour market services for disadvantaged people  are a key instrument of the European 
Employment Strategy, which places partic ular emphasis on the integration of 
disadvantaged people. Given the prospect of  a shrinking labour force and the EU policy 
agenda of promoting higher economic growt h, competitiveness and social cohesion, it is 
crucial to implement active labour market policies targeting disadvantaged people. 
Childcare services have rapidly expanded in many Me mber States due to increased 
labour market participation of women. Moreov er, quality childcare can foster healthy 
development, socialisation and education of  children, and enhance social cohesion, and 
facilitate the integration of children from disadvantag ed socio-economic backgrounds. 
The supply of childcare servic es has become more diversified in recent years. 
The main modernisation drivers for the three se ctors appear to be threefold (i) ageing is 
the main challenge for long-term  care services; (ii) labour market services have to adapt 
to the changing labour market needs, and (iii) the development of childcare services is a 
response to emerging needs resulting from ge nder equality policy ob jectives and changes 
in family structures. 
Common trends in modernisation 
In spite of the diversity across Member States, some common trends regarding the 
organisation, management and governance of  social services can be identified: 
modernisation is a response to the social and economic challe nges that all EU societies 
are faced with (ageing, changing gender roles and the quests for social integration, labour 
market flexibility and greater cost efficiency, etc.). The need to adapt to changing needs, 
which cannot be dissociated from the search for quality improvement, efficiency and cost 
containment, represents an important driver  of modernisation. In a context where the 
need for services is becoming increasingly sophisticated and complex, it is essential to promote stronger user orientation and user empowerment and to enhance access to social 
rights.  
Common features can also be identified in reforms of the organisation and management 
of SSGIs across Member States: the gene ral aim of increasing efficiency and 
effectiveness of service provision translates in to (i) increased utilisation of performance 
measurement tools, (ii) user empowermen t and user involvement mechanisms, (iii) 
integration of services, and (iv) decentral isation. The BR also observes a shift from 
public programming towards a market-based  regulation approach and the use of 
corrective methods. 
Consequences of national modernisation processes in terms of applicable Community 
law - the need for more practical guidance and support 
As the BR documents, national modernisation pr ocesses are a response of Member States 
to evolving needs and structur al changes and not a consequence of EU policies. They 
may, however, result in the application of Community rules. As a result of the State 
becoming less of a direct service provider bu t increasingly of a regulator/guarantor, while 
remaining an essential source of financi ng, there are questions concerning the 
applicability of Community rules.  
EN 9   EN As announced in the 2006 Communication2, the BR reports on the consequences of 
national modernisation proce sses in terms of applicable Community law and on the 
strategy put in place by the Commission to provide stakeholders in this field with 
guidance and support. 
The consultation process has shown that, at this stage, the difficulties experienced in the 
application of Community rules are not caused  by the rules themselves but rather by the 
fact that these rules are not well known and not  applied by public authorities and service 
providers and that the possibilities they  offer are not fully exploited. In its 
Communication on servi ces of general interest of 20 November 20073, the Commission 
committed itself to providing stakeholders w ith necessary guidance. In addition to a 
series of clarification provided in th e Communication itself, two Staff Working 
Documents, dealing respectiv ely with public procurement4 and state aid rules5, provide 
answers to the most frequently asked questions  in the social field during the consultation 
process.  
Moreover, an ‘interactive information serv ice’ (IIS) launched by the Commission in 
January 2008 provides concrete guidance to citizens, public authorities and service 
providers by answering their questions posted on a dedicated webpage. Even if it is too 
early to evaluate the IIS, the first result s are positive and show that the IIS meets an 
existing demand satisfactorily. 
The attention to SSGI quality 
Finally, increased attention to the issue of SSGI quality has emerged at various points in 
the analysis. This confirms the timeliness of the Commission’s intention to promote, within the Social Protection Committee, an EU quality framework for SSGIs. This, 
together with a more general analysis of quality issues, will be the focus of the 2010 
SSGI Biennial Report. 
                                                
 
2 COM(2006) 177 final. 
3 COM(2007) 724 final. 
4 SEC(2007) 1514, of 20 November 2007. 
5 SEC(2007) 1516, of 20 November 2007. 
EN 10   EN 1. INTRODUCTION  
Social services of general interest  (SSGIs ) play a vital role in European societies: they 
contribute to enhancing the cap acity of individuals to participate in society, enabling 
them to fulfil their economic and social pote ntial and guaranteeing that they can enjoy 
their fundamental rights. These services are an important delivery mechanism for social 
policies focusing on promoting opportunities fo r all to participate in society and a 
strategic field in the implementation of the Renewed Social Agenda.  Indeed, given the 
very different starting points and huge inequali ties in European societies, it is crucial to 
ensure that everyone has access to the services needed in or der to fully participate in 
social life and in employment. The modernisati on of social services is an important facet 
of the more general process of  modernisation of the welfare state, which the EU Member 
States have engaged upon in face of new social  challenges and major structural changes. 
In the context of the Agenda, the Commission lo oks at SSGIs in several ways. The Social 
Open Method of Coordination (OMC)6 will look at the role of social services in 
promoting social inclusion and access for all to  quality health and l ong-term care. Within 
the Social Protec tion Committee (SPC)7, the Commission will promote a European 
framework for SSGI quality. This role of this Biennial Report  (BR), the first of its type, 
is to sketch a broader picture of what SSGIs are, what they  do and how they are evolving. 
The BR examines this sector by showing how these services functi on and by highlighting 
their socio-economic importan ce. It describes the ongoing modernisation processes in 
the Member States and the main issues at st ake, with a view to facilitating the dialogue 
between the Commission, public  authorities and stake holders in this field. 
1.1. The debate on SSGIs at EU level 
With the Green Paper of 21 May 20038 the Commission launched a broad debate on 
services of general interest9. The Green Paper raised a considerable interest from 
stakeholders active in the social field. Th e White Paper adopted in May 2004 therefore 
paid specific attention to SSGIs and underlined  the interest in developing a systematic 
approach towards them in order to identify their main characteristics. 
                                                 
6 Set up at the Lisbon European Council of March 2000, the Open Method of Coordination 
provides a framework of political coordination where Member States agree to identify and 
promote their most effective policies in the fields  of Social Protection and Social Inclusion with 
the aim of learning from  each others’ experiences. 
7 The SPC is a committee created by Article 144 of the EC Treaty. It has three tasks: (i) monitoring 
the social situation and the development of social  protection policies in the Member States and in 
the Community; (ii) promoting exchanges of information, experience and good practice between 
Member States and with the Commission; (iii) prep aring reports and formulating opinions at the 
request of the Council and the Commission, as well as on its own initiative. It is made up of two 
official delegates per Member State (plus tw o alternate members). The Commission is a full 
member of the committee and provides the secretariat. 
8 COM(2003) 270. 
9 SGIs cover a broad range of activities: e.g. larg e network industries (energy, telecommunications, 
audiovisual broadcasting and postal services), water supply, waste management, education, social or health services. 
EN 11   EN The Communication on SSGIs of April 200610 (hereafter ‘2006 Comm unication’) made a 
first step in this direction. Based on an ex tensive consultation of Member States, social 
partners and civil society or ganisations in the area of so cial services, it provided a 
description of SSGIs in the European Union. In addition to health services, which were 
not covered in the Communicati on, two groups of services, albe it with varying functions 
and forms of organisation across the EU, were  identified: on the one hand, statutory and 
complementary social security schemes coveri ng the main risks of life and, on the other, 
those services provided dire ctly to persons a nd playing a preventive and socially 
cohesive role, such as social assistance servic es, employment and training services, social 
housing, childcare and long-term care services.  
The consultation process that followed th e 2006 Communication included (i) responses 
to a questionnaire prepared by the SPC in September 200611; (ii) a study on health and 
social services of general interest co mmissioned in 2006 and finalised in 200812 
(hereafter "the SHSGI study 2008");  (iii) the results of a peer  review on long-term care 
organised within the framework of the OM C by the Belgian authorities in May 2007 
and (v) the opinions of the European Parliament13, the European Economic and Social 
Committee14 and the Committee of the Regions15 on the 2006 Communication.  
The 2007 Communication16 crystallised the results of this consultation process, 
especially in relation to the main organisa tional characteristics set out in the 2006 
Communication. It listed (see belo w) a number of specific objec tives that social services 
are often meant to achieve and explained how these objectives are reflected in the way 
services are organised, de livered and financed.  
                                                 
10 Commission’s Communication ‘Implementing the Community Lisbon programme: Social 
services of general interest in the European Union’, COM(2006) 177 final of 26.4.2006.  
11 The questionnaire was addressed to Member Stat es, Social Partners and European organisations 
representing the civil society. The answers to this questionnair e are summarised in a Feedback 
report. See:  
http://ec.europa.eu/employment_social/spsi/docs/social_protection/2008/feedback_report_final_e
n.pdf   
12 The study was carried out by a consortium formed  by the European Centre for Social Welfare 
Policy and Research (Vienna), the International Cent re of Research and Information on the Public, 
Social and Cooperative Economy (CIRIEC, Liege) and the Monitoring Unit of the Observatory for the Development of Social Services in Europe at the Institute for Social Work and Social 
Education (ISS, Frankfur t am Main). See:  
http://ec.europa.eu/employment_social/spsi/docs/social_protection/2008/study_social_health_serv
ices_en.pdf   
13 FINAL A6-0057/2007. 
14 CESE 426/2007. 
15 CoR ECOS-IV-006. 
16 Communication on ‘Services of general interest, in cluding social services of general interest: a 
new European commitment’, COM(2007) 725 of 20 November 2007. It accompanies the 
Communication ‘A single market for 21st century Europe’, COM(2007) 724 final.  
EN 12   EN Objectives and principles of organisation of social services 
Social services are often meant to achieve a number of specific aims:  
– they are person-oriented services, designe d to respond to vital human needs, in 
particular the needs of users in vulnerable position; they provide protection from 
general as well as specific ri sks of life and assist in pers onal challenges or crises; 
they are also provided to families in a c ontext of changing family patterns, support 
their role in caring for both  young and old family members,  as well as for people with 
disabilities, and compensate possible fai lings within the families; they are key 
instruments for the safeguard of fund amental human right s and human dignity; 
– they play a preventive and socially cohesive  role, which is addressed to the whole 
population, independently of  wealth or income;  
– they contribute to non-discrimination, to gender equality, to human health protection, 
to improving living standards and quality of life and to ensuring the creation of equal 
opportunities for all, therefore enhancing the capacity of individuals to fully 
participate in the society. 
These aims are reflected in  the ways in which these s ervices are organised, delivered and 
financed:  
– in order to address the multiple needs of people as individuals, social services must be 
comprehensive and personalised, conceived and  delivered in an integrated manner; 
they often involve a personal relationship between the recipient and the service 
provider; 
– the definition and delivery of a service must ta ke into account the diversity of users;  
– when responding to the needs of vulnerabl e users, social services are often 
characterised by an asymmetric relations hip between providers and beneficiaries 
which is different from a commercial supplier / consumer relationship;  
– as these services are often rooted in (loc al) cultural traditions, tailor-made solutions 
taking into account the particularities of the local situation ar e chosen, guaranteeing 
proximity between the servic e provider and the user while ensuring equal access to 
services across the territory; 
– service providers often need  a large autonomy to address th e variety and the evolving 
nature of social needs; 
– these services are generally driven by the principle of solidarity and are highly 
dependent on public financing, so as to en sure equality of access, independent of 
wealth or income;  
– non-profit providers as well as voluntary wo rkers often play an important role in the 
delivery of social services, thereby expre ssing citizenship capacity and contributing to 
social inclusion, the social cohesion of  local communities and to intergenerational 
solidarity. 
Source: 2007 Communication 
EN 13   EN The 2007 Communication acknowledged the difficulties experienced by public 
authorities and service providers  active in the social fiel d in understanding and applying 
Community rules and launched a strategy to provide stakeholders with the necessary guidance.  
On top of a series of clar ifications provided in the Communication itself, two Staff 
Working Documents respectively de aling with public procurement
17 and State aid rules18 
provide answers to the most frequently asked questions in the social field during the 
consultation process. 
Finally, as announced in the 2007 Co mmunication, the Commission launched 
in January 2008 an ‘interactive information se rvice’ with the aim of providing concrete 
guidance to citizens, public au thorities and service provider s by answering the questions 
they post on a dedicated webpage. Since its launch, this information service has 
satisfactorily met an existing demand. 
1.2. The structure of the BR 
This BR builds on the debate launched after th e adoption of White Paper on services of 
general interest in 200419, and the consultation process that took place between 2006 and 
2007 as well as on the crucial steps re presented by the 2006 and the 2007 
Communications.  
After this first part which recalls the evolu tion of the debate on SSGIs at EU level and 
reviews the main steps taken over the last  four years, chapter 2 gives an updated 
overview of social and health services from  an employment and economic perspective. 
Chapter 3 analyses the diversity of na tional organisations and the drivers of 
modernisation in long-term care, labour mark et services for disadvantaged people and 
childcare. Finally, chapter 4 describes in more  general terms the modernisation processes 
on which Member States have embarked and analyses the impact of these changes on the legal framework applicable to SSGIs. 
                                                
 
17 ‘Frequently asked questions concerning the application of public procurement rules to social 
services of general interest’, SEC(2007) 1514, of 20 November 2007. 
18 ‘Frequently asked questions in relation with Commission Decision of 28 November 2005 on the 
application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to undertakings entrusted with the operation of services of general 
economic interest, and of the Community Framewor k for State aid in the form of public service 
compensation’, SEC(2007) 1516, of 20 November 2007. 
19 COM(2004) 374 final. 
EN 14   EN 2. HEALTH AND SOCIAL SERVICES FROM AN EMPLOYMENT AND ECONOMIC 
PERSPECTIVE  
This chapter describes the weight health a nd social services have in our economies in 
terms of employment and the financial resources  devoted to them. The first section deals 
with employment trends and characteristi cs. The second deals with the financial 
resources devoted to these services. Where possible, health care and different social 
services are distinguished, although specific information on the different sub-sectors is 
scarce, particularly on employment. 
The analysis made in chapters 2 and 3 is  based on statistical Eurostat or OECD 
information on health and social services in general. It is important to note that this 
analysis therefore covers all service activitie s in these sectors whether or not they are 
considered by Member States as serving a ge neral interest mission. In practice the great 
majority of social and health services are considered by Member States as being of 
general interest. 
2.1. Employment trends 
Growth in service industries is the main driv er of job creation in the EU Member States. 
Among these industries, health and social serv ices are a particularly dynamic sub-sector, 
one element in the ‘European job machin e’ (OECD), in many Member States. The 
analysis in this section is based on statis tical information from the European Labour 
Force Survey and refers to the ‘health an d social work sector’ in the Statistical 
Classification of Economic Activities in the European Community (NACE), Rev. 1.120. 
It looks at employment trends in the sector  and its contribution to  the overall employment 
rate and to employment growth, also in compar ison to other sectors. Due attention is paid 
to the gender aspect, as this is a sector th at predominantly employs women. Finally, the 
specific characteristics of the jobs in health and social work are analysed, some of which 
could undermine its potential as a driver of future job creation and sustainable 
employment. 
2.1.1.  Employment trends in the health  and social services sector 
From 2000 to 2007 the total employment rate in the European Union (EU-27) increased 
by 3.2 percentage points (p.p.) from 62.2% to  65.4%, the female employment rate by 
4.6 p.p. from 53.7% to 58.3% and the employme nt rate for older workers by 7.8 p.p. 
from 36.9% to 44.7%. Of this increase in the total employment rate, 0.8 p.p. are explained by the growth of employment in the health and social work sector (EU-
15: 1.0 p.p). For women and older workers, the cr eation of jobs in this sector accounts for 
1.4 p.p (EU-15: 1.8 p.p). and 1.8 p.p. (EU-15: 2.0 p.p), respectively, of the rise in the employment rate, as Figure 2.1 shows. Hence,  the contribution of this sector to the 
progress towards the Lisbon targ ets, i.e. an overall employ ment rate of 70%, 60% for 
women and 50% for older workers, is partic ularly strong for wome n and older workers. 
                                                
 
20 Activities in the health and social work sector – defined as division 85 of NACE Rev.1.1. – range 
widely, from health care provided by trained medical professionals in hospitals and other 
facilities, through residential care activities that still have a health care component to social work 
activities without any involvement of health care professionals. 
EN 15   EN Figure 2.1: Change in the employment rate from 2000 to 2007 
0.01.02.03.04.05.06.07.08.09.010.0
eu15 eu27 eu15 eu27 eu15 eu27
Total Women Older workersPercentage pointsRest of the economy Health and social work
 
Source: Eurostat, LFS 
In the EU-27 the share of employment in health and social work, calculated as the 
number of persons employed in the sector re lative to the total working-age population, 
rose from 2.4% to 2.7% for males and fr om 8.4% to 9.8% for females between 2000 and 
2007, showing a striking gender gap. This is also observed in the EU-15, where the increase was from 2.8% to 3.1% for males and from 9.3% to 11.1% for females during the same years. The proportion of worki ng-age women employed in the sector is 
especially high in Denmark, Sweden, Finl and and the Netherlands, where around one-
fifth of all working-age women are employed in health and social services. Along with 
employment, the gender gap in the sector is also rising and it is highest in the same 
countries where female employment is highest, which makes the already existing 
segregation in the labour  markets more pronounced. 
Employment in health and social services  as a proportion of total employment differs 
widely throughout the European Union. As s hown by Figure 2.2 below, it is possible to 
distinguish between three groups of Member States. In the first group, which includes 
Romania, Latvia, Cyprus, Bulgaria, Greece, Es tonia, Poland, Slovenia, Spain, Slovakia, 
Lithuania, Hungary, the Czech Republic, Italy, Portugal and Malta, the employment share of health and social services is in  the 4%-8% range, lower than the EU average 
(9.6%). In the second group, w ith employment shares rangi ng from 8% to 13% of total 
employment, we find Austria, Luxembour g, Ireland, Germany, the United Kingdom, 
Belgium and France. In the third group, we find Finland, the Netherlands, Sweden and 
Denmark, where the employment share of the sector in total employment ranges from 
15% in Finland to 18% in Denmark. These countries have a highly developed welfare 
state which put a special emphasis on the pr ovision of health and social services. 
EN 16   EN Figure 2.2: Employment in health and soci al work as % of total employment, 2007 
0.02.04.06.08.010.012.014.016.018.020.0
dk
se
nl
fi
fr
be
uk
de
eu15
ie
lu
eaeu
at
mt
pt
it
cz
hu
lt
sk
es
si
pl
ee
gr
bg
cy
lv
ro% of total employment
 
Source: Eurostat, LFS 
As social services have expa nded over time, employment ha s substantially increased in 
this sector for the EU on average (see Figure 2.3). For the EU-27, th e sector’s share in 
total employment grew from 8.7% in the ye ar 2000 to 9.6% in 2007. The same trend can 
be observed for the EU-15, where employment  in health and social services grew 
from 9.1% in 1995 to 10.6% in 2007.  
Figure 2.3: Trend of employment in health and social services as a percentage of total 
employment 
 
8.08.59.09.510.010.511.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007% of total employmenteu15
eu27
 
Source: Eurostat, LFS 
The share of this sector in total employ ment increased more strongly during 2002-2004, a 
period when overall economic and employment growth was weak, and then slowed in the 
following years, when economic and overall employment growth picked up (2005-2007). 
Similarly, economic and overall employment gr owth was strong in the boom years 1997-
2000, but this coincides with a rather stable shar e of the health and social work sector in 
total employment. That employment in this s ector is less cyclical  than in the overall 
EN 17   EN economy is not surprising, as it is largely fi nanced by public funds as it will be shown 
later in this chapter. 
Box 1: Breakdown of employment  in health and social services  
The health and social work sector comprises two major fields: human health activities and social work 
activities (the sector also includes the very small veterinary field), so it is important to look at the relative 
weight and development of health and social work separately. Even though the breakdown is available only 
for 1/3 of the Member States (Austria, the Czech Repub lic, Germany, Spain, France , Hungary, Italy, Poland 
and Portugal), it covers, however, almost 2/3 of total employment in the EU. The left panel in Figure 2.4 
shows a rebalancing of employment from human health to social work activities between 2001 and 2005. In 
that period, the share of employment in human health activities, the biggest field of activity within the 
sector, fell from 65.7% to about 62%, while the share of social work activities rose from 33% to around 
37%. 
Figure 2.4: Share and absolute growth in health and social services by field of activity (2001 and 
2006)  
Share of employment by field of activity 
(percentage points) Growth in employment by field of activity 
(thousands of persons) 
0.010.020.030.040.050.060.070.0
Human health activities Social work activities% of employment in health and social work2001
2006
 -1000100200300400500600
AT CZ DE ES FR HU IT PL PTAbsolute change in employmentSocial work activities
Human health activities
Source: Eurostat, LFS 
Note: The change for Italy and Poland is between 2004 and 2006 
Figure 2.4 shows differences among Member States: social  work activities turned out to be the driving force 
behind employment growth in the health and social se rvices sector in most Member States, namely the 
Czech Republic, Germany, France, H ungary, Italy and Portugal, in the period from 2001 to 2006, whereas it 
was human health in Poland. In Spain and Austria, the two sub-sectors contributed roughly equally to 
employment growth. 
The SHSGI study 2008 reports that France, which alr eady had the biggest share of employment in health 
and social services among the countries for which data were available, also exhibited the strongest growth. 
The main drivers are likely to be the positive trends in  life expectancy coupled with relatively high birth 
rates. As a result of increasing life ex pectancy, 130 000 jobs were created in the long-term care sector during 
the years 2000-2005. 55% of the new jobs were in new residential care facilities, the rest in home care 
services. The high birth rate boosted employment in childcare services. In addition, social integration 
services were expanded due to the sustained growth in public financing, another source of job creation in 
France. The number of jobs in such services rose by 3 000, a 30% increase compared to the year 2000. All in 
all, from 2000 to 2007, 727 000 new jobs were created in health and social work, 634 000 being taken up by 
women.  
While the share of health and social services  in total employment in the EU-27 grew as 
illustrated above, we can observe three diffe rent trends across the EU. One group of 
EN 18   EN Member States (Bulgaria, Latvia, Malta, Pola nd and Sweden) shows a fall in the share of 
this sector in employment between 199521 and 2007, a second group (Denmark, Estonia, 
Italy, Cyprus, Lithuania, Hungary, Slovenia,  Slovakia and Finland) shows a moderate 
increase and a third group (the Czech Republic, Belgium, Greece, Spain, Germany, Ireland, France, Luxembourg, the Netherlands , Austria, Portugal, Romania and the 
United Kingdom) shows strong empl oyment growth in the sector. 
The group of Member States where we observe  a relative fall in employment includes 
four Member States that entered the Un ion recently. Although the weight of social 
services in all of these countries was at th e low end of the European scale, the deep 
transformation of their economies towards a market economy brought about a sharp 
reduction in the size of their public sectors in order to get the economy onto a more 
sustainable path. The last Member State in this group is Sweden, which at the beginning 
of the ’90s saw a dramatic adjustment to it s public sector after re aching a level of public 
expenditure considered challenging for its fina ncial sustainability. Even after the cuts in 
expenditure, the share of employment in health and social services in Sweden is still one 
of the highest in the EU. 
In the second group, where the increase in the sh are is moderate, we first find Denmark 
and Finland. In these two Member States, th e share of employment was already high at 
the beginning of the period. In the case of De nmark, even this moderate increase means 
that it has taken Sweden’s place as the Member State with the highest share of employment in health and social services in the EU. We also find two Mediterranean 
Member States (Italy and Cyprus), where th e traditional role of the family in care 
activities is steadily decreasing. Finally, we  find a group of new Member States where 
social services are growing again after the co llapse of the system at the beginning of 
the ’90s. 
In the third group, with strong growth in employment in health and social services, we 
find the ‘continental’ economies strongly repr esented, i.e. the three Benelux Member 
States, France, Germany and Austria. The gr oup also contains the United Kingdom and 
Ireland, along with three Me diterranean countri es, Spain, Greece and Portugal. 
Employment in Portugal and Ireland was very low at the beginning of the period. Most of 
these countries have undergone rapid societal  changes, such as rapidly rising female 
participation and the development of new fa mily and household structures leading to 
stronger demands for such services. In genera l, this might also reflect the increasing 
demand pressures arising from an ageing, affluent society.  
2.1.2.  Structural changes in the EU employment and the role of health and social 
services 
Employment in the agricultural sector is sh rinking, while it rises very slightly in the 
industrial sector. Due to incr easing wage levels, low-skille d manual work in agriculture 
and industry is becoming too expensive in highly developed industr ial countries. Figure 
2.5 below shows that from 2000 to 2007 there wa s a fall in employment in agriculture by 
three million persons employed and a less than a million increase in employment in industry in the EU-27. 
                                                
 
21 Or closest year available. 
EN 19   EN At the same time, the services sector saw a remarkable increase in employment, as 
almost 19 million persons were employed in services during that period. Health and 
social services as part of the services sect or turned out to be one of the most dynamic, 
just after the real state, re nting and business ac tivities sector. This  sub-sector alone 
created employment for almost 3.3 million persons, representing about a sixth of the growth in the services  sector as a whole. 
The growth in services in general was more  than nine times greater than the loss in 
employment in other sectors, while employment growth in health and social services 
alone offset the job losses in agriculture. 
Figure 2.5: Change in sectoral employment for the EU-27 from 2000 to 2007 (in 
thousands with gender breakdown) 
-2000 0 2000 4000 6000 8000 10000 12000 14000Agriculture
Industry
Services
Health and social work
Real estate, renting and business activities
Education
Wholesale and retail trade
Hotels and restaurants
Other community, social, personal service activities
Public administration and defence
Activities of households
Transport, storage and communication
Financial intermediation
thousands of personsf
m
 
Source: Eurostat, LFS 
The picture for the EU-15 for the period 2000 to 2007 looks similar to that for the EU-
27; but in this case there is both a fall in the agricultural sector and in the industrial 
sector. The data in Figure 2.6 below show that employment in the agricultural and 
industrial sectors together fe ll by almost one million persons during this period, while the 
number of employed persons in services grew  by almost 16 million persons, out of which 
around 4 millions in health and social services. 
EN 20   EN Figure 2.6: Change in sectoral employme nt for the EU-15, 2000 to 2007 (in thousands 
with gender breakdown) 
-2000 0 2000 4000 6000 8000 10000 12000Agriculture
Industry
Services
Health and social work
Real estate, renting and business activities
Education
Wholesale and retail trade
Hotels and restaurants
Other community, social, personal service activities
Public administration and defence
Activities of households
Transport, storage and communication
Financial intermediation
thousands of personsf
m
 
Source: Eurostat, LFS 
The main finding from those figures is that — as part of the cont inuous shift towards a 
service economy — health and social services  provided one of the main contributions to 
employment creation from 2000. 
The further development of the services sect or in general and the health and social 
services sector in particular is very importa nt in order to achieve higher employment for 
women of all ages and older workers. Thes e two major groups ar e underrepresented in 
the labour markets of most EU Member States. 
Ageing societies are facing problems of economic growth and the financial sustainability 
of their social insurance schemes due to in creasing age-dependency ratios, therefore it 
has become a priority of employment policie s to increase the participation of those 
groups that are currently underrepresented in  the labour market. Since all EU Member 
States face the consequences of demographi c ageing, the goal of increasing the labour 
market participation of women and older workers is part of a comprehensive strategy to 
enhance the functioning of Member States ’ labour markets in line with the Lisbon 
strategy. 
Looking at the development of employment in di fferent sectors by gend er, we see that in 
the EU-27 women obtained 60.5% of all the new jobs created from 2000 to 2007, while 
they occupied 82.5% of the additional new jobs in health and social services (see Figure 2.5 above). 
The same is true for the EU-15 in the pe riod from 2000 to 2007 yet slightly more 
pronounced. The new jobs for women in se rvices easily outnumber the already 
remarkable gains for men in the sector. In the sub-sector of health and social services, the 
gains for women are again much bigger than for men (see Figure 2.6 above). 
When looking at employment creation in h ealth and social services in 1995-2007 (see 
Figure 2.7), broken down by age group, we see that the group of prime-age workers 
accounted for the biggest share of the grow th in employment in health and social 
EN 21   EN services, whereas the increase of the group of  older workers was truly remarkable in 
relation to its overall size. 
Figure 2.7: Employment creation in health and social services by  age group (1995* to 
2007) 
-500 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000eu15eu27deukfrnlitessefidkbecziehuptplatgrrosksicylu
thousands of persons15-24
25-54
55-64
* or closest year available 
Source: Eurostat, LFS 
2.1.3.  Features of employment in health and social services 
Employment in the health and social sect or presents some special characteristics 
compared with the rest of the economy.  
First, as seen in Figure 2.8, the proportion of high- skilled workers22 in health and social 
work (doctors, nurses, people with pedagogical training, social workers)  is higher than in 
the total economy and the proportion of low-sk illed workers is lower. In 2006 the share 
of low-skilled workers was 24.5%  in the total economy, compared to 16.3% in the health 
and social work sector. In contrast, the share of high-sk illed workers was 25.7% in the 
total economy, but 38.8% in the health and soci al sector. In recent years, moreover, the 
proportion of high-skilled employees in health an d social work is rising faster than in the 
total economy. 
Second, regarding working times, the usual average weekly working hours for full-time 
employees in the sector are for almost all Member States lower than in the rest of the economy. Working hours are lowest  in Italy, Ireland, Spain a nd Denmark and highest in 
Austria, Malta, Slovenia and Latvia. The diffe rence with other sect ors is highest in 
Greece, Spain, Italy and Portugal. But, due to  the very nature of the work, i.e. the 
provision of services to individuals, non-sta ndard working hours are more frequent than 
in the total economy. As shown in Figure 2.8,  the proportion of pe ople doing shift work 
(26.8%) or working night hours (2 5.6%) is higher than in the total economy, where the 
comparable shares are 14.3% and 15.6%, respectively. 
                                                
 
22 Skills level is defined by level of educa tion or training successfully completed. 
EN 22   EN Figure 2.8: Skill levels and working pa tterns in health and social work, 2006 
0.05.010.015.020.025.030.035.040.045.0
Low-skilled High-skilled Shift Work Night WorkTotal Economy Health & Social services
 
Source: LFS 
Third, the prevalence of part-time work is higher than for the total economy (see Figure 
2.9). In the EU, about 18% of people are wo rking part-time in th e total economy, while 
the comparable figure for health and so cial work is 31.4%. However, there is 
considerable variation throughout  the European Uni on. In the Netherlands, for instance, 
where part-time female employment is very  common, 76.4% of people working in health 
and social work do so on a part-time basis. Other Member States where the incidence of 
part-time work is high are Sweden and Belg ium. In Greece, on the other hand, only 3.5% 
of people working in health and social servic es work part-time, co mpared with 5.6% in 
the total economy. Part-time working in health an d social services is also rare in Portugal 
and essentially non-exist ent in Romania. The prevalence of  part-time work together with 
the large employment gender gaps illustrate the trade-offs for the different members of the family regarding the choice between partic ipating in the labour market and assuming 
care responsibilities w ithin the family, i.e. reconcilia tion of work and family life. 
Figure 2.9: Part-time working in health and social work, 2007 
0.010.020.030.040.050.060.070.080.090.0
nl
se
be
de
dk
at
uk
lu
eu15
ea
eu
fr
ie
mt
it
fi
ee
es
pl
cy
lt
cz
lv
si
sk
hu
pt
gr
bg
roTotal economy Health and social work
 
Source: Eurostat, LFS 
EN 23   EN Fourth, temporary contracts ar e slightly more common than in the total economy (see 
Figure 2.10). In the EU, 12.1% of people ha ve temporary employment in the total 
economy, while the comparable figure for hea lth and social work is 12.7%. Again, there 
are significant differences across the Europ ean Union. Temporary wo rk in health and 
social work is more common than for the total economy in Finland, Sweden, Spain, 
Denmark and Germany, but not in Italy, Be lgium, Hungary, the Netherlands, Slovenia 
and Poland. A surprising and counterintui tive observation is that on average the 
incidence of temporary jobs is higher for men than for woman. 
Figure 2.10: Temporary contracts in health and social work, 2007 
0.05.010.015.020.025.030.035.0
fi
se
es
dk
de
cy
ie
bg
pt
fr
ea
lu
eu15
eu27
at
cz
uk
sk
gr
it
be
hu
nl
si
plTotal economy Health and social work
 
Source: Eurostat, LFS 
Furthermore, gross earnings are lower than in  the total economy in most of the Member 
States for which data are ava ilable. This is in line with the findings of many studies on 
the gender pay gap, showing that  sectors with high female shares in employment are 
characterised by low wages. 
When looking at average gross hourly pay23 (see Figure 2.11) for di fferent sectors, a gap 
can be seen between the health and social work sector and the total economy. Starting from comparable levels in 1995, average gro ss hourly earnings for employees in health 
and social work have remained fairly stab le in purchasing power parity, increasing by 
around 14% over the 10-year span between 1995 and 2005, while hourly wages in the 
overall economy show a much higher increase of 24.5%. A similar incr ease is registered 
in market services: starting from a lower leve l in 1995, the gap with th e health and social 
work sector in terms of average gross hourly earnings was almost filled by 2005. 
                                                
 
23 Due to the unavailability of data on net hourly wages in the various sectors of the economy across 
Europe, average gross hourly earnings are consider ed here. These are computed as the total gross 
pay of employees (before taxes and social contributions paid by employers and employees) in 
each sector, divided by the number of total hours worked by employ ees in the sector in question. 
While this is an approximation, it nonetheless provides an interesting indication of the relative wages paid across sectors. 
EN 24   EN Figure 2.11: Wage evolution in the hea lth and social work sector, 1995-2005 
12.00 €14.00 €16.00 €18.00 €20.00 €22.00 €24.00 €26.00 €28.00 €
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Average gross hourly earningsTotal non-market services Total economy Health and social work Total market services
 
Source: EU KLEMS, Growth and productivity accounts. 
An even more striking difference emerges if av erage gross hourly earnings in the health 
and social services are compar ed with earnings for other non-market services, such as 
education and public administratio n: here the gap not only is  significant, but  widens over 
time. For example, in 1995 the average gross hou rly pay in health and social services was 
75.7% of that in public administration, while by 2005 the proportion fell further to 
67.4%. In other words, average pay in the health  and social work sector went from being 
three quarters of the salary in public  administration to two thirds in 2005.  
Only in Malta, Spain and Slovakia are earnin gs higher in the health and social work 
sector than in the total economy, a fact that seems associated with the lower incidence of 
female employment in comparison with other Member States, as seen in section 2.1.1.  
Migration could be seen as a possible explanation for salaries  remaining relatively low. 
Although data from the Labour Force Survey (see Table 2.1) show that the proportion of employed immigrants is still lower than for the total economy, in recent years the 
increase in the number of employed recent non- EU migrants has been more rapid in the 
health and social work sect or than in the total economy. Nonetheless, the impact of 
migration in this sector is still rather limited. 
Table 2.1: Migrants in the heal th and social work sector 
2000 2006 
of which*** Economic activity 
(NACE) Citizens of 
other EU-15 
Member 
States Citizens of 
non-EU-15 
countries Citizens of 
other EU-15 
Member 
States Citizens of 
non-EU-15 
countries EU-12 citizens Non-EU-27 
citizens 
Share of employed foreigners by economic activity in the EU-15**, 2000 and 2006 
(in % of total employed per economic activity, age group 15 to 64)  
Services 2.0 3.0 1.9 4.4 0.7 3.8 
of which       
Health and social work 1.6 2.6 1.4 3.4 0.4 2.9 
Total economy 2.0 3.3 1.9 4.8 0.8 4.0 
EN 25   EN 2000 2006 
of which*** Economic activity 
(NACE) Citizens of 
other EU-15 
Member 
States Citizens of 
non-EU-15 
countries Citizens of 
other EU-15 
Member 
States Citizens of 
non-EU-15 
countries EU-12 citizens Non-EU-27 
citizens 
Share of employed recent immigrants* by economic activity in the EU-15**, 2000 and 2006 
(in % of total employed per economic activity, age group 15 to 64)  
Services 0.3 0.6 0.4 1.7 0.4 1.3 
of which       
Health and social work 0.2 0.4 0.2 1.3 0.2 1.1 
Total economy 0.3 0.6 0.3 1.8 0.5 1.3 
* Recent immigrants here defined as fore ign nationals who have been resident fi ve years or less in the receiving country. 
** Does not include Italy and Ireland, for which no data by nationality were available in 2000 and 2006, respectively. 
*** Differences in sum due to rounding. 
Source: own calculations using Eurostat LFS 
Considering all those facts, there is a wide variety of working conditions and wage levels 
in health and social services, with not onl y high-quality, high-wage employment but also 
many workers on low wages and in unstable empl oyment, as illustrated by the relatively 
high incidence of temporary contracts in most  of the western European Member States. 
The latter characteristics, together with hi gher health risks and difficulties in achieving a 
good work-life balance, lead to a low degree of job satisfaction24. 
2.1.4.  Conclusions 
Health and social services have contributed st rongly to job creation and structural change 
in the European Union, in particular to the increase in female employment and the 
employment of older workers. The sector has performed remarkably well in terms of 
employment creation at a time when other s ectors are shrinking, as  employment growth 
in social services has been strong both in periods of fast economic growth and in periods 
of slower growth. According to Employ ment in Europe 2006, female part-time 
employment in particular has contributed to  about 60% of total employment creation in 
recent years. 
The further development of health and social services should help to achieve the goals of 
the Lisbon strategy as it is particularly relevant for incr easing employment of women and 
older workers. Health and social services ar e relevant not only as  source of employment 
but also to facilitate labour market particip ation for those with care responsibilities – still 
mostly women25 – and for helping those who need to adjust to economic change. 
But, as seen above, there are also a number of challenges to the continued growth of 
employment in social services. The fact  that non-standard working hours are more 
frequent can lead to some work dissatisfaction. 
Moreover, in contrast with the above-averag e educational levels and the higher share of 
non-standard working hours, gross hourly earn ings are below average in those Member 
                                                 
24 See chapter 3 in Employment in Europe 2007. 
25 See chapter 3 in Employment in Europe 2004. 
EN 26   EN States for which data are available, which c onfirms that sectors with high female shares 
in employment are char acterised by low wages. 
Financial constraints might have  contributed to k eeping wage levels low in the sector, 
while the availability of part-time jobs might have attracted people looking for such 
arrangements. In recent years a rapid increa se in migrants from non-EU countries might 
have also played a role. The possible consequenc e of these developments is that it will in 
future become more difficult to attract quali fied employees, which could lead to staff 
shortages or reduce the quality  of services, a frequently mentioned concern among policy 
analysts and stakeholders. 
EN 27   EN 2.2. Social expenditure 
The economic significance of h ealth and social services becomes evident when looking 
at the funds used to finance them. Indeed, so cial protection benefits in kind, public or 
private, which is the best estimate available for the resources devoted to health and social services, amounted in 2005 to around 9% of th e GDP of the EU-25. The present section 
describes trends in expenditure on health and social services. First, the respective roles of public and private social spending is anal ysed, then the composition of total social 
spending and the trends are examined. Fi nally, the relationship between social 
expenditure and employment in the health  and social work s ector is reviewed. 
2.2.1.  Public and private social expenditure 
Social protection expenditure is used both to provide social s ecurity and health and social 
services and can be financed from both public  and private sources. While information on 
private sources is limited, the OECD produces regular statistic s that include an estimate 
of publicly and privately finan ced social expenditure. Not su rprisingly, social protection 
spending is mostly financed from the public pur se in the majority of Member States, but 
in some countries private soci al expenditure is relatively high, while at the same time 
there are signs that it is increasing in general. 
Figure 2.12: Public and private social protection spending, 1995 and 2003 
02468101214161820
1995
2003199520031995
2003
1995200319952003
1995
2003199520031995
2003
1995200319952003
1995
2003199520031995
2003
1995200319952003AT BE DE ES FI FR GR IE IT NL OECD PT SK UK US% of GDPPublic spending Private spending
 
Source: OECD 
In all the OECD member countries, privatel y financed social expenditure rose from 
11.8% to 13.2% of total social expenditure  between 1995 and 2003. In 2003, the share of 
private financing was highest in the Ne therlands (27.1%), the United Kingdom (24.7%) 
and Finland (17.2%). The exclusion of pensi ons, which account for the bulk of privately 
financed social expenditure, gives a better im pression of the privatel y financed share of 
spending on social services. Fi gure 2.12 shows a rise in the privately financed share from 
6.1% to 6.7%, indicating a slight diversification in the financing of such services. Behind 
these numbers there are again significant natio nal differences, with private financing of 
social spending higher in the Netherlands  (21.6%), Greece (12.4 %), France (11.6%) and 
the United Kingdom (10.3%), a fact that onl y in Greece seems to be explained by 
relatively low levels of public expenditure. 
EN 28   EN The rise in the share of pr ivate financing should, however, not be confused with how 
such services are provided (d iscussed in chapter 3). Even in  countries that rely fully on 
public sources for funding the provision of car e or other social se rvices, the provision 
might be organised as a mix between privat e market-oriented ente rprises, non-profit 
organisations and a limited number of direct public institutions. 
The rest of the analysis in this section w ill look at the distribution of social spending by 
functions as recorded in the Eurostat database  ‘The European System of integrated Social 
Protection Statistics’ (ESSPROS)26. 
2.2.2.  Social expenditure by function: a shift from cash benefits to services 
Expenditure on social protection can be disaggr egated between cash benefits and benefits 
in kind. Among other things, it includes cash benefits su ch as pensions, maternity 
payments, unemployment benefits and social assistance and services such as childcare 
and care for the elderly and disabled. While onl y part of the spending on cash benefits is 
intended for the consumption of social services , practically all the sp ending on benefits in 
kind finances social services. Therefore, the rest of this section will refer interchangeably to benefits in kind and h ealth and social services. 
Figure 2.13 and Table 2.2 show that be tween 1995 and 2005 spending on social 
protection benefits in the EU- 15 remained fairly stable on average, rising only by 0.2 p.p. 
from 26.5% of GDP in 1995 to 26.7% of GDP in 2005. This may be the result of 
Member States’ efforts to contain growth in  social expenditure as a part of public 
expenditure control, but could also be due to the different cyclical positions and the 
decline in structural unemp loyment over the 1995-2005 peri od. In the EU-25, spending 
rose by 0.7 p.p., from 25.6% of GDP in 2000 to  26.3% of GDP in 2005. Taking a closer 
look at the individual Member States, we cannot identify any clearly defined trend, even 
though we observe rather strong increases in so cial spending in those Member States that 
had a fairly low point of departure such as Ireland, Greece and Malta. 
                                                
 
26 According to Eurostat, social protection encompasses all interventions by public or private bodies 
intended to relieve households and individuals of the burden of a defined set of risks or needs, 
provided that there is neither a simultaneou s reciprocal arrangement nor an individual 
arrangement involved. The list of risks or needs that may give rise to social protection is, by convention, as follows: sickness/health care,  disability, old age, survivors’ pensions, 
family/children, unemployment, housing, and soci al exclusion not elsewhere classified. ESSPROS 
Manual. The European System of integrated Social Protec tion Statistics (ESSPROS). 2008 
edition. 
EN 29   EN Figure 2.13: Trend in social protection benefits for the EU-15 from 1995 to 2005 
051015202530
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005% of GD PCash benefits Benefits in kind
 
Source: Eurostat, ESSPROS so cial expenditure database 
Figure 2.13 and Table 2.2 also show a slight trend for cash benefits  to be replaced by 
more spending on benefits in kind. While sp ending on cash benefits fell from 18.4% of 
GDP in 1995 to 17.6% of GDP in 2005, spending on health and social services rose from 
8.1% of GDP to 9.1% of GDP in the EU-15 during the same period.  
Table 2.2: Social protection benefits as % of GDP in the EU-15 and the EU-25 
 EU-15 EU-25 
 1995 2005 Difference 
1995-2005 2000 2005 Difference 
2000-2005 
Social protection, total   
All functions 26.5 26.7 0.2 25.6 26.3 0.7 
Cash benefits   
All functions 18.4 17.6 -0.8 17.6 17.4 -0.2 
Sickness/health care 1.3 1.0 -0.3 1.1 1.0 -0.1 
Pensions* 13.3 13.4 0.1 13.3 13.3 0.0 
Family/children 1.5 1.5 0.0 1.5 1.5 0.0 
Unemployment 2.1 1.5 -0.6 1.5 1.5 0.0 
Benefits in kind   
All functions 8.1 9.1 1.0 8.0 8.9 0.9 
Sickness/health care 6. 0 6.7 0.7 5.9 6.6 0.7 
Care for the elderly and disa bled** 0.7 1.0 0.3 0.8 0.8 0.0 
Family/children 0.6 0.6 0.0 0.5 0.6 0.1 
Unemployment 0.1 0. 1 0.0 0.1 0.1 0.0 
Housing 0.6 0.6 0.0 0.5 0.6 0.1 
* The figures presented here are the sum al all benefits in cash under the functions old age, survivors and disability in 
ESSPROS. 
** This includes benefits in kind under ol d age, survivors and disability functions. 
Source: Eurostat, ESSPROS so cial expenditure database 
 
EN 30   EN Figure 2.14: Expenditure on social protection benefits by br oad social policy area, in percentage of GDP, in 2005 
7
2.1
6.3
2.4
1. 4
1. 9
2.4
1. 9
2.2
2.9
3.1
2.2
4
0.7
2.5
1. 1
1
1. 8
2.1
1. 9
0.2
0.9
1. 4
0.8
1. 5
0.9
0.5
0.3
1. 1
0.3
0.75.7
8.1
5.1
6.4
6.6
6.1
6.7
6.6
6.6
5.9
7.6
6.6
5.5
6.3
6
6.6
6.3
4.7
5.7
5.3
3.1
5.5
3.9
2.8
6.2
4.5
4.1
4.9
3.4
3.3
2.5
0 5 10 15se
frdk
de
beateu15
ea13
eu25nl
uk
eu27fiit
gr
ptsi
lu
huespl
cz
mtcy
ie
skbgro
lt
eelv
Health
Other servicesBenefits in kind9.9
12 . 6
9.2
12 . 2
12 . 5
13 . 1
11. 8
12
11. 7
10 . 2
11. 3
11. 6
8.7
15 . 3
11. 9
10 . 5
10 . 1
7.8
8.6
8
11. 4
7.6
8.8
8.2
4.1
6.7
7.9
5.7
5.8
5.3
5.61. 8
0.8
1
1. 3
1
1
1
1
1
2.3
0.5
0.9
1. 2
0.5
0.6
0.4
1. 1
0.9
0.7
1. 1
0.7
1. 1
0.9
1. 7
0.7
0.3
0.4
0.5
0.6
0.52.8
1. 2
3
1. 6
1. 6
1. 8
1. 6
1. 5
1. 6
2.4
1. 9
1. 6
2.4
1. 4
1
2.2
1. 7
1. 8
1. 9
1. 3
2
1. 3
1
0.5
0.8
1. 3
1. 2
1. 1
1
0.83.7
4.6
4.7
4.5
5.4
3.9
3.2
3.5
3.2
2.6
1. 9
3.2
4.1
1. 1
1. 5
2.2
2.5
4.4
2.5
2.6
1. 6
2.2
2.2
3.7
3.6
2.7
1. 4
2
1
1. 6
1. 50.1 0.9
0 5 10 15 20 25se (30.9)
fr (29.6)
dk (29.3)
de (28.4)
be (28.3)
at (27.8)
eu15 (26.7)
ea13 (26.6)
eu25 (26.3)
nl (26.3)
uk (26.3)
eu27 (26.2)
fi (25.9)
it (25.5)
gr (23.5)
pt (23.0)
si (22.9)
lu (21.4)
hu (21.4)
es (20.3)
pl (19.2)
cz (18.5)
mt (18.1)
cy (17.9)
ie (17.0)
sk (16.4)
bg (15.5)
ro (13.9)
lt (12.8)
ee (12.3)
lv (11.9)Pensions
Sickness
Disability
Other benefitsCash benefits
 
Source: Eurostat, ESSPROS database 
 
EN 31   EN As seen in Figure 2.14, total social spending on benefits in the EU-27 was 26.2% of GDP in 
2005. It ranged from about 12% of GDP in La tvia and Estonia to about 30% of GDP in 
Denmark, France and Sweden. Spending on social se rvices, i.e. health services, care for the 
elderly and disabled, childcare, labour market services, social housing an d social inclusion, is 
lower than spending on cash bene fits in all Member States. Sp ending on benefits in kind was 
8.9% of GDP for the EU-27, ranging from around 3.5% of GDP in Latvia, Poland, Estonia 
and Cyprus to about 10%-12% of GDP in Sweden, Denmark, the United Kingdom and France.  
A closer look at the specific benefits in kind shows that social spending on health services 
ranged from 2.5% of GDP in Latvia to 8.1% of GDP  in France. Other services ranged from as 
low as 0.2% in Poland to over 7% of GDP in  Sweden. Social spending on health services 
accounts for a larger share of social spending than all other social services  put together in all 
Member States but Sweden and Denmark, wh ere spending on other services is higher, 
especially as care for the elderly and disabled has a large weight in social spending (4.5% of 
GDP in Sweden and 3.1% of GDP in Denmark) . The same pattern can be observed with 
childcare, where Denmark and Sweden spend 2.2% of GDP and 1.5% of GDP, respectively, 
while some Member States spend almost nothing. The United Kingdom (1.5%), France 
(0.8%) and Denmark (0.7%) have the highest sp ending on social housing services, while the 
Netherlands (0.8%), Greece (0.5%) and Denmark (0.3%) spend most on services to combat 
social exclusion. The breakdown of benefits in kind apart from health and sickness care can 
be seen in Figure 2.15. 
Figure 2.15: Social protection benefits  in kind excl. health care, 2005 
012345678
se
dk
fi
uk
nl
gr
de
eu15
eu27eu25
fr
hu
ea13
at
es
luie
be
mt
si
lt
pt
sk
cz
cy
lv
it
bg
ee
ro
pl% of GDPInvalidity Old age Childcare Unemployment Housing Social exclusion n.e.c.
 
Source: Eurostat, ESSPROS database 
Health thus remains the single biggest item of e xpenditure, but other soci al services seem to 
be on the increase. Overall, cash benefits still account for most social protection expenditure, 
but expenditure on services is gaining in weight. Nevertheless, there is still scope for a further 
shift towards a more proactive approach, notably in childcare.  
2.2.3.  The relationship between employme nt and social protection benefits 
Finally, we can analyse employment in health and social services in relation to social 
protection benefits by plotting th e employment rate in the health and social work sector 
 
EN 32   EN against social protection expe nditure excluding pension expe nditure. This gives a fairly 
informative picture (See Figure 2.16.). 
As expected, there is a strong correlation betw een the two indicators. Member States with a 
high expenditure-to-GDP ratio also have a high employment rate in  the health and social work 
sector and vice versa. The main explanation for this fact is the relatively large weight of 
wages and salaries in spending on benefits in  kind. Salaries can make up to 80% of total 
expenditure in sectors such as long-term care, di sability care or childcare. As noted in the 
2006 Communication, these sectors fo cus on services for individua ls delivered by people and 
are therefore employment-driven.  
Figure 2.16: Employment in health and social work vs social protection benefits excl. 
pensions, 2005 
eu
uk
sksise
ropt
plnl
mt
lvlu
ltitie hu
grfr
fi
es
eedk
de
czcy
bgbe
at
0510152025
02468 1 0 1 2 1 4
Employment rate in health and social workSocial protection excl. pensions as % of GDP
 
Source: Eurostat, LFS and ESSPROS. 
In Figure 2.16, we can again clear ly differentiate between three groups of Member States. In 
the first group, we find Denmark, Finland, the Netherlands and Sweden, where the 
employment rate in the health and social wo rk services is higher than 10% and social 
protection expenditure higher than  15% of GDP. The employment rate is highest in Denmark 
(13.7%), whereas social protection expenditure  is highest in Swed en (21.7% of GDP). A 
second group is near the EU average: in Be lgium, Germany, France, Austria, Luxembourg, 
Ireland and the United Kingdom, the employment rate ranges  between 6.1% in Luxembourg 
and 8.8% in the United Kingdom, while social protection expenditure ranges from 13.7% of 
GDP in Ireland to 18.9% of GDP in France. In the third group, we find all the Mediterranean 
and the Eastern European Member States, with  the employment rate varying from 2.3% in 
Romania to 4.5% in Portugal, wh ile expenditure can be  as low as 3.4% of GDP in Latvia, or 
as high as 14.1% of GDP in Portugal. 
Moreover, while both the health sector and the so cial work sector are quite labour-intensive, it 
appears that the gains in terms of employment are higher in t hose Member States that spend 
relatively more on social services than on health  services. This can be seen by looking at the 
relation between health and so cial expenditures in Figure 2.14 in the countries above and 
below the line in Figure 2.16. Countries below the line spe nd relatively more on social 
services than on health and have higher employme nt in the sector. For example, Sweden has a 
higher benefits expenditure-to-GDP  ratio, but the employment rate  is somewhat lower than in 
Denmark, where expenditure on social services is higher. The same observation can be made 
 
EN 33   EN comparing France with the Un ited Kingdom and Germany with the Netherlands, with France 
and Germany spending relatively less on social  services and somewhat more on health 
services than the United Kingdom and the Netherlands, respectively. 
This seems due to the fact that the social wo rk sector almost only needs employed persons to 
produce the services, i.e. take ca re of the old, the children, or the unemployed, while there is a 
wide use of high technology in the hea lth sector that increase productivity. 
2.2.4.  Conclusions 
All in all, the analysis shows that the financial resources devoted to heal th and social services 
are largely public, although the sm all private component is increas ing. Over the last ten years, 
Member States seem to have slowly shifted funds from cash benefits  to benefits in kind, 
allowing for the growth of health  and social services. Nonetheless, there seems to be scope for 
a further shift towards a more proactive appr oach, notably on childcare. While the largest 
expenditure item is health care , we see the strongest increase s in care for the elderly and 
disabled. Finally, because social services are ve ry labour-intensive, there is a high correlation 
between social expenditure and employment in the sector. 
Of course, the strong dependency of these serv ices on public funds make s them particularly 
vulnerable to the development of public finances in general and the pressures coming from 
the ageing of the EU populations, as demonstrat ed by the long-term projections carried out by 
the EPC and the European Commission27. It might be the case th at the high dependency on 
public funds might have led to some of the tensions noted in  following chapters between the 
desire of service providers for long-term stabil ity and short-term financial constraints. Such 
constraints may also explain some of th e observations made regarding employment 
characteristics, notably the trends in earnings. These tensions will increase with the ageing of 
the EU population and might also lead to furt her pressures on wages and impact on the quality 
of the services offered. If, on the other hand, Me mber States pay attention to the quality of 
services, the need for well-trained and motivat ed personnel will increase, leading to further 
increases in the financ ial resources required. 
One way to reconcile these needs is to streng then inclusive labour markets and anticipatory 
policies such as prevention and rehabilitatio n. This could reduce the need for income 
replacement benefits for people in working age and moderate the growth in the numbers of 
those requiring long-term care, as illustrated in the Ageing Working Group Projections. At the 
same time, this calls for a strategy of proactive social policies which allows for further refocusing of public expenditure and increased efficiency
28. Chapter 3 will show how these 
pressures have emerged in specific s ectors and how policies have responded.  
                                                 
27 Economic Policy Committee and European Commission (2006), The impact of ageing on public 
expenditure: projections for the EU-25 Member St ates on pensions, healthcare, long-term care, 
education and unemployment transfers (2004-50), European Economy. Special Report no. 1/2006. 
28 In this regard, the introduction of information and communications technologies (ICT), for example in 
the area of e-health, might result in productivity improvements. 
 
EN 34   EN 3. TRENDS IN LONG -TERM CARE , LABOUR MARKET SERVICES FOR DISADVANTAGED 
PERSONS AND CHILDCARE  
The present chapter looks at three sectors: long-term care,  labour market services for 
disadvantaged persons and childcare. Ongoing socio-economic changes, such as ageing, 
globalisation, gender equality and changes in fa mily structures have a strong impact on these 
sectors, which are also particularly illustrative of health and social services' contribution to 
employment growth in the EU. This chapter an alyses the role played by these services in 
European societies, presents an overview of service provision and expenditure and describes the forms that the modernisation proce ss can take in these three sectors. 
The chapter is based mainly on th e results of the SHSGI study 2008
29, which drew in turn on 
in-depth country studies from eight Member States (the Czech Republ ic, France, Germany, 
Italy, the Netherlands, Poland, Sweden and the United Kingdom). More specifically, the part 
on long-term care is based on an analysis of the service provision in  these eight Member 
States, the part on labour market integration compares the Czech Republic, Germany, Poland, Sweden and the United Kingdom, and the part on childcare builds on an analysis of the 
service provision in the Czech Republic, France, Germany, Italy, the Netherlands 
and Poland
30. 
At the same time, the present chapter draws on va rious other studies and analyses prepared or 
commissioned by the Commission services, such as, for instance, the EU Report on long-term 
care in the European Union31 or the Employment in Europe reports32. 
                                                 
29 The SHSGI study 2008 analyses not only long-term care, labour market services for disadvantaged 
persons and childcare, but also social integration and re-integration and social housing. The 
Commission is currently analysing the results on the st udy related to the last two sectors and will decide 
on follow-up activities, including as part of the open method of co-ordination on social protection and 
social inclusion. 
30 We refer to the SHSGI study 2008 for detailed references and sources. 
31 EU Report: Long-term care in the European Union, April 2008, 
http://ec.europa.eu/employment_social/spsi/docs/social_protection/ltc_final_2504_en.pdf . This report 
reviews the 2006 national reports in relation to long-term care. It analyses the main challenges Member States face and their strategies to  tackle these challenges in the li ght of the agreed common objectives 
within the Open Method of Coordination. 
32 Employment in Europe is the main tool used by DG Employment, Social Affairs and Equal 
Opportunities to analyse employment performance and labour market developments in the European 
Union and in the acceding and candid ate countries. It provides the ba sic analytical and statistical 
background to underpin the Joint Employment Report as well as other instruments key to the European 
Employment Strategy. The report has been produced annually since 1989, with electronic copies 
available since 1998. For the last few years, the report has been entirely written by the Employment Analysis unit of DG Employment, Social Affairs and Equal Opportunities in close collaboration with 
Eurostat, and is published in the autumn. See: 
http://ec.europa.eu/employment_social/employment_analysis/employ_en.htm
. 
 
EN 35   EN 3.1. Long-term care 
The definition of long-term care,  the services and be nefits provided as well as the population 
coverage vary between the Member States.  
The OECD has defined long-term care as ‘a cross-cutting policy issue that brings together a 
range of services for persons who are dependent  on help with basic activities of daily living33 
over an extended period of time’34. Elements of long-term care include rehabilitation, basic 
medical services, home nursing, social care, housi ng and services such as transport, meals, 
occupational and empowerment activities, thus also  including help with instrumental activities 
of daily living35. In the SHSGI study 2008, long-term car e services encompass three broad 
groups: (i) services for elderly persons with se vere functional limitations who receive care in 
institutions; (ii) services for persons with moderate to severe f unctional limitations who 
receive care in the community, ofte n as a mix of informal and formal care; (iii) social services 
to support care in the community, such as resp ite care, day care, and counselling and the like 
for care recipients, their families and other volunteers. In the present BR, long-term care refers to services both in an inst itutional and in a co mmunity setting.  
Long-term care operates at the boundaries betw een health and social care and is usually 
provided to persons with physical  or mental handicaps, the frai l elderly and particular groups 
that need support in con ducting their daily life activities. Di fferent levels of organisation and 
different divisions of responsibility (public-priva te) as well as differences in the demarcation 
of the boundary between the medical  component and the social care component result in great 
variation in long-term care services, their organisation an d their role within the social 
protection systems of the Member States
36. 
Long-term care systems have undergone major changes during the past decade in terms of 
their financing, planning, provision of services  and quality developments. The expected, and 
observed, increase in demand for long-term care services repres ents a policy challenge for 
many Member States, as the curren t supply is considered to be insufficient and inadequate in 
terms of meeting current and especially future needs. 
The great diversity that exists  in the organisation, financin g and provision of long-term care 
services across Member States translates into different responses and strategies to address this policy challenge. This influences several aspect s of long-term care provision: the degree of 
accessibility of long-term care services and their fi nancing, the role of informal carers and the 
degree of support rece ived, the quality of the care provided and the long-te rm sustainability of 
the resources dedicated to the sector. Additi onally, better integration of or cooperation 
between health and social services remains an  important challenge in most Member States. 
                                                
 
33 Activities of daily living are self-care activities that a person must perform every day such as bathing, 
dressing, eating, getting in and out of bed or a chair, moving around, using the toilet, and controlling 
bladder and bowel functions. 
34 OECD 2005 Long-Term Care for Older People. 
35 Instrumental activities of daily living are activities related to independent living and include preparing 
meals, managing money, shopping for groceries or personal items, performing light or heavy 
housework, and using a telephone. 
36 EU Report: Long-term care in the Eu ropean Union, April 2008, pp. 2-3. 
 
EN 36   EN 3.1.1.  The role of long-term care services in an ageing Europe 
Member States are currently at different stages in developing comprehensive policies for the 
provision of care to persons in ne ed of long-term care. As with childcare, th is sector of social 
services very much relies on the participation of private households, which still provide the bulk of care in all Member States. Often, thes e households also have to shoulder a large 
financial burden in cases where out-of-pocke t payments and co-payments for formal care 
services are required. 
Demand for long-term care on average is expect ed to increase. Acco rding to the latest 
Eurostat demographic projections, the number of  very old people (80 years of age or older) 
will increase over the next two decades by over 50% in most EU Member States. By the year 2050, the number of very old people will have almo st tripled. In Italy, the share of persons 
aged 65 and over was 16% of the total population in 1995, and grew to 19% in 2005, compared to EU-15 and EU-25 averages of  15% and 17%, respectively. Italy (19%), 
Germany (19%) and Greece (18%) were the Member States with the highest old-age-dependency ratios in 2005, while  those with the lowest were  Ireland (11%), Cyprus and 
Slovakia (both 12%). According to Eurostat pr ojections for 2050, the share of persons aged 
65 and over will rise to 30% in both the EU-15 and EU-25 and to 35% in Italy. 
Demographic ageing and societal changes, as such, do not necessarily translate into an 
increased demand for long-term care services. It is the increases in lif e expectancy and the 
incidence of disability and dependency that dr ive increases in demand for long-term care. 
Increased longevity will spur future demand fo r long-term care services in both the formal 
and informal setting. Increased longevity ha s and will bring about additional demands in 
terms of rehabilitation, prevention of ill health in old-age, adequate living conditions for the 
elderly population (social assistance and pensi ons) and various policies aimed at enhancing 
participation in societal activ ities and empowerment schemes. Population ageing results in an 
increasing share of old and very old people in the population, leading to new patterns of 
morbidity and mortality, such as an increase in (often multiple and reinforcing) degenerative and chronic diseases. Demographic ageing, coupl ed with fertility rates below replacement 
level and a prevalence of chronic disease in th e older age groups, can serve as a proxy of the 
future demand for long-term car e. A higher prevalence of ch ronic diseases and dependency 
patterns in old age does not mean that long-te rm care is a concern solely for the elderly 
population despite their predominan ce among long-term care recipients
37. Steeply increasing 
age-dependency ratios will negatively affect the fiscal stance by increasing spending needs and reducing the expected amount of contri butions from the working-age population.  
Older people, however, not only live longer live s: there is also ev idence from at least 
some Member States that people stay healthy longe r and that the onset of severe disability is 
more and more delayed. The most important el ement in addressing the future needs for long-
term care services (both formal and informal) is the degree of additional life-years spent in good health or the health status of the elderly population. Indeed, since demographic 
developments point to the in creased longevity of  the population, a serious challenge, or 
opportunity, in terms of public heal th is the prevention of ill-hea lth in old age, i.e. delaying 
the onset of disability or dependence. Demogr aphic developments increase the pressure on 
                                                
 
37 EU Report: Long-term care in the Eu ropean Union, April 2008, pp. 5-6. 
 
EN 37   EN long-term care systems to provide more and better curative medical care but also more 
rehabilitative, nursing and social care38. 
One ought to remain cautious in any analysis of future demand and possible cost-containment 
measures with regard to long-term care pr ovision and financing, since the evidence 
concerning this trend is currently mixed. As a recent OECD analysis quoted in the SHSGI 
study 2008 puts it, ‘it would not seem to be prude nt for policy-makers to count on any further 
reduction in the prevalence of disability among older people to  offset the rising demand for 
long-term care that will result  from population ageing’. There is however some evidence that 
there is much room for improving prevention stra tegies that could help postpone or mitigate 
health and disability problems among the elde rly and hence the costs of publicly provided 
long-term care services. These uncertainties toge ther with the uncertain ties related to future 
life-expectancy estimations make long-te rm care projections rather difficult. 
Demographic ageing and societal changes imp act on both the provision and supply of long-
term care services. Long-term care services ar e provided both on a form al, accredited basis 
and on an informal basis. Informal care has traditionally been undertaken predominantly by 
women. Societal changes such as  the increased partic ipation of women in the labour market 
mean that there is, and will be, less time available for women to take on such care 
responsibilities. Additionally, considering th e life-expectancy gap between men and women 
(on average women live longer) and the identified trend in the e volution of family structures 
(dissolution and break-up), it can be argued that  women in the older ages  will need some form 
of care (formal and/or informal) since, in view  of the prevalence of de pendency and disability 
in older ages, this could not be provided on an informal basis by family members. This issue will be addressed later when analysing the ge neral drive to improve support mechanisms for 
informal carers and increase the provision of  formal care in a community setting.  
Together with the concerns about the impact of  demographic trends and societal changes, the 
need for better adapting long-term care to users’ needs is at the top of social policy agendas. 
These come in addition to other important concerns, such as staff shortages and improving staff qualifications, although these seem to be more pressing i ssues for Member States where 
the public supply of serv ices and their funding ar e already advanced. In particular, the current 
staff shortages are likely to become even more acute in the mid- to long-term (5 to 20 years). 
This is not only driven by new demand, but also by concerns re garding pay levels, high staff 
turnover and difficult working conditions. 
In response to these challenges, most Member St ates have initiated reforms to long-term care 
systems, often with a special focus on qual ity assurance, improvement and accreditation 
initiatives. In some cases, this goes hand in ha nd with expanding the scope of available social 
services while keeping in mind their accessibili ty and, at the same time, the resources 
available. Concerns regarding quality improve ment often include the expansion of support 
schemes for informal and formal carers such as  respite care and their inclusion in social 
security schemes. 
3.1.2.  Overview of service provision 
The structure and the organisation of the diff erent long-term care schemes vary between the 
Member States, reflecting more the organisati onal features of each system rather than 
                                                
 
38 EU Report: Long-term care in the Eu ropean Union, April 2008, p. 8. 
 
EN 38   EN population structure and demographic developm ents. The variations reflect the differing 
national approaches to familial solidarity (occu rrence of informal care and support for carers) 
as well as identifiable dispar ities between the demand for and the provision of publicly funded 
long-term care services39. 
The interaction of different le vels of government in organising and funding long-term care is 
often complex, as the regulation,  financing or provision of these services is a shared 
responsibility. Framework legisl ation is often enacted at na tional level, while detailed 
regulation and the organisation of services is frequently delegate d to regional or local level. 
In some cases, the devolution of  responsibilities for organising long-term care to local level 
has resulted in differences in the way care assess ment is implemented and in differences in the 
generosity of services, often depending on the allocation and size of local budgets. 
Moreover, there is now consid erable competition among differen t types of suppliers of long-
term care in many Member States, which has in so me instances helped to drive the agenda of 
internal and external quality assurance and increas ed reporting to th e public. While public 
providers are still dominant in the Czech Repub lic and in Sweden (with  shares of 80% and 
70% of the supply, respectively), they account for only 10% in the United Kingdom and 5% 
in Germany. Midway between these extremes, th ey represent 42% in France and 30% in Italy. 
Non-profit providers represent 80% of the su pply in the Netherlands, approximately 50% 
in France, Germany and Italy, 15% in the Czech Republic and 10% in both Sweden and the United Kingdom. In the latter, for-profit provi ders have a share of 80% of the supply. As 
for other Member States, with the exception of  Germany (approximately 50%), the share of 
for-profit providers is very low (20% in Swed en, Italy and the Netherlands, 7% in France and 
5% in the Czech Republic).  
The numbers of dependent older people who r eceive long-term care in institutions range 
across Europe from below 2% in Italy and Irela nd to more than 7% in Sweden and Hungary. 
But the mix of services offere d and the type of in stitutions that are behind the aggregate 
numbers of Figure 3.1 below are not the same in  the different Member States. Intensity of 
care, for example, will be on average higher in Sweden than in Hungary, and the comfort of 
living conditions is much higher in Sweden, wh ere practically all nursing home inhabitants 
have a choice of a single room or service ap artment, whereas many nursing home inhabitants 
will have to share rooms in most other Memb er States. With the exception of Sweden, the 
average number of persons per room in a nur sing home typically ranges from 1.4 in Germany 
or the United Kingdom to 2 in the Netherlands or more in other Member States. 
                                                
 
39 EU Report: Long-term care in the Eu ropean Union, April 2008, p. 15. 
 
EN 39   EN Figure 3.1: Long-term care r ecipients in institutions, 2004 
0,01,02,03,04,05,06,07,08,09,0
Italy
IrelandGermany
Austria
Luxembourg
United Kingdom
Denmark
Czech RepublicFinland
Slovak Republic
NetherlandsFrance
Belgium
Sweden HungaryPercentage among people aged 65 years and older
 
Source: OECD Health Data 2006 
The reasons why some Member States have lo wer numbers of reported older people living in 
institutions are manifold. Caring for frail ol der persons is still predominantly a family 
responsibility in some Member States, such as Italy and Irel and, and public policy has only 
recently become more active in complementing fa mily care with more publicly available care 
alternatives. For other Member States, there is a combination of a continuing family tradition 
in providing care and an incr easing supply of home care al ternatives, sometimes also 
supported by public programmes that allow families to decide on how to spend publicly provided funding for long-term care (e.g. care  allowances in Austria and Germany). 
Figure 3.2: Long-term care recipients in the community (including people receiving care 
allowances), 2004 
0510152025
Luxembourg
France
Germany
Finland
United Kingdom
Belgium
Czech RepublicSweden HungaryAustriaDenmarkPercentage among people aged 65 years and older
 
Source: OECD Health Data 2006 
Home-care services are in many cases less de veloped than care provided in institutions. 
Moreover, as shown in Figure 3.2 below, there is  a great disparity betw een Member States in 
 
EN 40   EN the share of older people who recei ve care in a community setting40. However, this 
comparison is more difficult than in the case of care in institutions due to national differences. 
In Austria, for example, th e large number of care recipi ents includes many people who 
receive relatively modest monthly payments, whereas the entitlement conditions (combination 
of functional restrictions and minimum number of hours of care needed) in Germany result in 
fewer people getting over the th reshold for entitlement to care allowances or, alternatively, 
professional home care services. 
The boundary between ‘institution’ and ‘home’ is increasingly getting blurred as public long-
term care programmes have aimed to create ‘h ome-like’ environments for persons who need 
long-term care. In Denmark, for example, many  nursing home places have been converted to 
service apartments served by the same providers  also active in home care. These cases could 
now show up in the statistics either under ‘institution’ or un der ‘home’. One ought to remain 
cautious when assessing the statistics on long-te rm care provision by settings. It is difficult to 
measure the exact degree and coverage of long-term care provision. Difficulties in 
measurement stem from varying definitions of what constitutes long-term care, what schemes 
are included under the long-term car e concept, and the length of  stay. Some Member States 
favour longer lengths of stay in  institutions than others. 
In any event, as appears from the EU Repor t on long-term care in the European Union, the 
Member States are firmly fo cused on enhancing tailor-made home and community care 
services and are moving away from institutional care. This does not mean that institutional 
care provision is to be dismantled. Rather, instit utional care must be maintained for those with 
severe disabilities and conditions for whom  home care is not the most appropriate 
alternative41. 
There is also a general trend towards care coordi nation, which is seen as crucial in enabling a 
high level of quality and efficient use of resources  in the provision of l ong-term care services 
in an institutional or comm unity setting, thus ensuring an  adequate continuum of care 
irrespective of the different leve ls of long-term care provision (local, regional, national) and 
organisation. Some Member States focus on the provision of a medical care continuum, 
whereas others discharge pati ents from institutional care faster while emphasising the 
rehabilitative or preventive follow–up of care. Indeed, coordination problems at the interface 
between medical, social services and informal care can result in negative outcomes for users and an inefficient use of resources
42. 
Community care, home care, resi dential care and day care are labour-intensive sectors with 
staff costs accounting for the majority of the ove rall costs in these settings. Labour supply in 
these settings is a major preoccupation for Memb er States, particularly  considering the labour 
shortages in medical, nursing a nd social care. In the community  care setting, the problem of 
insufficient and inadequately trained staff is exa cerbated by the fact that  the bulk of the care 
provided in that setting tends to be carried out by family or informal caregivers.  
                                                 
40 ICT for Ambient Assisted Living is a way to allow for independence and continuity of care at home. To 
this purpose, the Commission propos ed a Decision on the establishm ent of the Joint Programme for 
Research in Ambient Assisted Living (COM/2007/0329 final) that will be adopted in June by the Parliament and Council. 
41 EU Report: Long-term care in the Eu ropean Union, April 2008, p. 13. 
42 EU Report: Long-term care in the Eu ropean Union, April 2008, p. 26. 
 
EN 41   EN As informal care will continue to play an important role an d given the strong focus on home 
provision, there is a recognised ne ed to develop structures that  support informal caregivers. 
Policy proposals for informal care include: in formation, training, counselling, respite care 
(allowing caregivers time off), financial aid to  informal carers, tax credits and exemptions, 
allowing informal caregivers to reconcile care  provision and paid employment (in particular 
through work leave to care for relatives and c onsideration of care peri ods as part of the 
contribution period for pension purposes), form alising their status a nd including them in 
social insurance schemes43. 
Staff shortages in the long-term care sector in both the institutional and home settings, 
coupled with demographic deve lopments and changing family structures, will most likely 
result in an increased demand for formal car e-giving in both settings. The quality of the 
workforce inevitably influences the quality of the long-term care services provided. In addition to adequate qua lifications and constant  training, Member States  have had to devise 
ways to support and sometimes formalise the working conditions of informal caregivers
44. 
3.1.3.  Overview of expenditure 
Total expenditure on long-term care in the EU -15 ranges from below 0.2% of GDP to around 
1.8% of GDP. About half of all EU Member St ates for which data are available have an 
overall public spending of 0.7% of GDP or more (see Table 3.1 and Figure 3.3 below). 
Table 3.1: Estimated expenditure on l ong-term care and projections up to 2050 
  AWG Reference scenario 
(ECFIN) OECD estimates 2050 Projection 
Country 2004 2050 Change 
(2004-2050) 2004 (Health 
Data 06) (*) 2005 (**) Cost 
pressure Change 
(2004-2050) Cost 
Containment Change 
(2004-2050) 
BE 0.9 1.9 1 0.8 1.5 3.4 1.9 2.6 1.1 
DK 1.1 2.2 1.1 1.7 2.6 4.1 1.5 3.3 0.7 
DE 1 2 1 0.9 1 2.9 1.9 2.2 1.2 
GR Na Na Na Na 0.2 2.8 2.6 2 1.8 
ES 0.5 0.7 0.2 0.4 0.2 2.6 2.4 1.9 1.7 
FR 0.3 0.5 0.2 0.3 1.1 2.8 1.7 2 0.9 
IE 0.6 1.2 0.6 Na 0.7 4.6 3.9 3.2 2.5 
IT 1.5 2.2 0.7 Na 0.6 3.5 2.9 2.8 2.2 
LU 0.9 1.5 0.6 1.4 0.7 3.8 3.1 2.6 1.9 
NL 0.5 1.1 0.6 1.1 1.7 3.7 2 2.9 1.2 
AT 0.6 1.5 0.9 0.7 1.3 3.3 2 2.5 1.2 
PT 0.5 0.9 0.4 0 0.2 2.2 2 1.3 1.1 
FI 1.7 3.5 1.8 0.4 2.9 5.2 2.3 4.2 1.3 
SE 3.8 5.5 1.7 0.7 3.3 4.3 1 3.4 0.1 
UK  1 1.8 0.8 0.4 1.1 3 1.9 2.1 1 
EU-15 0.9 1.6 0.7 0.7 1.3 3.5 2.2 2.6 1.3 
CY Na Na Na Na Na Na Na Na Na 
CZ 0.3 0.7 0.4 0.1 0.4 2 1.6 1.3 0.9 
EE 0.3 0.6 0.3 Na Na Na Na Na Na 
HU 0.6 1.2 0.6 0.2 0.3 2.4 2.1 1 0.7 
LT 0.5 0.9 0.4 Na Na Na Na Na Na 
LV  0.4 0.7 0.3 Na Na Na Na Na Na 
MT 0.9 1.1 0.2 Na Na Na Na Na Na 
PL 0.1 0.2 0.1 0.4 0.5 3.7 3.2 1.8 1.3 
SK 0.7 1.3 0.6 Na 0.3 2.6 2.3 1.5 1.2 
SI 0.9 2.1 1.2 Na Na Na Na Na Na 
EU-25 0.9 1.6 0.7 Na Na Na Na Na Na 
Source: ECFIN 2006, OECD 2006, OECD Health Data 2006 
                                                 
43 EU Report: Long-term care in the European Union, April 2008, pp. 31-32. 
44 EU Report: Long-term care in the European Union, April 2008, pp. 31-32. 
 
EN 42   EN Figure 3.3: Expenditure on long-te rm care (in % of GDP), 2003/2004 
00,20,40,60,811,21,41,61,82
Portugal
Hungary
France
Poland
Finland Spain
SwedenAustria
BelgiumGermany
Netherlands
Luxembourg DenmarkPrivate
Public
 
Source: OECD Health Data 2006 
In all EU Member States, private households take on part or all of the burden of care, either 
by providing the majority of ca re hours that people needing l ong-term care receive or by 
making substantial contributions to the financing of long-term care, in the form of co-
payments to publicly provided care or as out-o f-pocket spending on care fo r which no or only 
very little public coverage (re imbursement or exemption) is provided. This can also be the 
case for systems where access is universal, but wher e funding is restricted to only part of the 
total care needs (see Figure 3.3 above). 
As many pensioner households in al l Member States do not have the financial means to afford 
considerable monthly payments to care providers , social assistance remains in many cases an 
important source of funding. The sh are of private funding in total long-term care can also be 
high for some Member States where long-term care provision is currently low, e.g. Portugal 
or Spain. 
Although home care or community services ar e less expensive than  acute care in an 
institutional setting, the resour ces allocated to the home care sector vary between Member 
States. In the majority of Member States, publ icly funded institutional care still accounts for 
more than half of the long-term care expenditure . Despite the fact that most Member States 
wish to expand community and home care, either for financial reasons or  in order to provide 
patient-centred services, the share of home care as a component of public spending on long-
term care varies. In the Member States with the least developed long- term care systems, the 
share of public spending on home care as a pr oportion of total long-term care expenditure is 
minimal. Other Member States have made significant steps towards increasing public 
spending on home and/or community care. The schemes included in the definition of long-
term care and the legal status of long-term ca re providers will also affect the degree of 
comparability between the various schemes and their levels of expenditure45. 
In the coming decades, public long-term care expe nditure is expected to  increase steeply. This 
growth will be determined by several factor s in addition to demographic ageing: (i) the 
availability of informal care by family, friends, and the voluntary  sector; (ii) public pressure 
                                                 
45 EU Report: Long-term care in the Eu ropean Union, April 2008, p. 15. 
 
EN 43   EN to put public long-term care programmes in pl ace, where these are currently rudimentary, and 
to enhance them where long-term care provisi on is already developed; (iii) the cost of 
improving the quality of care in both the commun ity and institutional settings; (iv) cost 
pressures arising from staff s hortages; (v) trends in the incidence and prevalence of 
dependency and disability, which are currently uncertain, and, fina lly, (vi) trends in the living 
conditions of older people, such as income leve ls, means available for meeting their long-term 
care needs, and changing family structures, whic h can often lead to th e isolation of elderly 
people. Changing family structures and th e degree of development of long-term care 
provision influence the availability  of formal and informal carer s, which must be taken into 
consideration in addressing the quality of life of long-term car e recipients in a community 
setting.  
All estimations of future long- term care spending seem to agr ee that substantial additional 
investment in long-term care will be needed in response to the growing number of very old 
persons in the population. By 2050, spending in the EU-15 may almost double from currently 
around 1% of GDP to almost 2% of GDP, according to recent OE CD projections, and 
increase by two thirds according to the AWG reference scenario of the EPC (see Table 3.1 
above). 
To interpret these projections correctly, it is im portant to keep in mind that they are mainly 
driven by estimates of: (i ) the future numbers of elderly pe rsons (population pr ojections); (ii) 
the future numbers of dependent elderly pe rsons (prevalence rates and projections of 
dependency); (iii) the balance between formal and informal care; (iv) the balance between 
home and institutional care within formal care provision, and (v) the unit costs of care. One needs to remain cautious in the interpretation of these projections as gathering data in order to 
set baseline expenditure leve ls has proved very difficult.
46 
3.1.4.  Modernisation trends in long-term care 
From the analysis in the SHSG I study 2008 it appears that modern isation within the field of 
long-term care is mainly driven by socio-economi c transformations that affect both the needs 
for care and the financing needs.  
– Demographic changes : as seen above, this is one of the main issues that most Member 
States are facing and is of particular importance for Member States with care provision based on contributory or so cial insurance systems. 
– Changes in the needs for care
: twenty years ago, institutions and services mainly 
addressed people experiencing social difficultie s (insufficient resources or absence of a 
family environment). With the increase in th e number of dependent people, the level of 
dependence and the poly-pathologies of th e elderly, long-term care services are 
increasingly called upon to provi de more professional and often more medical services to a 
broader and more differentiated segment of th e population. This trend will also impact on 
the skills required to provide these services.  
– Increased need for combining formal and informal care : the ageing of the population is 
also taking place in a social context where th e structure and the role  of the family have 
evolved in most of the Member States. This has an impact on traditional informal care 
provided by family members and volunteers to the elderly and people with disabilities or 
illnesses. As seen above, in many Member St ates, ensuring a better combination between 
                                                 
46 EU Report: Long-term care in the Eu ropean Union, April 2008, pp. 9-11. 
 
EN 44   EN formal and informal care is a topical issue and seve ral have developed specific schemes to 
support informal carers and have even includ ed them under social security schemes.  
– User orientation — from public to private provision of services : as will be further 
analysed in chapter 4, the increased focus on user empowerment is accompanied in most 
Member States by the introduc tion of market-based regula tory mechanisms and the 
increased involvement of the private sect or in service provision. Personal budgets, 
supplemented by professional case management, as is the case in Germany, the Netherlands and the United Kingdom (Engla nd), increasingly appear to be a way of 
empowering users. The development of ICT app lications for health and social care can, in 
most cases, allow for a better adaptation of  service provision to users' needs.  
– Integration of health  and social services
: in most Member States, the separation of health 
and social care leads to difficulties in coor dinating care packages for dependent people. 
Some measures have recently been introduced to promote the integration of health and 
social care services. In the United Kingdom, for example, local authorities are now obliged 
under the Community Care Act 2003 to reimburse  NHS hospital trusts if a patient cannot 
be discharged from hospital because there ar e no alternative long-term care services in 
place. Initiatives have also been  taken to promote the development of intermediate care. In 
the Netherlands , this trend has led to a wave of merg ers between different types of service 
providers.  
– Decentralisation : as will be further analysed in chapter 4, there is a trend towards 
transferring more responsibility to local levels  in the organisation of social services, with 
different results depending on the national cont ext (increased weight of community care 
versus institutionalised care, decreasing level of welfare st ate provision, etc.). 
The table below shows the main drivers in each of the Member States analysed in the SHSGI 
study 2008. 
Table 3.2: Drivers of modernisation in long-term care 
  Member State 
Type of driving force   CZ DE FR IT NL PL SE UK 
       
Demographic change   2 1 2 1 1 1 1 3 
Stronger concern to take into account user interests and user 
choices   2 2 2 2     1 2 
Budgetary constraints on public  authorities and/or social 
insurance agencies   3 2 1 4 1 1 2 1 
More weight for partic ipatory processes   3 3 2   1   3 3 
Evolving concerns/demands (e.g. support for family/informal 
carers, integrated approaches)   3 2   1 2   4 3 
Evolving relationship betwee n public authorities and non-
state service providers (based on contracts, with a stronger 
focus on accountability, efficiency, effectiveness and the 
control of these factors)   3 4 2       2 2 
Organisational restructuring (e.g. in the form of integrated 
services)   1 3 4 5 2   3 1 
EU legal and political context   2 2 3 5 5 2 2 3 
Introduction of new public management concepts   4 4 4 5     2 2 
Note: Rating from 1 (Very important) to 5 (Not at all important)    1 2 3 4 5 
Source: SHSGI study 2008 — results from the questionnaire for in-depth country-studies, 
p. 245  
 
EN 45   EN 3.2. Labour market services for disadvantaged people47 
Persons with disabilities48 who are inactive and unemployed and those with other 
disadvantages, e.g. with a low education or in long-term une mployment with little work 
experience, are the main target  groups of the labour market services offered under national 
labour market public policies. 
Since its start in the late 1990s, the European Employment Strategy49 has placed a particular 
emphasis on the integration of disadvantaged pe rsons into the labour market. In addition, the 
Commission launched an initiative in 2006 for th e active social and economic inclusion of 
people furthest from the labour market50. The strategy proposed is based on three integrated 
pillars: adequate income support, access to inclusive labour markets and quality social 
services. For labour market integration to be sust ainable, disadvantaged people first need to be 
supported with sufficient resources and person alised employment and social services, to 
enhance their social participation and employability.  
Persons with a long-standing health problem or persons with disabilitie s are considered as a 
group at high risk of being excluded from th e labour market. 78% of the ‘very severely’ 
disabled and 49% of the ‘severely’ disabled pe rsons of working age in the EU were inactive 
in 2002, as against 27% for the non-disabled. Howe ver, the employment rate of persons with 
moderate or mild disabilities is comparable to that of th e general population. The reasons 
behind low participation rates among the ‘very severely’ and ‘severely’ disabled in most 
Member States are their lower employability, be nefit traps (i.e. risks of losing benefits on 
starting work) and the reluctance of employer s to recruit disabled workers. Given the 
demographic phenomenon of a shrinking labour for ce in the future and given the EU agenda 
of promoting higher economic growth, competitiven ess and social cohesion, it is crucial to 
implement active inclusion policie s for people with disabilities, especially to provide better 
access to services and programmes to help them to get a job in the open labour market or in sheltered workshops. 
                                                
 
47 The present section only takes into consideration the providers of services that offer “work integration” 
services in a stable and continuous way for a la rge category of beneficiar ies, and not those which 
concentrate on particular sub-categor ies of specifically disadvantaged pe ople, such as former prisoners, 
drug addicts or severe mentally disabled, or those which concentrate on particular types of professional 
training, such as the construction sector. Thus, the re port analyses providers that offer various support 
and assistance services with the ai m of permanently reintegrating disadvantaged persons back into the 
labour market. 
48 For more information on the situation of people  with disabilities in the European Union see the 
Communication Situation of disabled people in the European Union: the European Action 
Plan 2008-2009 , COM/2007/738 of 26.11.2007 in 
http://ec.europa.eu/employment_social/index/com_2007_738_en.pdf  and its related annexes in 
http://ec.europa.eu/employment_social/index/sec_2007_1548_en.pdf .  
49 On the European Employment Strategy see: 
http://ec.europa.eu/employment_social/employment_strategy/guidelines_en.htm . 
50 COM(2006) 44 final of 8.2.2006 and COM(2007) 620 final of 17.10.2007. See: 
http://ec.europa.eu/employment_social/spsi/active_inclusion_en.htm .  
 
EN 46   EN 3.2.1.  The role of labour market services 
The main purpose of labour market services for disadvantaged persons51 is to integrate them 
into the regular labour market by enhancing thei r employability. This goal is mainly achieved 
by creating job opportunities and by providing trai ning in sheltered conditions and experience 
with on-the-job training, in order to improve  the social and professional abilities of 
disadvantaged persons and to increase their skill levels and opportunities so  that they are able 
to find jobs in the regular labour market. 
In particular, the integration of disabled pers ons into the regular labour market calls for 
individual counselling and support services. Th e interface between the education sector and 
training programmes, on the one  hand, and job take-up, on the other, is a key element for 
successful labour market inte gration. In many cases, the transition from education and 
training programmes to labour market participa tion and from sheltered workshops to regular 
jobs goes hand in hand with suitable adjustment s to social protection programmes. One of the 
main challenges of labour market integration for disabled persons in a number of Member 
States is the fact that many persons worki ng in sheltered workshops would be able to 
participate more fully and take up work in th e regular labour market, but corresponding job 
offers do not exist or are not available in sufficient numbers. 
3.2.2.  Overview of service provision 
In most cases, the regulation, financing an d delivery of labour market services are 
responsibilities shared between  national, regional and local authorities. The framework 
legislation is often formulated at national level,  while detailed regulatio ns and the delivery of 
services are frequently delegated to regional and local level. However, as with long-term care 
services, the devolution of respons ibilities for organising  labour market serv ices to local level 
has resulted in differences in the way the servic es are provided, due to differences in the local 
budgets available. 
Ensuring the provision of labour market integration services for disadvantaged persons is 
obviously a complex task. The competent public  authorities remain responsible for the 
process of work integration as a whole at thei r respective levels, but service provision can be 
in the hands of numerous actors and co mbine various types of resources.  
Public employment services remain the most important labour market institution. They 
deliver personalised and tailor-m ade services to disadvantaged  people, by understanding and 
knowing their needs. They play a crucial role, as they have (i) the abilit y to provide services 
to all disadvantaged people; (ii) the advantag e of proximity to job seekers through full 
geographic coverage of the countr y; (iii) a life-long pe rspective, as they offer a large number 
of training facilities; (iv) a comprehensive view  of labour market need s; (v) the capacity to 
implement mainstream approaches and to implem ent strategies, policies and measures defined 
by government; (vi) the capacity to network at local level as they  have the ability to involve 
all stakeholders at loca l level (e.g. in large cities) and to create partnerships to improve the 
efficiency of action, allowing a more rapid and effective approach to unemployed and inactive 
persons.  
                                                 
51 In broad terms, this covers people who are unemployed, people in employment but at risk of 
involuntary job loss, and inactive persons who are curr ently not part of the labour force but who would 
like to enter the labour market and are disadvantaged in some way. 
 
EN 47   EN Among the Member States studied in the in-d epth analysis (the Czech Republic, Germany, 
Poland, Sweden and the United Kingdom), th e United Kingdom has 60% of its service 
provision in the hands of public entities, whil e the remaining 40% is divided equally between 
for-profit and non-profit providers. In the other f our Member States, public institutions take 
up a larger share (in excess of 80%). 
The new partnership models and modes of provi sion that are currently developing include the 
participation of several types of providers and stakeholders. The chain of intervening actors 
and the synergies generated in the reintegra tion process thus now matter more than the 
individual input of each provider. However, the coexistence of providers  with different ways 
of working may entail difficulties. Thus, the forms of governance in place and the 
coordination of the public, private for-profit and not-for-profit actors intervening in the 
process are key factors. 
Finally, the participation and motivation of the beneficiaries in the management or 
organisation of their reintegrati on process is a particular challe nge, with a view to enhancing 
their self-confidence and their own capacity to reintegrate with in the regular labour market. 
Given the characteristics of the beneficiaries, this participation is often quite difficult to achieve. The degree to which it is achieved is an  important indicator of  the quality of the 
services provided. 
3.2.3.  Overview of expenditure 
In 2006, total public expe nditure on all labour market pol icies was 1.9% of GDP in the 
EU-27. However, this figure hides considerable  differences across Member States with 
respect to the level of expenditure and its distribution between th e services of public 
employment agencies, active labour market policy measures and passive labour market 
income support policies. For inst ance, in five EU Member Stat es, the share of GDP spent on 
labour market policies was more than 2.5% or more: Denmark (4.34%), Germany (2.97%), 
Belgium (2.9%), the Netherlands  (2.68%), and Finland (2.54 %). In contrast, many Member 
States spent less than  0.5% of GDP, notably  Estonia (0.15%), Lit huania (0.39%), Romania 
(0.43%), Greece (0.47%) and the Czech Republic (0.49%) (See Table 3.3). 
Table 3.3: Public expenditure on labour mar ket policy, by category, as a % of GDP 
(2006) 
  
 Labour 
market 
services 
(1) Training 
(2) Job 
rotation 
and job 
sharing 
(3) Employment 
incentives 
(4) Supported 
employment 
and 
rehabilitation 
(5) Direct 
job 
creation 
(6) Start-up 
incentives 
(7) Total 
LMP 
measures 
(2-7) Total 
LMP 
supports 
(8-9) Total 
LMP 
1-9 
EU-27 0.22 0.21 0.00 0.12 0.06 0.07 0.04 0.51 1.20 1.92 
EU-15 0.22 0.22 0.00 0.13 0.06 0.08 0.04 0.53 1.25 2.00 
Belgium 0.20 0.20 - 0.21 0.12 0.35 0.00 0.89 1.81 2.90 
Bulgaria 0.06 0.05 - 0.05 0.01 0.29 0.01 0.39 0.18 0.63 
Czech Republic 0.13 0.01 - 0.03 0.05 0.03 0.00 0.13 0.23 0.49 
Denmark 0.16 0.54 - 0.47 0.51 0.00 - 1.52 2.66 4.34 
Germany 0.27 0.34 0.00 0.06 0.01 0.09 0.12 0.61 2.09 2.97 
Estonia 0.02 0.04 - 0.00 0.00 - 0.00 0.05 0.08 0.15 
Ireland 0.24 0.21 - 0.03 0.01 0.21 - 0.46 0.86 1.57 
Greece 0.01 0.04 - 0.02 - - 0.00 0.06 0.40 0.47 
Spain 0.10 0.15 0.01 0.32 0.02 0.06 0.08 0.63 1.43 2.16 
France 0.24 0.29 - 0.12 0.07 0.19 0.01 0.68 1.39 2.32 
Italy 0.03 0.22 0.00 0.18 - 0.01 0.04 0.45 0.79 1.27 
Cyprus : 0.01 - 0.04 : - 0.01 : 0.66 : 
Latvia 0.07 0.10 - 0.05 0.01 0.01 - 0.17 0.30 0.54 
Lithuania 0.09 0.07 0.00 0.06 0.00 0.05 0.00 0.18 0.13 0.39 
Luxembourg 0.06 0.12 - 0.20 0.01 0.06 0.00 0.39 0.59 1.04 
Hungary 0.09 0.06 - 0.08 - 0.05 0.00 0.19 0.36 0.64 
Malta : : - - - 0.00 - - - - 
Netherlands 0.47 0.13 - 0.13 0.49 - - 0.75 1.47 2.68 
Austria 0.18 0.40 0.00 0.06 0.04 0.04 0.01 0.54 1.39 2.11 
Poland 0.09 0.10 - 0.05 0.16 0.02 0.04 0.36 0.71 1.16 
 
EN 48   EN   
 Labour 
market 
services 
(1) Training 
(2) Job 
rotation 
and job 
sharing 
(3) Employment 
incentives 
(4) Supported 
employment 
and 
rehabilitation 
(5) Direct 
job 
creation 
(6) Start-up 
incentives 
(7) Total 
LMP 
measures 
(2-7) Total 
LMP 
supports 
(8-9) Total 
LMP 
1-9 
Portugal 0.13 0.25 0.00 0.13 0.04 0.03 0.00 0.45 1.27 1.84 
Romania 0.04 0.02 - 0.05 - 0.03 0.00 0.11 0.28 0.43 
Slovenia 0.10 0.06 - 0.03 - 0.07 0.02 0.18 0.39 0.66 
Slovakia 0.17 0.01 - 0.02 0.01 0.05 0.04 0.14 0.34 0.65 
Finland 0.13 0.37 0.05 0.10 0.10 0.09 0.02 0.72 1.69 2.54 
Sweden 0.19 0.33 0.06 0.51 0.20 - 0.03 1.13 0.96 2.28 
United Kingdom 0.37 0.02 - 0.01 0.01 0.00 - 0.05 0.19 0.60 
Norway 0.12 0.26 - 0.02 0.13 0.06 0.00 0.47 0.50 1.08 
Note: Denmark (2004), Greece (2005) 
Source: Eurostat Labour Market Policy Databa se (Labour Market Policy Intervention, 2006) 
The European Employment Strategy and the OECD Job Strategy re commend redirecting 
spending towards active labour market policies, mainly because these measures specifically 
target labour market reintegration for disa dvantaged groups. However, according to the 
SHSGI study 2008, Member States have not ma de any significant progress over the past 
decade in shifting resources from passive to activ e measures. In fact, in the majority of the 
Member States, spending on active measures is  less than one half of  the amount spent on 
passive labour market income support policie s. The Netherlands, Sweden and Denmark stand 
out as those Member States that spent a re latively higher propor tion on active measures. 
The European Social Fund (ESF) and the Eu ropean Regional Development Fund (ERDF) 
have also invested substantially in active la bour market policies across the European Union. 
In the 2000-2006 period, as shown by Figure 3. 4 below, around 30% of total ESF funding, 
amounting to some 19 billion euros, was devoted to this policy field. In the same period 
nearly 291 million euros were spent via the ER DF under the same heading. In addition, some 
4 billion euros were spent on specific measures  to improve women’s access to the labour 
market via the ESF and 84 million euros via the ERDF. Member States made use of ESF and 
ERDF funding to a different ex tent. By way of example, while the share of active labour 
market policies in national ESF spending amount ed to 47% in Slovakia, 40% in Spain, and 
37% in Latvia, some Member States devoted le ss then 10% of their ESF budget to this area 
(Belgium: 2%, Ireland and Ma lta: 6%, Portugal: 8%). 
Figure 3.4: ESF breakdown 2000-2006 (as a pe rcentage of total ESF budget of 70 bn 
euros) 
31%
23%22%18%6%
Active labour market
policy
Life-long learning
Adaptability
Social inclusion
Improving women'slabour market access
 
Source: European Commission data 
 
EN 49   EN In 2004, out of the total expenditure on activ e labour market policies in the EU-25, 17.8% 
specifically targeted the integrat ion of persons with disabilities52. Other major categories of 
expenditure were training (40.4%), direct job creation (16.3%) and employment incentives 
(18.5%). 
Expenditure on active labour mark et policies can take the form  of direct transfers to 
individuals, employers or service providers, a nd there are considerably differences within the 
EU in this respect. For example, more than tw o thirds of expenditure in the Netherlands and 
the United Kingdom are direct tr ansfers to service providers, whereas over two thirds of 
expenditure in Italy, Latvia, Hungary, Bulgaria  and Romania are transfers to employers. In 
Ireland and Finland, a high proportion of all expe nditure on active lab our market policies 
comprises direct transfers to indi viduals (65.2% and 49.2%, respectively). 
In terms of coverage, only 15.7% of working disabled persons in th e EU-15, and 11.4% of 
those in the new Member States, received some assistance to work in  2002. In the EU-15, the 
assistance provided most often involved the kind of work to be performed (37%), support and 
understanding from superiors a nd colleagues (15%) or the amount  of work to be performed 
(13%). In the new Member States, the assistan ce provided concerned the kind of work (52%) 
and the amount of work to be performed (33%). 
Compared to training programmes, spendi ng on employment incentives and public 
employment services is associat ed with significantly better outcomes. The evidence suggests 
that job-search assistance programmes in genera l, and activation policies in particular, feature 
highly among the more cost-eff ective active labour market pol icy measures in terms of 
helping the unemployed to find a job and keep it53. 
3.2.4.  Modernisation trends in labour mark et services for disadvantaged people 
The modernisation process of labour market serv ices is strongly encouraged by the European 
Employment Strategy54. 
From the analysis developed in the SHSGI study 2008, it appears that developments in this 
area are influenced by more general trends characterising labour market policies. These 
include a stronger focus on the quality of huma n resources and continu ous learning, and on 
the development of active labour market policie s addressing specific target groups (long-term 
unemployed, unqualified youth, etc.).  
In this policy context, according to the SHSGI study 2008, the modernisation of labour 
market services is characterised by the following features:  
– Welfare ‘contractualism’ , under which the beneficiary of a service/allowance also has 
certain obligations and responsib ilities. This trend has transl ated for example into policies 
that make rights to benefits conditional upon the beneficiary following specific work 
integration programmes. The New Deal Programme put in place in the United Kingdom in 1997 is an example of such an active labour market policy. 
                                                
 
52 This includes expenditure on regular and sheltered employment and other rehabilitation and training 
programmes. 
53 Employment in Europe Report 2006, p. 162. 
54 On the European Employment Strategy see: 
http://ec.europa.eu/employment_social/employment_strategy/guidelines_en.htm . 
 
EN 50   EN – Rescaling  of provision modes, with, in general, lo cal authorities being given greater room 
for manoeuvre in the choice of services a nd their implementation. In certain Member 
States, however, some ‘recentralisation’ has ta ken place. In Sweden, for example, in 2005 
a new integrated government agency replaced  the 21 regional social insurance offices, 
which became regional branches.  
– Targeting : the policy rationale behind targeting is that long-term unemployment is a 
major cause of social exclusion. This trend ha s, for example, led to the development of 
policies targeting unemployment in deprived neighbourhoods.  
– Partnership with the third sector : this trend in labour mark et services leads to the 
development of partnerships with  organisations in civil society.  
The table below shows the main drivers in each of the Member States analysed in the SHSGI 
study 2008. 
Table 3.4: Drivers of modernisation in labour -market services for disadvantaged people 
  Member State 
Type of driving force   CZ DE PL SE UK 
      
Budgetary constraints on public  authorities and/or social 
insurance agencies   4 3 1 2 1 
Stronger concern to take into account user interests and 
user choices   2 2 2 1 4 
Evolving relationship betwee n public authorities and non-
state service providers (based on contracts, with a 
stronger focus on accountabilit y, efficiency, effectiveness 
and the control of these factors)   4 3   2 1 
More weight for part icipatory processes   3 5 1 2 3 
Introduction of new public management concepts   5 3   3 1 
Organisational restructuring (e.g. in the form of integrated 
services)   4 3   3 2 
EU legal and political context   2 4 2 4 3 
Evolving concerns/demands (e.g. support for 
family/informal carers, integrated approaches)   3 4   3 4 
Demographic change   5 5   3 3 
Note: Rating from 1 (Very important) to 5 (Not at all 
important)   1 2 3 4 5 
Source: SHSGI study 2008 – result s from the questionnaire for in -depth country-studies, p. 
248 
 
EN 51   EN 3.3. Childcare 
Childcare services have in rece nt years experienced rapid grow th in many Member States, a 
trend that is mainly due to the increased la bour market participation of women. This is 
particularly true for France and the Netherlands , but also Germany and Italy saw some growth 
in the sector. There are, however, notable ex ceptions, namely several Member States in 
Eastern Europe, where the overall supply of child care services declined during their transition 
towards a market economy. The main reasons for this development were the financial 
difficulties of local governments and a decrease in the demand for childcare services due to very low birth rates and high unemployment. In  addition, the shrinking of supply was due to 
the extension of the parental leave to th ree years in the Czech Republic and to the 
privatisation of enterprises in Poland, where before the transition employers were relatively active in the organisation of childcare. 
Hand in hand with the overall growth, recent year s have been characterised in many Member 
States — in particular in the EU-15 — by divers ification in the supply of childcare services, 
regarding the types of providers, the type of  financing and the wa y these services are 
regulated. 
3.3.1.  The role of childcare services 
Childcare services play a crucia l role for a number of policy ta rgets. Quality childcare can 
foster the healthy and sound development as well as the socialisation and education of 
children, and help parents to reconcile work a nd family life. They also help to strengthen 
social cohesion and inclusion, to promote gend er equality, to raise female labour market 
participation
55 and to improve quality and productivity at work. Thus, access to childcare 
services is essential for the well-being of children, for their families and for the community as well as for a productive and growing economy.  
While the policy debate on childcare has mainly focused on facilitating the participation of 
women in the labour market
56, in recent public discussion ch ildcare seems to have shifted 
from being considered as an instrument of la bour market policy toward s being perceived as a 
goal in itself, playing an important role in the development of children and adding value to childcare at home. Furthermore, improving soci al cohesion and inte grating children from 
disadvantaged socio-economic b ackgrounds are gaining importance  as issues across Europe.  
Ensuring suitable childcare servi ces is high up on the social ag enda of the Eu ropean Council 
and the European Commission and represents a policy priority in practically all Member States. 
In order to remove disincentives  to female labour force partic ipation, the Barcelona European 
Council agreed on the goals of providing, by 2010, childcare to at  least 33% of children under 
3 years of age and to at leas t 90% of children between 3 year s old and the mandatory school 
age in each Member State. In pr actice, the level of childcare se rvices differs considerably in 
                                                
 
55 Childcare services can be seen as a very effectiv e labour market policy instrument as they not only 
facilitate the participation of women in the labour market but also offer job opportunities mainly for 
women. 
56 In the Netherlands, in 2002, childcare policy was tran sferred from the Ministry of Health, Welfare and 
Sports to the Ministry of Social Affairs and Employment, thus reflecting the view of childcare as a 
labour market instrument. 
 
EN 52   EN the EU-25, but in most Member States it is be low the Barcelona targets, notably for children 
below 3 years of age.  
The increased attention given to childcare receivi ng in policy debates has also been reflected 
in the evolution of the scope of the European  Social Fund (ESF) and the European Regional 
Development Fund (ERDF). In the 2000-2006 period, actions relating to childcare were in 
principle implemented only as  accompanying measures, i.e. could be supported where 
necessary to ensure the successful implementa tion of main ESF actions (e.g. in the case of 
training for women, childcare can be financed to allow mothers to participate in such training)
57. For the 2007-13 period, however, facilitati ng access to childcare is recognised as a 
key element in increasing labour market part icipation and can be supported ‘in its own 
right’58. In the agreed Operational Programmes ov er 555 million euros have been earmarked 
for spending on childcare infrastructure. 
3.3.2.  Overview of service provision 
The underdevelopment of childcare services for children up to three years old — with the 
exception of the Nordic Member States, the Neth erlands and France — is related to traditional 
views of childcare: a huge part of care responsib ilities for small childre n is still left to the 
families. Crèches and nurseries are found mainly in urban areas, and are a last resort for 
working parents. Denmark, Sweden and the Ne therlands are the Member States with the 
highest proportions of children in the age gro up 0-3 receiving formal child-care (40% or 
more), followed by Finland and France (30% or more)59. Much lower proportions are 
observed in the southern and central European  Member States. In Italy and Germany, the 
public supply of early childcare services has traditionally been very low, while in the Czech Republic and in Poland the low rates are also a consequence of the transition process, as 
mentioned above. 
In contrast, there is almost universal access to kindergarten or pre-school for the age group 3-
5, following a clear educational approach. Coverage  is 90% or more in several Member States 
and service availability is also more uniform across Member States. 
Care provision for school-aged children (6 to 11 years) is still in the development stage in 
most of the EU Member States. Adequate care levels for this age group are provided in the 
northern Member States (40% or more in Denm ark and Sweden), in the southern countries 
(35% or more in Italy and Spain) and to some extent in the new Member States (20% or more 
in the Czech Republic and Poland). As with form al services for pre-school children, central 
European Member States also lag behind for this se rvice category.  
There is a clear positive correlati on between the enrolment rate of children in the age group 0-
3 and the employment rate for women with ch ildren in the age group 0-3. As the employment 
rate is higher than the enrolment rate in many Member States, one can assume that the gap is 
being filled by informal care an d/or women working pa rt-time. Although part of this may be 
due to voluntary decisi ons, it also indicates that there is a ‘hidden’ demand for childcare 
resources among working mothers (see Figure 3.4). 
                                                
 
57 See Regulation (EC) No 1784/1999 of the European Parliament and of the Council on the European 
Social Fund, Article 3(2)(b)(i). 
58 Article 3(1)(b)(ii) of Regulation 1081/2006 explicitly mentions ‘ measures to reconcile work and private 
life, such as facilitating access to child care and care for dependent persons ’. 
59 Eurostat EU-SILC (2005). 
 
EN 53   EN Figure 3.5: Employment rates for mothers with children under 3 and access rates for 
children under 3 to licensed ECEC services 
0102030405060708090
AT,
01BE,
04DK,
99SF,
02FR,
04DE,
04IE,
02IT,
02NL,
04PT,
01SE,
03UK,
03CZ,
04HU,
04
Women employment rates with children under 3 % of children aged 0-3 in regulated child care 
Source: OECD: Starting Strong II, 245 
Due to the increasing participation of women in  the labour market and the wide spread of 
part-time work and irregular working times, not  only the ‘quantitative’ availability of 
childcare facilities is relevant , but also the extension and flex ibility of opening hours, which 
have major implications for working parents.  Roughly speaking, crèches provide for full-day 
care throughout the year, whereas  kindergartens and pre-school s partly follow a half-day 
system. A problem with after-sc hool care centres, which usually c over at least office hours, is 
that they frequently close during holidays. In many Member States , however, replacement 
childcare facilities provide serv ices during the holiday season. In general, there is a trend to 
extend the opening hours of  childcare facilities. 
In all the Member States anal ysed in depth in the SHSGI study 2008, childcare services are 
largely regulated at central level. In recen t years, however, many Member States have 
delegated responsibilities in the field of child care from national government to the regions and 
municipalities. The latter are also responsib le for planning and assessing the demand for 
childcare services. 
The provision of childcare across Europe takes a variety of forms. The core services for 
children below three years of age are family day-care, collective crèches and integrated 
centres. These services are often complemented by drop-in centres for families and parent-led playgroups. For children between three years a nd mandatory school age, a broad system of 
kindergartens or pre-schools is usually avai lable. In many Member States, childcare for 
school-age children is organise d around activities provided in schools or in centres to 
complement school lessons. Frequently, out-of-sc hool provision is loosel y regulated, offering 
a range of different services. In the absence of other services, childminders are a flexible form of care for children in several age groups , very common in many Member States. 
In order to encourage the cr eation and diversification of services and to limit public 
expenditure, there is a trend toward the delegati on of public services to the private sector. In 
many Member States, the provision of childcare services is already, in principle, open to 
private providers (e.g. third-se ctor organisations, commercial  providers, enterprise-based 
services, user cooperatives, and the like). 
 
EN 54   EN These providers are usually subject to an accreditation process. Quality requirements 
frequently have to be met (pedagogical approach , capacity to reach set targets such as number 
of children, opening hours, car e ratios, budget, etc.). If th ese conditions are met and the 
services receive a positive evaluation from the authorities, investment subsidies can be granted for their creation. Often these start-up co ntributions are granted on  the basis of bids in 
response to an open call for tenders by the municipalities. 
Usually, private providers also have access to p ublic support for their current costs if they 
meet some specific criteria and requirements.  
In addition, there are also demand-side meas ures in form of tax deductions for private 
enterprises paying crèche fees for their employ ees or building or renova ting company crèches. 
In France, for example, for-profit enterprise s have been able since 2004 to deduct 60% of 
their expenses for the creation of  childcare services or for the reservation of childcare places 
in existing services. In Italy, tax reductions were introduced  in 2002 and 2003 for employers.  
Italy and Poland provide specia l income tax or value-added tax rates for non-governmental 
organisations active in th e field of childcare. 
Moreover, public-private partnerships to provide childcare services are facilitated in a number 
of cases, although there has not been much adva nced public-private cooperation in the field. 
The only exception is Germany, w ith its long-standing cooperati on between public authorities 
and non-profit organisations in th e childcare sector. Although publ ic-private partnerships are 
encouraged in France through the possibility of non-profit or for-p rofit organisations 
participating in the contrat-enfance (childcare contract), so far ve ry few of them have been 
signed. In Italy, public-private agreements with non-profit organisations play a role in 
parenthood support initiatives. In the Czech Republic, there has not been any advanced 
public-private cooperation in th e childcare sector. In Poland, there are some examples of 
cooperation between municipalities and non-gove rnmental organisations for kindergarten 
education in rural areas. 
Notwithstanding the trend toward the emergence of new types of providers, public  authorities, 
especially regions and municipali ties, still remain the predominant providers of childcare. One 
of the exceptions is Germany, where — in accord ance with the principle of subsidiarity — the 
current legislation stipulates  that public providers (the Länder , municipalities) can step in only 
if the supply by independent pr oviders is inadequate. Generall y, the share of both non-profit 
and for-profit private providers is  growing in all Member States. 
The further introduction of market mechanisms is  to be expected but, for reasons of equity 
and efficiency, a certain level of regulation a nd funding of services by public authorities will 
also remain indispensable in future. 
The growing "marketisation" of the sector has led to the problem of organising and 
coordinating the different provid ers in order to harmonise strategies in accordance with 
education and labour market requirements, demogr aphic trends as well as interest and demand 
on the part of citizens. Thus, new planning a nd coordination mechanisms that take into 
account the new interactions betwee n various levels of public auth orities, the for-profit sector, 
non-profit organisations and civil society have em erged in practically all Member States. The 
new coordination tools can be se en as examples of innovative practices in terms of their 
regulatory design.  
 
EN 55   EN In terms of employment, there is  a general tendency towards an in crease in the number of jobs 
in childcare services, following the overall growth in service supply. In some EU-15 Member 
States, this has even led to a shortage of prof essionals in childcare services due to the growing 
demand for childcare places. In France, in part icular, the employment of childminders and 
specialised educators for young ch ildren has increased. Again, excep tions to this trend can be 
seen in a number of Eastern European Memb er States, among them the Czech Republic and 
Poland, where, as noted above, there has been a decline in childcare services. 
The educational levels of staff and the qualifications required in  the childcare sector vary. On 
the whole, the childcare workforce is not hi ghly trained. People caring for children below 
school age have usually completed secondary vo cational schooling but do not normally have 
an academic education. However, in many Me mber States, progress is being made in 
redeveloping the curriculum to introduce a higher competence-based profile. Thus, younger 
educators are becoming more qualified and in creasingly have university degrees. As with 
childcare for school-aged children, many jobs are teaching posts or  similar positions in after-
school programmes. 
In many Member States the average pay of traine d staff in childcare facilities is significantly 
below the salaries of primary teachers. A huge number of community or  voluntary providers 
are unable to offer higher remunera tion due to financial restrictions . In most cases, workers in 
public facilities are better paid than those in private facilities.  Unless childminders operate in 
a market with high demand, incomes in this fi eld are also very lo w. Where out-of-school 
childcare is mainly provided by teac hers, the pay is usually higher. 
One problem in attracting adequately trained sta ff to the sector might be the relatively high 
proportion of part-time and short-term jobs. This holds especially true for out-of-school care 
provision and for Member States with a pre-school system on a half-day basis (e.g. Germany). 
In almost all Member States, the share of fema le employees is very high (close to 100%) in 
the childcare sector. This is the case in Germ any (96%), France (97%),  Italy (close to 100%) 
and the Czech Republic (close to 100%) in servi ces for children below 6 years of age. In the 
Netherlands, the share is 75% in primary educa tion as a whole but higher for services for 
children aged 4-6. 
3.3.3.  Overview of expenditure 
Overall, public expenditure covers from about 66%  to 90% of total childcare costs in Europe. 
As shown in Figure 3.5 below, public expenditu re on early childhood services (0-6 years) 
ranges from 2% of GDP in Denmark to about 0.4% in Italy. In France, expenditure is 1% 
of GDP, whereas in Germany and the Netherla nds it is only slightly higher than in Italy. 
However, a number of Member States with  comparatively low public expenditure (among 
them Germany and the Netherlands) have in recent years significantly increased their 
spending levels. In Italy, due to  severe budget constrai nts, expenditure has been characterised 
by stop-and-go, rather than steady growth. 
As a rule, regions and municipalities are re sponsible for financing childcare, but these 
services also receive subsidie s from the central budget.  
 
EN 56   EN Figure 3.6: Public expenditure on ECEC services (0-6 years) 
00,511,522,5
Austria
Denmark
Finland
FranceGermany Italy
NetherlandsSweden
United Kingdom
Hungary
Public expenditure as % of GDP 
Source: OECD: Starting Strong II, 246 
As regards ESF resources, it is estimated th at around 2.40 billion euros will finance actions to 
support women in the 2007-13 period with the aim of improving access to employment, 
sustainable participation in employment and th e reconciliation of work and private life, for 
example by facilitating access to childcare an d care for dependent persons. In addition, in 
their Operational Programmes, Member States pl an to spend some 555 million euros from the 
European Regional Development Fund on childcare infrastructure.  
Another source of financing is parents’ co-pay ments. However, childcare should be affordable 
in order to provide more incentives for its ut ilisation and to improve parental choice. In 
general, parents’ contributions are dependent on their incomes. Fees for private services are 
usually higher than fees for childcare services in the public sector. In general, parents contribute less than a third to childcare costs in  Europe. In several Member States, e.g. France 
(from 2 years), Italy and the Czech Republic (from 3 years) and th e Netherlands (from 4 
years), pre-schools and kindergartens are free. 
OECD research referred to in the SHSGI st udy 2008 suggests that even after deducting all 
relevant types of government support, typica l out-of-pocket expenses for two pre-school 
children can add up to 20% or more of the to tal family budget. Consequently, additional tax 
payments and the loss of social assistance or other benefits combined with even limited out-of-pocket expenses on childcare can leave pare nts making the transition from inactivity to 
labour market participation with less disposable income than if they were to stay at home
60. 
The OECD research suggests th at only sustained public fundi ng and investment in policy, 
services and management can secure both the affordability and quality of services in the 
future. 
                                                 
60 The inactivity trap facing jobless households with children is referred to in the SPC report on child 
poverty 2008, which indicates that the share of those households in the overall population has not 
changed since the start of the d ecade, despite the growing overall pa rticipation of men and women in 
employment. 
 
EN 57   EN 3.3.4.  Modernisation trends in childcare services 
In most EU Member States, the main driving forces behind the modernisation of childcare 
services are the changes in family structures (fewer children per fam ily, a growing proportion 
of single parents, etc.), the increasing participation of wome n in the labour market, more 
flexible labour market requirements and the re sulting increasing demand for these services.  
As seen above, low birth rates and a wider or ientation towards the early socialisation of 
children are other factors infl uencing childcare policies. 
Finally, the search for greater flexibility and for innovation, as well as budgetary reasons, are 
prompting increasing recourse to the privat e sector for the provision of services.  
The development of public childcare is also influenced by the culture and traditions of the 
different Member States and by the perception they have of the divi sion of responsibility 
between family and public policies.  
The table below shows the main drivers in each of the Member States analysed in the SHSGI 
study 2008. 
Table 3.5: Drivers of modernisation in childcare services 
  Member State 
Type of driving force   CZ DE FR IT NL PL 
      
Evolving concerns/demands (e.g. support for 
family/informal carers, integrated approach, etc.)   3 2 1 1     
Demographic change   2 1 4 3   1 
Budgetary constraints on public  authorities and/or social 
insurance agencies   4 3 2 4   1 
Stronger concern to take into account user interests and 
user choices   3 2 4 3 2   
Organisational restructuring (e.g. in the form of integrated 
services)   3 2 3 5 2   
More weight for partic ipatory processes   3 3 3       
EU legal and political context   4 3 4 4 2 2 
Introduction of new public management concepts   4 3 3 5 3 2 
Evolving relationship betwee n public authorities and non-
state service providers (based on contracts, with a 
stronger focus on accountabilit y, efficiency, effectiveness 
and the control of these factors)   4 4 2       
Note: Rating from 1 (Very important) to 5 (Not at all 
important)    1 2 3 4 5 
Source: SHSGI study 2008 — results from the que stionnaire for in-depth country studies, 
p. 253 
In the Member States analysed in the SH SGI study 2008, there is ge nerally an imbalance 
between supply and demand, which leaves part of the demand unsatisfied, in particular for 
children below the age of 3. The ongoing modernisation process aims to improve the 
childcare offered in both quantitative and qualita tive terms. Increasing parents’ freedom of 
choice and improving their access to childcare se rvices are part of these strategies. The 
development of childcare services is also viewed  as helping to provide disadvantaged children 
with better conditions and to crea te equal chances for the future.  
 
EN 58   EN These trends crystallise as two main strategi es aiming to increasing the supply of childcare 
services: (i) diversification in the forms of childcare and (ii) development of new forms of 
delegation and financial support. 
3.3.4.1.  Diversified forms of childcare  
The coordination and cooperation be tween different forms of childcare is more and more seen 
as a way to increase the level of supply, as illustrated by the following examples: 
– Collective services such as crèches which ar e able to provide both regular care (on a full-
time basis) and occasional care for children who usually depend on ot her services (for 
example in France). 
– Enterprise-based or -financed  services as a way of suppor ting employees with childcare 
responsibilities (for example in Italy). 
– Integration of childminders and family crèches  within the existing mix of services (for 
example in France and Germany). However, th e level of regulation of these activities 
might differ from one Member State to another.  
– Introduction of (partly compulsory) pre-schoo ls, in order to better integrate children 
requiring special care or children who otherwise would not be reached by formal childcare. 
This issue is being debated in several Member  States. In the Netherlands, for example, pre-
school arrangements are already on the ri se, while Poland introduced pre-school 
preparation in 2004 for six-year-o lds in order to create equa l educational opportunities for 
children from different environments. 
– A series of innovative practices can also be  observed, which target disadvantaged groups 
and aim to improve the accessibility of childcare services (buses providing itinerant collective childcare, co operation between local authoritie s and NGOs to provide pre-school 
education in rural areas where no childcare is available, etc.).  
In this context, there is also an increased focus on the involvement of parents. In several 
Member States, committees or councils of parent s have been establishe d and are involved in 
childcare policies, even if th eir rights and roles can vary. 
3.3.4.2.  New forms of delegation and financial support 
A shift towards the delegation of public services to the private sector can be observed in many 
Member States. The objective is to stimulate the creation of new services, to improve the accessibility of these services and to lower public costs.  
In several Member States, more competition ha s been introduced in th e provision of childcare 
services, with the intention of increasing pa rents’ freedom of choice and improving their 
position as customers. The reasoning behind this move is that the combination of informed 
consumers and competing providers is likely to have a positive impact on the quality of services, while at the same time reducing public costs. 
In Ireland, the United Kingdom and the Netherlands , for example, subsidie s to parents, such 
as cash benefits, vouchers or tax reductions, ar e used more frequently compared to supply-
side subsidies paid directly to service providers. The ‘free choice’ objective is also at the core 
 
EN 59   EN of a recent reform of the funding system in  France, which promotes childminders through 
vouchers and tax credits.  
Both profit and non-profit private providers are involved in this proces s, but their relative 
importance and the segments in which they op erate vary across different Member States.  
3.3.4.3.  Outcomes of the modernisation process 
The modernisation trends identifie d above are leading to an incr ease in the suppl y of childcare 
services. This is a positive development both fo r children of working pa rents, who need to 
reconcile work and family, and for children wi th a disadvantaged background, for whom early 
socialisation is an asset.  
At the present stage, however, a considerable part of the demand remains unsatisfied and the 
goal of ‘free choice’ is still far from being reached. 
While the strategies identified above are likely to improve this situation, they are also creating 
new risks and challenges. The diversification in the available forms of childcare can make 
quality control procedures more difficult to implement. Childminders or ‘family crèches’ are 
not always subject to the same level of regula tion in the different Member States. Moreover, 
parents are not always ready or prepared to take on the role as  supervisors of quality. Finally, 
private childcare services, even if partially financed by public resources, are often more 
expensive than public services, which might lim it the access of families with low incomes to 
these services.  
The OECD research quoted in the SHSGI st udy 2008 suggests that, while the benefits of 
increased supply and choice that result from th e increased role played  by private providers 
cannot be ignored, the affordability and quality of childcare services can only be secured by 
sustained public funding a nd investment in policy, services and management. 
 
EN 60   EN 4. MODERNISATION AND THE QUEST FOR GOOD GOVERNANCE  
As set out in chapter 3 of the present BR, SSGIs are unde rgoing change in response to 
evolving needs and socio-economic challenges.  These changes have had an impact on the 
public provision and financing of these servic es. Member States have therefore embarked 
upon the modernisation of their so cial services to react to th ese needs and challenges while 
ensuring financial sustainabili ty. In the context of the pr esent report, the concept of 
‘modernisation’ is used to cover the wide range of reforms that have taken place in the social field over the last 20 years.  
Diversity of modernisation processes 
Based on the analysis carried in the SHSG I study 2008, chapter 3 gives a flavour of the 
different forms that modernisation processes ca n take in the various sectors concerned.  
These processes are influenced by the inner lo gic of each policy field and by socio-economic 
factors that have an impact on  certain SSGIs more than others : for example: (i) the ageing of 
the population is the main challeng e that long-term care services currently have to face; (ii) 
labour market services have to adapt to the re quirements of the labour market and to changes 
in labour market policy orientations; and (iii ) the development of ch ildcare services is a 
response to new needs linked to gender equality and to changes in the role of families.  
Moreover, depending on the political, historical and cultural context of each Member State, 
these processes have started out from differ ent levels of government, and a variety of 
structural changes in the organisation, mana gement, regulation and governance of social 
services can be observed across the EU.  
The diversity of the existing national institutiona l frameworks for the provision of SSGIs is an 
important explanatory factor for the variety of  modernisation processes that can be observed 
at national level. The following aspects influe nce the forms taken by national modernisation 
processes:  
– the distribution of responsibilities for the organisation, regulation, pr ovision, financing and 
evaluation of social services at national, regional and local level; 
– the main design parameters of  social protection systems; 
– the entitlement conditions for specific benefits: these conditions are sometimes clearly 
defined in the applicable legal framework while  in other situations, particularly for means-
tested benefits, local authorit ies enjoy some discretion, e.g. w ith regard to the form these 
benefits can take (benefits in ki nd, in cash, personal SSGIs, etc.);  
– the different types of providers (public , private for-profit or not-for-profit); 
– the different financing modes and sources of funding (shares of taxe s, social insurance 
contributions, user fees, donations, own fi nancial resources of providers, etc.), 
– the extent of user participation in so cial service provisi on and evaluation, and 
– the implementation of consumer protection mechanisms. 
 
EN 61   EN Some common trends 
In spite of this diversity, some common tre nds regarding the organisation, management and 
governance of social services can be identi fied and are presented in this chapter.  
Modernisation is a response to the main soci al and economic challenges EU societies are 
facing (ageing, gender equality, so cial integration, labour market  flexibility and efficiency, 
etc). The necessity to adapt to changing needs,  which cannot be dissociated from the search 
for quality improvement, efficiency and cost containment, is amongst the most important 
drivers of modernisation. In a context wher e the services needed  are becoming more 
sophisticated and complex, the need to develop a stronger user orientation, to increase user 
empowerment and to promote access to social ri ghts also play a role in this process. 
The tables depicting the drivers of modernisat ion for long-term care, employment services 
and childcare, presented in chapter 361, show that for these three sectors the main drivers are 
the combination of demographic or  societal changes and financia l constraints. In second place 
come drivers relating to new forms of orga nisation, a new role for public and private 
providers and participatory approa ches (reflecting in fact the pr ocess of modernisation itself). 
Concerns relating to the EU legal and political context co me only in a third position. 
These drivers play a role at different levels  of the delivery system. They influence the 
organisation and management of these services, but also impact on the regulatory mechanisms 
and forms of governance that apply to them. M odernisation processes are therefore examined 
at two different levels in the following sections : the level of organisa tion and management, on 
the one hand, and the level of governance a nd regulation, on the other. The examples 
provided in the following sections generally  come from the SHSGI study 2008. They often 
refer to relatively recent experiences or pilot projects that have not yet been evaluated, in 
particular with regard to thei r mid- or long-term effects. 
The present chapter builds on the findings of  two consultation exercises (preceding and 
following upon the 2006 Communication) and re lies in particular on the SHSGI study 2008. 
                                                 
61 See pages 40-41, 46-47 and 54-55 above. 
 
EN 62   EN 4.1. Modernisation in SSGI organisation and management 
Modernisation strategies within the field of SSGIs are part of  a broader trend of 
modernisation in the public sector over the last 20 years. Traditionally public sector 
management used to focus on compliance w ith rules and regulations. This type of 
management has been criticised for focusing more  on processes than on results and for its lack 
of incentives to use resources efficiently. 
Basically four orientations, each aiming to increas e the efficiency and effectiveness of service 
provision, characterise the organi sational and managerial reforms of social services in the 
Member States: performance management, user  orientation, integration of services and 
rescaling of governance levels. 
4.1.1.  Performance management 
A key feature of the reforms has been the incr eased measurement of performance. The main 
steps in measuring performance consist in (i ) developing a consensus on missions, goals and 
objectives, (ii) implementing performance measurement systems including performance 
indicators, and (iii) using performance information as  a basis for decision-making. 
Three types of performance me asurement tools are usually used in order to assess the 
performance of social services: performa nce indicators, benchmarking and outcome 
assessment: 
– performance indicators : the implementation of performance indicators in the social sector 
can be challenging, in particular because it is often difficult to link input (resources used to 
deliver social services), activ ities and outputs (‘package’ of services that may require a 
bundle of activities) to outcomes (the impact of the outputs on the needs to be addressed). 
In England, the Commission for Social Care Insp ection (CSCI) uses a star  rating to assess the 
service performed by local councils. Performance indicators form a key part of the star 
ratings. They provide a view of how local councils are serving th eir residents w ith respect to 
social services and highlight the progress local counc ils are making in improving services and 
meeting national objectives. It is  still too early to make a final and comprehensive assessment 
of how this framework works in practice. 
Source: SHSGI study 2008, p. 210-211. 
– benchmarking : benchmarking can be defined as a means to find and implement best 
practices. It can apply at differe nt levels. It can concern the processes and activities used to 
transform inputs into outputs, be used to compare different organisational performance or 
to specify performance norms or standards to be achieved. 
– outcome assessment : in this case, the assessment is not limited to the process by which 
inputs are converted into outputs but concerns the outcome of the public action. It requires 
appropriate evaluation instruments and is no t a straightforward exercise. The value and 
objectives of the policies pursued, as well as the nature of the information collected to 
assess policies, can give ri se to heated controversy. 
The introduction of performance measurement to ols within the field of social services 
constitutes an improvement in measuring e fficiency and not only inputs, processes and 
 
EN 63   EN compliance. However, this approach is not w ithout risk, as assessing effectiveness can be 
methodologically and politically challenging. There is, for exam ple, a risk of focusing too 
much on outputs, especially if performance is  measured in quantitative terms (e.g. cases 
completed), at the expense of outcomes (e.g. satisfied users), w ith the consequence that the 
service at issue does not address sufficiently thos e who are most in need. For example, if the 
priority of a given public employment service is to re duce long-term unemployment, a 
performance indicator focusing on the number of  unemployed persons in  general who found a 
job over a one-year period would not properly asse ss the achievement of this priority if it does 
not take into account (i) the specific difficultie s encountered in finding jobs for the long-term 
unemployed and (ii) the extent to which th ese persons stay on the labour market for a 
sufficiently long period  of time. Moreover, performance m easurement tools could lead to 
‘cream-skimming’, in other words selecting and addressing ‘easy cases’ in order to improve 
the performance to be measured, and ultimately not, or not sufficiently, addressing the users who could be most in need.  
4.1.2.  User orientation and access to social rights 
Getting the users of social services more involved in the delivery process is one of the general 
trends of modernisation across the EU. The obj ective is to enhance quality and efficiency, 
notably by establishing a direct  feedback between users and providers. A further aim is to 
increase users’ autonomy and their capacity to participate in society. This explains why 
modernisation strategies that ai m to promote access to social rights also endeavour to increase 
user orientation and empowerment.  
4.1.2.1.  User orientation 
There are different models of user involvement, which depend on whether the user is seen as a 
citizen with rights (‘welfarist approach’), a consumer with choices and exit possibilities 
(‘consumerist’ approach) or a co-producer who influences service provision (‘participationist’ 
approach). In practice, the strategies chosen are generally a mix of th ese different models.  
The table below shows the main elements characterising each of these three models: 
Table 4.1: User involvement in social servi ces. Various strands of thinking, elements and 
tools  
‘Welfarism’  ‘Consumerism ’  ‘Participationism’  
• Hierarchical governance of service 
systems 
• Full coverage/ uniform services 
• Equal standards 
• Boards and commissions 
for corporate governance 
• Quality control by state inspection 
• Social rights and patients' charters • Competition 
• Individual choice 
• Market research (by or 
for providers) 
• Vouchers 
• Customer orientation 
• Consumer lobbying 
• Consumer protection • Collective self-help 
• Volunteering 
• Strengthening user and community 
based service providers 
• Strengthening local embeddedness 
• Orientation towards empowering 
users 
• More service dialogues 
• More user control in designing and 
running services 
Source: SHSGI study 2008, p. 213. 
Legislation imposing obligations on service provide rs with the aim of reinforcing users’ rights 
(e.g. obligation to provide information, obligation to involve users in the management of the 
 
EN 64   EN structure, etc.) generally corres ponds to the ‘welfarist’ logic. For example, this is the case 
in France in the field of reside ntial care. These legislations so metimes mix the ‘welfarist’ and 
the ‘consumerist’ approaches (in the fi eld of passengers' rights for example). 
Direct payment schemes, providing users with  an individual budget enabling them to choose 
among different options, are an example of a ‘c onsumerist’ approach. This possibility exists 
in several Member States, notably in the UK (England), in the Czech Republic, in the 
Netherlands, in Austria and in Germany, partic ularly in the field of long-term care.  
Examples of a ‘participationist ’ approach can be found where th e users are directly involved 
in the management of a service, for example through participation in meetings or committees, 
to which a budget is sometimes allocated, etc. This is for example the case for public childcare facilities in Italy, where parents are playing an increasin gly important role.  
Even if these user models are based on different principles, they all assume that the user is 
informed and autonomous. However, this is no t always the case in th e social field, where 
beneficiaries often do not have the necessary in formation (on their need s, the providers, the 
possible choices, the level of qua lity, etc.) to make informed choices. Support mechanisms are 
therefore needed to make user orientation eff ective. This is the case for example in the UK, 
where volunteers assist users in ma naging direct payment schemes.  
4.1.2.2.  Access to social rights 
Concrete access to social  services strongly depends on the ar chitecture of social provision: the 
applicable legal framework and the status of th e rights to services, but also the resources 
allocated, the process and procedures for realisin g rights (e.g. how the se rvice is financed and 
delivered, enforcement mechanisms, etc.) and th e ability of users to claim their rights.  
Strategies aiming to improve access to social rights often try to reinforce user orientation  (for 
example by reducing ‘organisational barriers ’ to social rights due to fragmentation, 
compartmentalisation and difficulties in coopera tion between agencies and between different 
geographical levels of administration) and user empowerment  (by providing them with 
support and assistance to  claim their rights). 
4.1.3.  Integration of services 
Service integration means the coordi nated delivery of a range of serv ices to beneficiaries. It is 
usually implemented through ‘integrated gate ways to services’ a nd through ‘service 
platforms’ that make access to services more user-friendly. 
An example of service integration is the inte gration of legal and social consultancy for 
persons in excessive debt with placement serv ices and with general social assistance and 
support services. In several Member States, health and social services are also integrated with 
services for drug addicts.  
Another example can be found in long-term care,  where the shift toward s providing integrated 
care for the elderly is an importa nt modernising trend. Historicall y, health and social services 
have been organised by different institutional actors, provided by different professionals and even fragmented into specialised services. Ho wever, the integration of health and social 
services is a complex process where professiona l histories and practice s as well as cultural 
contexts often differ. Examples of service inte gration in the field of long-term care can be 
found in Italy, where the use of integrated (soc ial and health) home care vouchers has recently 
 
EN 65   EN been introduced in Lombardy. The debate is also ongoing in the Netherlands, where several 
mergers have taken place between home-car e and institutional care providers.  
Labour market policies are another field where the integration of services, benefits and 
agencies is on the agenda. This is notably the case in Germany where, as a result of recent 
reforms, unemployment assistance and soci al assistance have been combined.  
In many areas of social policies, the integrati on of social services is a powerful tool for 
increasing the effectiveness of social servi ces and avoiding the unde sirable side-effects of 
social schemes. However, it requires sufficient resources to be allocated to coordination and 
need-assessment tasks. 
4.1.4.  Decentralisation 
The overall tendency in the Member States has been to move to wards decentralising 
responsibility for social policy from the central st ate to sub-national authorities. The idea that 
local authorities have a better know ledge of their citizens’ local n eeds than central authorities, 
the increasing demands for regi onal autonomy and the search  for cost-effectiveness and 
efficiency are among the many reasons for initia ting these reforms. However, decentralisation 
should be accompanied by the allocation of suffi cient budgetary resour ces as otherwise the 
differences in economic resources among regions could have a negative impact on service 
provision62.  
In most Member States, however, a number of social policy instruments remain to varying 
degrees in the hands of  central governments. Apart from en acting legislation and formulating 
policy aims and directions, the state has regul atory and control authority over most national 
social security, social welfare and employment institutions. 
In designing a multi-level governance system for social services, governments are confronted 
with two types of trade-off, between adaptation to local needs and universal social rights and 
benefits as well as between  local autonomy and central ised budgetary control.  
                                                 
62 See also, on this point, the report of the European Parliament on SSGIs in the EU, A6-0057/2007, 
recital 16.  
 
EN 66   EN 4.2. Changing forms of regulation and governance of SSGIs 
This section examines the changes characterisi ng the regulation and go vernance of social 
services and discusses three major developments in greate r detail: the increased role of 
market-based regulation, the introduction of ne w forms of public-priva te partnership, and the 
development of new governance practices.  
4.2.1.  The increased role of market-based regulation 
Two main regulatory mechanisms can be identifie d in the area of social services: (i) public 
programming regulation and (ii) market-based re gulation. One of the major trends that can be 
observed is the shift from pub lic programming regulation to market-based regulation. The 
latter usually requires the use of correctiv e mechanisms to tackle market failures. 
4.2.1.1.  Public programming regulation vs. market-based regulation 
Public programming regulation  is based on budgetary, pla nning, certifying and control 
procedures (ex-ante quality definition and ex- post service inspection) that define and assess 
the needs to be met, authorise the producers, and impose quality and process standards. It 
generally involves contracts be tween the public authority and the service provider and often 
encompasses the financing of any deficit, if need be. 
The French regulatory system in the field of long-term care is an example of public 
programming. It entails a proced ure of authorisation and approva l, together with a budgeting 
procedure based on the principle of reim bursement by the public authorities. 
Source: SHSGI study 2008, p. 225-226. 
Under the market-based regulation  approach, public authorities allow for more competition. 
This can include both competition for the market, whereby potential service providers 
compete for contracts awarded by public authorities and competition on the market, which 
allows users to choose between different prov iders (either profit-making firms or non-profit 
organisations). Under this approach, consum ers and producers enjoy a greater degree of 
freedom and, in many situations, the user becomes a direct customer. By enhancing 
competition, public authorities aim at creating incentives, which incite service providers to 
reduce costs through efficiency gains and to innovate. However, public authorities often 
continue to play an important role in orie nting demand, influencin g price definition and 
guaranteeing quality, as well as  in financing the provision of  services. Cash allowances, 
integrated budgets, vouchers, etc. are among the tools used by public au thorities to support the 
purchase of services and empower the users of these services.  
4.2.1.2.  The shift towards market-based regulation 
The expansion of market-based regulation, an d the consequent reduction in the scope of 
public-programming regulatory mechanisms, is one of the main trends that can be observed. 
In the field of long-term care, market-based re gulation has been introduced notably in the UK, 
France (home-help services), the Czech Republic and Poland (as a result of the de-institutionalisation of public care services) and in Germany, Italy, Sweden, and the 
Netherlands. Market-based mechanisms are im plemented for the regulation of childcare 
services in France, Italy and th e Netherlands. They are also us ed for the regulation of labour 
 
EN 67   EN market services in, for example, the Czech Republic, Germany, the UK and Sweden. 
However, no statistics reflecting their relative  importance with respect to other forms of 
regulation and social servi ce provision are available. 
Market-based regulation may be exemplified by the British regulatory framework in the field 
of long-term care services. Long-term care serv ices in the United Kingdom are financed and 
organised differently according to whether they are classified as health care or social care. 
Health services are funded by central government from tax revenues. Social care services are 
funded by local authorities with revenue genera ted from local taxes (known as council tax) 
and user charges in addition to central government grants. 
Since the early 1990s there has been  a shift in the balance of service provision for the elderly 
from largely publicly provided care to servi ces predominantly provided by the independent 
sector. Similarly, residential car e has increasingly been provided by the independent sector. 
The commissioning of services involves decisions about the types of serv ices required to meet 
local needs, decisions on the service and sector balance in order to ensu re the supply of the 
services required and decisions on the quality assurance aspects of care provision. There has 
been an increasing focus on the significant role pl ayed by partnerships in securing services to 
meet local needs. Successful commissioning largely depends on whether there are well-
established and mature relationships between providers and local authority commissioners, 
generally adopting a partnership approach. A dr ive towards the integrated commissioning of 
health and social care has been a major element of the policy agenda aimed at improving the 
coordination of care packages for dependent people. This drive has been accompanied by an 
increasing emphasis on the deliv ery of individualised care. 
Source: SHSGI study 2008, p. 232-233. 
4.2.1.3.  Market-based instruments and corrective methods 
In the field of social services , public authorities use different types of instruments to enhance 
competition while at the same time achieving policy objectives such as guaranteeing the desired level of service quality and continuity  or service accessibility and affordability.  
In this area, the efficiency of market mechan isms is limited by the fact that many of these 
services do not constitute a conventional market and depend on public funding. Moreover, these markets are characterised by information asym metries, i.e. the fact that in general the 
provider has more information about the nature a nd quality of the servic e than the beneficiary. 
This situation leads to market failures, which is all the more true for social services addressing vulnerable persons who are generally not in a position to make informed choices. In such 
cases, the relationship between th e provider and the bene ficiary can in general not be equated 
with a commercial supplier/consumer relationship.  
In order to achieve certain public objectives, public regulati on is therefore often needed 
(hence the reference to ‘quasi-markets’, wher e competition is introduced but where certain 
conditions are put in place to ensure that publ ic policy objectives are met, in particular 
through regulation).  
Market regulation can take different forms, fr om price control to licensing or authorisation 
schemes ensuring that the desired level of quality is met and that the services are accessible. 
Certain requirements, for example quality requ irements, can also be imposed on providers by 
 
EN 68   EN public authorities in the course of public procurement procedures  or as a condi tion to obtain a 
grant.  
Compliance with the conditions imposed by public  authorities through various instruments is 
generally a condition to obtain public funds.  
On the financing side, more sp ecifically, different instrument s are used to increase the 
affordability of social services e.g. 
– grants  directly given to service providers; 
– tax reductions , which aim to reduce the final price pa id by the user and may benefit either 
the service provider or the user; 
– vouchers , which are subsidies granting limited purcha sing power to an individual to choose 
among a restricted set of services. Vouchers ar e an interesting example as this instrument 
combines the two objectives pursued by quasi-marke ts in the social field. By increasing the 
possibilities for beneficiaries to choose betwee n different providers, they contribute to 
enhancing competition on the market. By reduci ng the price paid by the user, they make 
the service at issue more affordable. 
Other corrective methods, e.g. case management and individual needs assessment, have been 
developed to address market failures stemming from the asymmetry of information between 
users and providers: 
– case managers  act as coordinators to help users obtain home and community care services, 
thereby bridging the gap between users and service providers. Additionally, the case manager provides links to other resources and serv ices to assure that users' needs are met. 
– individual needs assessment
 provides comprehensive and integrated evaluations covering 
the physical, social, psychological, and environmental needs of the beneficiary. By identifying the presence of met and unmet needs,  these procedures help prioritise plans for 
care provision and define an individual's care package. 
4.2.2.  The introduction of new forms of  public-private partnership 
As a result of these modernisati on processes, the state is less th an before a direct provider of 
SSGIs but is playing an increasi ng role as regulator/guarantor.  
The delegation of tasks to private providers requires comprehensive framework regulations 
that can range from technical specifications to quality standards and also cover the financing 
of services and how infrastructure and investme nt costs are shared be tween public authorities 
and providers. It also leads to  new forms of partnership betwee n public authori ties and private 
organisations.  
Public-private partnerships (PPPs) are a specifi c form of partnership and cooperation between 
public authorities and private en tities. They involve the co-financing and sharing of risks and 
responsibilities. They can be complex settings that institutionalise collaborative arrangements 
between private (profit-making firms and non-profit organisations) and public sector 
organisations. 
 
EN 69   EN The consultation process did not provide eviden ce of any widespread us age of public-private 
partnerships in the field of SSG Is. The national reports of the Me mber States examined in the 
SHSGI study 2008 also show that PPPs, invol ving the sharing of financing and of 
responsibilities and risks, are at this stage not  very common and do not play a significant role 
in modernising social services. Social services generally do not constitute a conventional market and few private actors are therefore w illing to invest money and to take risks in 
activities that are mainly pub licly funded and where the prof itability is non-existent or 
minimal.  
Some Member States (including Austria, Ire land, Poland and Spain) have expressed their 
intention to make increasing use of PPP-type m odels in the future. Even so, PPP models seem 
to be more relevant for specific sectors and limited tasks. This is particularly the case for the social housing sector, where PPP models concer n essentially the construction of housing and 
not the operation of social housin g or related services. As most  authors and experts agree, 
PPPs are only likely to be used or needed wh ere there is very large capital expenditure 
involved, and not for the operation of a service. 
4.2.3.  The development of new governance practices 
Modernisation entails a changing role for public authorities from hierarchical intervention to 
network steering and partnership with multiple stak eholders. It also entails new forms of user 
participation, civic involvemen t and dialogue with civil soci ety. Such negotiated social 
governance embraces a diverse range of actors: soci al partners, local authority representatives, 
social entrepreneurs and other NGOs as well as community-based groups, voluntary 
organisations and se lf-help initiatives. 
Consequently, new forms of governance are need ed in order to promote cooperative and 
strategic partnerships between a variety of actors, to enhanc e horizontal coordination and to 
foster civil society initiativ es. These new forms of governance entail the development of 
institutionalised partnerships where the role  of public authorities is transformed from 
hierarchical centralised command to horizont al, more complex and multi-faceted network-
based coordination. 
In France, new forms of local governance can be obs erved in the field of childcare, where 
more emphasis is put on the role of public authorities in terms of coordination and 
governance. For example, at municipal level, ‘ch ildcare coordinators’ have been put in place 
in order to facilitate th e implementation of the ‘ contrats-enfance ’ (childcare contracts) and to 
support the development of a common childcare cult ure at local level. Th ey mainly work with 
non-profit organisations pa rticipating in the ‘ contrat-enfance ’. Locally, these institutional 
tools are implemented in different ways, lead ing to forms of governance that vary greatly 
from one place to another. 
In Italy , special rules and arrangements have been introduced in order to support civil society 
initiatives within the field of  childcare. The Region of Lombardy, for example, has recognised 
a new legal category, i.e. ‘associations of soci al solidarity’ and self-help associations of 
families (referred to as the ‘fourth sector’), fo r which part of the regi onal funding is generally 
reserved. 
Source: SHSGI study 2008, p.238-239. 
 
EN 70   EN 4.3. Consequences of national modernisatio n processes in terms of applicable 
Community law  
As highlighted in the previous sections of th is chapter, Member Stat es have embarked upon 
modernising SSGIs in order to meet evolving n eeds and societal challe nges. Even if these 
modernisation processes can take different forms and start from different levels, they are often 
characterised by increased decentralisation of the organisation of social services to local or 
regional levels, by the outsourcing of some services to the private sector and by the 
development of new forms of partnerships. 
Modernisation processes have lead to a situation in  which the State is less than before a direct 
provider of the service but is playing an increasing role as regulator/guarantor, while 
remaining an essential source of financing. Such  a situation is relatively new and unfamiliar 
for most stakeholders (regional and local author ities, service providers and beneficiaries) in 
most Member States. Moreover, as a consequen ce of these changes, a growing proportion of 
social services in the Eur opean Union now fall under the Community rules on competition 
and the internal market, insofar as they can be considered economic activities. As a result, 
national authorities, at central, regional and lo cal level, increasingly have to apply these rules 
when defining, organising and providing SSGIs. 
The broad consultation process mentioned in the Introduction to the present BR, which was 
launched by the Commission following the 2 006 Communication, has re vealed a lack of 
familiarity with and understanding of the co rrect application of Community rules among 
public authorities and service providers. This lack of familiarity and understanding is notably due to the fact that local authorities and small and non-profit providers, which play an 
important role in the social sector, have limited resources to dedicate to  the necessary learning 
process.  
A careful analysis of the questions raised duri ng the consultation process has confirmed that, 
at this stage, the difficulties experienced in the application of Community rules are not caused by the rules themselves but rather by the fact  that these rules are not well known and applied 
by public authorities and service providers.  
It is important to recall th at the interaction between Commu nity rules and the organisation, 
provision and financing of SSGIs is relatively recent
63, the opening-up of SSGIs markets to 
private actors is relatively new and the case-law is limited.  
In particular, when existing le gislations and provisions are considered, notably by those who 
have to apply them, as being ‘problematic’ or di fficult to apply in the light of the nature of 
SSGIs, it is most often because the rules ar e misunderstood and/or not well applied. The 
following examples illustrate this point:  
– various stakeholders seem to believe that Community rules impose on public authorities an 
obligation to outsource the prov ision of SSGIs and to apply public procurement rules. The 
application of competition rules is also often understood as implying that several operators 
                                                 
63 While the SHSGI study 2008 highlights the uncertainty concerning the application of Community rules 
and its impact on the provision of SSGIs, the authors stress that ‘in general it proved difficult to find 
supportive evidence when do cumenting the impact and consequences  of the application of EU rules’ 
(see the overview of chapter 13, p. 262). 
 
EN 71   EN should compete for the provision  of the service concerned. Th ese perceptions create fears 
that a ‘market-oriented’ approach  would put at risk the objec tives pursued by services that 
are generally driven by the principle of solidarity.  
This is however not the case: public authoritie s have full discretion to decide whether to 
provide the service directly or entrust it to a third party. In addition, the fact that competition 
rules apply to social services which are deemed  to be economic activities does not mean that 
public authorities have to privatise service provi ders, to ensure that several service providers 
are present in the market or to abolish existi ng special or exclusive rights that are necessary 
and proportionate for the provision of the service. 
– stakeholders in the social fiel d often argue that the applicat ion of public procurement rules 
leads to a situation where the cheapest offer must  be chosen to the detriment of the quality 
of the service.  
This interpretation of the rule s is not correct. The underlying objective of public procurement 
is to obtain the best value for taxpayers' m oney. This however does not translate into an 
obligation to choose the cheapest option. The applicable rules enab le public author ities to use 
criteria focused on quality and to  incorporate their social consid erations in tender procedures, 
in order to select the most suitable provider.  
– In the field of State aid, there is an obligation to ensure that the public service 
compensation which is paid by a public auth ority to a service provider entrusted with a 
mission of general interest doe s not over-compensate the costs incurred by this service 
provider. This obligation has of ten been interpreted as a requ irement to provide in advance 
detailed calculation where it is often impossi ble to know all the details of costs when an 
operator starts providing an SSGI.  
In fact the State aid rules do not impose such kind of  obligation. They only ask to determine 
in advance on which basis the compensation will be calculated, but not its exact amount, and 
to ensure that no overcompensa tion will be paid in the end.  
4.3.1.  The strategy put in place by the Co mmission to provide practical guidance 
The Commission considers that the appropriate response to the questions and queries from 
stakeholders active in the field of SSGIs is ther efore not to change the applicable rules but to 
provide more practical guidance and support aime d at ensuring that these rules are correctly 
understood and applied and that  the possibilities they offer are fully exploited. The 
Commission sets out its commit ment in the Communication on ‘S ervices of general interest, 
including social services  of general interest: a new European commitment’64 presented in 
November 2007.  
The Communication acknowledged the difficulties  experienced by public authorities and 
service providers active in the social field in  understanding and appl ying Community rules 
and launched a strategy to provide stake holders with the necessary guidance. 
                                                 
64 This Communication, which is systematically referred to in the present BR as the 2007 Communication, 
is quoted in footnote 15 above. 
 
EN 72   EN Two Staff Working Documents65 dealing respectively with St ate aid and public procurement 
rules accompanied the Communication. These two documents bring concrete answers to the 
most frequently asked questions and are particular ly relevant for the soci al field. Section 4.5 
gives an overview of the answers already given in these two documents to concrete questions 
raised by stakeholders. 
In order to ensure that concrete guidance is given on new questions ra ised in this field by 
citizens, public authorities and service pr oviders, the Commission has created an ‘ interactive 
information service ’ (IIS).  
Questions can be sent to the Commi ssion by filling out a specific mail form 
(http://ec.europa.eu/services_genera l_interest/registr ation/form_en.html ).  
This service has been operational since the en d of January 2008. Even if it is too early to 
evaluate the system, the results so far are positiv e as they show that the IIS is responding to a 
concrete demand to help stakeholders develo p a good understanding of the application of 
Community rules to SSGI.  
Most of the questions received so far fall with in the scope of the IIS. Key themes raised 
include the interpretation of con cepts such as ‘general interest ’, ‘economic’ activities, ‘act of 
entrustment’ and ‘overcompensation’. The interaction between public procurement, 
concessions and state aid rules and the scope a nd obligations deriving from the principle of 
transparency have also been raised. The most re levant and interesting qu estions will regularly 
enrich the two Staff Working Document s which are available on the website.  
4.3.2.  The follow-up by the Social Protection Committee (SPC) 
In January 2008, the SPC66 decided to reactivate an informal working group on SSGIs that 
had been involved in the consultation proc ess initiated by the 2006 Communication. The 
working group on SSGI is not an institutiona lized group, but an informal working group 
gathering the experts of those Member States willing to par ticipate. It works under a concrete 
mandate given by the SPC. 
The SPC mandated the working group to contribute to the work undertaken by 
the Commission and, notably, to analyse the answers provided in the two Staff Working 
Documents, to identify more examples derive d from the SSGI sector and to review whether 
further questions or problems arise. 
The working group held a first exchange of  views at the beginning of March 2008, which 
provided an occasion to clarify doubts and misunde rstandings raised by stakeholders and to 
enhance the mutual understandi ng between the Member States and the Commission services. 
                                                 
65 Frequently asked questions documents concerning the application of the public procurement and state 
aid rules, SEC(2007)1514 and SEC(2007)1516 of 20 November 2007. 
66 The role and tasks of the SPC are explained in the introduction to this BR. 
 
EN 73   EN In the field of State aid, th e debate showed that the appl ication of the ‘SGEI package’67 still 
raises various questions. The working group w ill look further into Member States' use of 
possibilities for financing SSGI both under the SGEI package and the de minimis 
Commission Regulation68, which is applicable to all economic activities. On public 
procurement rules, the debate focused on public -public cooperation, th e interaction between 
public procurement and State aid rules and the no tions of ‘contract for pecuniary interest’ and 
of ‘cross-border interest’. The relevance of institutionalised pub lic-private partnerships (IPPP) 
in the social sector, the national legal fram eworks and practices concerning public-public 
cooperation in the area of SSGIs and the potential interest for limiting through national 
legislation the provision of SSGIs only to non-pr ofit operators appeared to be issues meriting 
further analysis. 
In June 2008, the SPC will send a questionnaire to Member States and stakeholders' to gather 
their views in particular on the issues iden tified by the working group as meriting further 
analysis. 
The results of the working group, including analys is of and responses to the questionnaire, 
will be reflected in a Final Report from th e SPC to the EPSCO Council of December 2008. 
                                                 
67 In particular, this package encompasses Commission Decision 2005/842/EC of 28 November 2005 on 
the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation 
granted to certain undertakings entrusted with the ope ration of services of general economic interest, OJ 
L 312 of 29.11.2005 and the Commission Framework for State aid in the form of public service 
compensation, OJ C 297 of 29.11.2005. This package is often referred to as the ‘Altmark’ or ‘Monti-
Kroes’ package. 
68 Commission Regulation n° 1998/2006 of 15 December 20 06 on the application of articles 87 and 88 of 
the Treaty to de minimis aid, OJ L 379/5 of 28.12.2006. 
 
EN 74   EN 4.4. Answers already brought to concrete questions raised by stakeholders 
The present section sets out the most frequent and relevant ques tions identified in the context 
of the consultation and refers to the answer s and guidance provided by the Commission inter 
alia in the two Staff Working Documents.  
4.4.1.  Scope of Community rules 
The fact that an activity or a service is considered to be economic69 triggers the application of 
competition and internal market rules70. Some SSGIs have been considered non-economic 
activities71. During the consultation process, public au thorities as well as service providers 
underlined their uncertainty in relati on to the definition of ‘undertaking’72, of ‘services’73 and 
of ‘economic activity’ in the field of SSGIs. In  view of the local natu re of many SSGIs, the 
interpretation of the criteria of ‘affectation of trade’ under competition rules and the boundaries of the scope of internal mark et rules have also raised questions. 
General clarifications of these concep ts are brought in section 2.1 of the 2007 
Communication. Moreover, the Staff Working Document on State aid gives concrete 
examples of activities that ha ve been considered as non-econo mic (see reply to question 2.4), 
or not affecting trade between Member Stat es (see replies to questions 2.9 and 2.10). The 
Staff Working Document on public  procurement also gives indi cations of what could be 
considered as low-value contracts which have no relevance to the internal market (see reply to 
question 2.3).  
The Staff Working Document on  State aid also recalls that  even when an activity is 
considered economic, thereby subject to compet ition rules, this does not mean that public 
authorities have (i) to ensure that a multiplicity  of operators operate on the market, (ii) to 
privatize public entities nor (iii) to abolis h existing special or exclusive rights that are 
necessary and proportionate for the provision of  the service (see reply to question 2.11). 
4.4.2.  Provision of SSGIs 
Direct provision
 
Community rules concerning the ch oice of the provider,  i.e. public procurement rules, do not 
apply when public authorities provi de the service directly or thr ough an internal provider (this 
                                                 
69 Competition rules only apply to economic activities, namely the provision of ‘goods or services’ on a 
market by ‘undertakings’. Internal  market rules only apply to ‘ser vices’ within the meaning of the 
Treaty, namely services corres ponding to an economic activity. 
70 However, public procurement rules do not apply to contracts that do not have a potential for cross-
border interest. Competition rules do not apply if th ere is no impact on trad e between Member States. 
71 For example, statutory social security schemes resting on the principle of national solidarity do not 
constitute economic activities. See for example joined cases C-159/91 and C-160/91, Poucet and Pistre , 
[1993], ECR I-637. 
72 According to well established case-law, an undertak ing is an entity engaged in an ‘economic activity’, 
i.e. the provision of goods or services on  a given market (see e.g. case C-41/90, Höfner and Elser , 
[1991], ECR I-1979). 
73 Only services that are normally subject to remuneration and thus correspond to an economic activity are 
regarded as ‘services’ within  the meaning of the Treaty. 
 
EN 75   EN is referred to as an ‘in-house provider’ situation)74. Most of the questions raised in this context 
ask whether public authorities can decide to provide SSGIs themselves or if they are 
constrained by Community rules to externalize service provisi on. More specific questions 
concern the scope and limits of the ‘in-house provider’ exception. 
The Staff Working Document on pu blic procurement clarifies that a public authority has full 
discretion to decide whether it provides services itself or entrust them to a third party (see 
reply to question 1.1). It also provides explanations regarding the ‘in-house’ provider concept 
(see replies to questions 1.2, 2.9 and 2.10). The recently  adopted Communication on 
institutionalised public-private pa rtnerships (PPPs) contributes to this clarificati on exercise by 
specifying the practical ways of carrying out a te nder procedure to entrus t services to a public-
private entity.  
Externalised provision  
A series of questions arise where Member States  decide to externalise the provision of SSGIs.  
a) Limits to market regulation 
Member States that decide to outsource the pr ovision of an SSGI might choose to regulate the 
market in order to ensure that certain object ives of general interest, for example social 
objectives, are met. 
During the consultation process, so me stakeholders expressed conc erns that the application of 
Articles 43 and 49 of the EC Treaty on the freedom  to establish and the freedom to provide 
services and the application of the proposed Services Directive75, that was being negotiated at 
the time of the consultation, could call into  question national measures regulating the 
provision of SSGIs (e.g. rules requiring approvals or authorisations built with the aim of 
protecting users, ensuring quali ty and access, and distributing s upply over the entire national 
territory).  
The questions raised in this cont ext have generally speaking been  related to the interpretation 
of the concepts used by the ECJ in its case-la w on the basis of Article 43 and 49 and to the 
scope of the proposed Services Directive in the SSGI field76. 
The 2007 Communication recalls that measures intended to regulate markets – such as 
authorisation requirements – are perfectly possible to the extent that they are justified by 
public interest objectives and proportionate to the objectives pursued. Concerning the 
Services Directive, the services of the Commission issued in 2007 a Handbook on 
implementation of the Services Directive77 which aims to provide gui dance to Member States 
in the implementation process. The services of the Commission are al so providing support to 
Member States in the on going screening process. 
                                                 
74 However, public procurement rules may apply in cases where a public authority needs to buy goods or 
services required for it to provide a given SSGI itsel f, regardless of whether th e SSGI corresponds to an 
economic activity or not, as in this case the public authority concludes a contract for pecuniary interest. 
75 The Services Directive was adopte d in 2006. Directive 2006/123/EC of the European Parliament and of 
the Council of 12 Decembe r 2006 on services in the internal market, OJ L 376/36 of 27.12.2006. 
76 See Feedback report, section 4.3. 
77 http://ec.europa.eu/internal_market/service s/docs/services-dir/guides/handbook_en.pdf 
 
EN 76   EN b) Need to specify the scope  and the nature of the service 
Even if State aid rules and public procurement rules pursue different objectives and establish 
distinct legal frameworks, they both entail the necessity to specify the scope and the nature of 
the service to be provided. Under State aid rules, a clear act of entrustment  is required when a 
public authority assigns to a provider a public service obligat ion to be compensated with 
public funding. Similar obligations to specify the scope and natu re of the serv ice exist under 
public procurement rules, where the characteristic s of the service must generally be described 
in the technical specifications .  
In these two areas, stakeholders expressed thei r concerns as to how to comply with the 
obligations related to the act of entrustment or the drafting of technical specifications and as to whether these obligations are adapted to the sp ecificities of SSGIs. This was translated into 
more specific questions, e.g. 
– how can the requirement for an ‘act of en trustment’ from public authorities to SSGI 
providers be reconciled with the autonomy
 and the freedom of initiative of such providers 
that various Member States recognise and re spect, according to their constitutional/legal 
framework? Such question relates to the fact that, historically, in some Member States, 
these service providers have th emselves taken the initiative to develop the services in 
question well before public authoritie s became involved in social policy.  
The 2007 Communication recalls that in order to pr ovide legal certainty and transparency, it is 
important that public authorities  assign missions of general in terest to service providers 
through acts of entrustment. It notes that in th e area of social services, Member States seem 
sometimes less aware than in other sectors of the implications of Article 86(2) of the EC Treaty which allows for the reconciliatio n between missions of  general interest 
and Community rules by providing that th e latter only apply insofar as they do not  obstruct 
the performance of these missions.  
On the specific aspect of the autonomy of service providers, the St aff Working Document on 
State aid gives examples which show that the requirement for an ‘act of entrustment’ is fully compatible with the autonomy and freedom of  initiative enjoyed by many providers in the 
social field (see reply to question 5.6). 
– how to draft an act of entrustment
 concerning services that have to be (i) seen in terms of 
an integrated approach; (ii) personalised to the specific needs of individual users and (iii) 
adapted in the process of delivery to changing  situations in terms of care intensity, user 
profiles and number of users?  
On these aspects too, the Staff Working Docume nt on State aid provides clarifications. It 
shows that the acts of entrustment can take di fferent forms depending on the nature of the 
service and of the entrusting body (see reply to question 5.2) and do not have to define each 
specific activity concerned in the provision of th e service (see reply to question 5.3). It also 
explains that the concept of ‘act of entrustm ent’ is fully compatible with an integrated 
approach (see reply to question 5.4) and is adapted to changi ng situations (see reply to 
question 5.5). 
– how to draft detailed specifications  for a public procurement procedure concerning SSGIs? 
In this regard, public authori ties and service providers have stressed the risk that: (i) 
tenders focus only on prices ignoring other crit eria such as long term sustainability and 
 
EN 77   EN continuity78; (ii) services are segmented, whereas ensuring a ‘continuum’ of service is of 
particular importance in the area of SSGIs (which  means that an integrated approach to the 
different needs of the recipient is often needed  in this sector and also, for example, that 
short-term contracts could be particularly  detrimental in a sector where a personal 
relationship often has to be established betw een the recipient and the service provider).  
As recalled earlier in the pres ent report, the underlying objective of public procurement is to 
obtain the best value for taxpayers' money, whic h does not translate in to an obligation to 
choose the cheapest option. The Staff Working Document on public procurement specifies 
that the applicable rules provide  a wide range of possibilities to set up specifications and 
allow public authorities to use quality focuse d criteria and take into account the social 
dimension of the required service in order to select the most suitable provider (see replies to question 2.2) Moreover, Community rules do not impose on public authorities to conclude 
short-term contracts. 
– how to avoid creating too heavy a burden
 for small, locally based, non-profit providers 
which often employ voluntary workers? These se rvice providers are very active in this 
sector and are generally considered to be well equipped to deal with s ituations that have a 
strong local dimension. This is notably becaus e these organisations ge nerally have a strong 
cultural and ethical focus on supporting the disa dvantaged. Similar issues were raised by 
stakeholders as regards the se lection of service providers and the financing of SSGIs.  
On this aspect in particular, both Staff Wo rking Documents provide useful information on 
how the existing rules aim at limiting administrativ e burden, which is particularly relevant in 
the SSGI field.  
The Staff Working Document on State aid first recalls that when the conditions for the 
application of the de minimis Commission Regul ation are met, a public authority can provide 
financial support up to € 200.000 over a three years'  period without having to notify to the 
Commission the related funding (see re plies to questions 2.7 and 2.8).  
For all other cases, the aid will be considered co mpatible and even exempted from notification 
if the conditions of the Comm ission Decision of 28 November 2005 are met. The Decision 
exempts from notification annual compensation in ferior to 30 million € for beneficiaries with 
an annual turnover inferior to 100 million €. Fo r hospitals and social housing, the exemption 
of notification is valid ir respective of any threshold. 
For larger amounts of compensa tion a notification is possible  and the related aid can be 
considered compatible by the Commission on the basis of the SGEI Framework. The 
objective of the Decision – and of  the SGEI package in genera l - is precisely to provide 
greater certainty for financing SGEI.  
The Staff Working Document on public procuremen t explains the legal framework applicable 
if a public authority decides to externalise the provision of SSGIs. It poi nts out the wide range 
of possibilities provided for by the Public Procurement Directive 2004/18/EC79, and in 
                                                 
78 See Feedback report, section 4.1 on the difficulties in drafting detailed specifi cations and a reference to 
the fact that ‘the risk of public tender focusing on prices’ has often been mentioned. 
79 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the 
coordination of procedures for the award of public works contracts, public supply contracts and public 
service contracts (OJ L 134, 30.4.2004, p. 114–240). 
 
EN 78   EN particular the possibility to defi ne quality criteria. It recalls th at only a few provisions of the 
Directive apply to social servi ces, which means that in this field, public authorities already 
benefit from a larger margin of  discretion compared to other s ectors (see in particular replies 
to questions 2.1 and 2.3). 
c) Selection of the service provider 
The application of European public procuremen t rules seems a particul ar source of concern 
for stakeholders in the field of SSGIs. Ther e is considerable misunderstanding of the 
applicable framework. Here also, general con cerns were translated into more specific 
questions that the Staff Working Document  on public procurement has clarified:  
– what is the exact scope of the principle of  transparency, which applies even when the 
thresholds set in the Directive 2004/18 EC are not met?  
This aspect is dealt wi th in the replies to questions 2.1 and 2.4, which provide  clarifications 
regarding the applicable fram ework, notably on the distinc tion between a public service 
contract and a service conces sion and on the obligations de riving from the principles of 
transparency and non-discrimination. 
– how to reconcile public procurement procedures, which are perceived as limiting the 
number of providers selected, with the preservation of a sufficient degree of freedom of 
choice  for SSGI users80? 
This aspect is dealt with in the reply to question 2.5, which sp ecifies that public procurement 
procedures do not aim at limiting the num ber of service pr oviders selected. 
– is it allowed to introduce as a criterion for the selection of a service provider its familiarity 
with the local context , this aspect often being essential for the successful provision of an 
SSGI? In light of the importance of the non-profit  sector in the field of SSGIs, is it allowed 
to limit the selection only to  non-profit service providers? 
The Staff Working Document makes a series of clarifications on possibl e selection and award 
criteria which are particularly relevant in the social field, such as requirements related to the local context (see reply to question 2.6) or th e non-profit nature of a service provider (see 
reply to question 2.7). 
– do public authorities still have the possibility to negotiate with service providers during the 
selection process? This is particularly impor tant for SSGIs as public  authorities are not 
always in a position to define very precisely their requirements at the beginning of the 
process. Discussion with potenti al service providers is ther efore sometimes necessary to 
help public authorities to define these requirements. 
This aspect is dealt with in the reply to question 2.8, which expl ains that negotiation remain 
possible insofar as the operators selected to pa rticipate in a negotiated procedure are treated 
equally. 
– to what extent do public procurement ru les apply to inter- municipal cooperation
? This 
cooperation could take different shapes, e .g. one municipality buying a service from 
                                                 
80 See section 4.1 of the Feedback report. 
 
EN 79   EN another; two municipalities organising together a call for tender or creating a new entity for 
the provision of an SSGI, etc. 
The reply to question 2.9 descri bes different possible types of cooperation between public 
authorities. 
– to what extent do public procurement rule s apply to public-private partnerships? 
This aspect is dealt with in the reply to que stion 2.10. Moreover,  a Communication on 
institutionalised public-private partne rships was adopted on 5 February 200881. 
4.4.3.  Financing of SSGIs 
Most SSGIs are highly dependent on public funding. The criteria used to assess the 
compatibility of public service compensation (PSC) with Community rules are defined in 
‘SGEI Package’. These criteria, in particular th e necessity for the State to clearly define the 
mission it entrusts and to ensure that no overcompensation is paid, have been the subject of various questions from stakeholde rs in the social field, e.g.  
– the parameters for cost compensation, which have to be established ex-a nte to limit the risk 
of overcompensation, were perceived as being not flexible enough to take into account the 
specificities of SSGIs. This was interpreted by va rious stakeholders in the social field as an 
obligation to provide in advance a detailed calculation of thes e costs while in this sector 
unpredictable changes in care intensity, in the nu mber and profiles of users and in the level 
of revenues often lead to a high degree of cost unpredictability
82 and to the ri sk of ex-post 
deficit.  
The Staff Working Document on St ate aid clarifies that the ap plicable rules do no impose any 
obligation to provide in advance a detailed calculation of all the costs but simply to determine 
the basis for the calculation of the future compensation, so as to ensure a minimum of transparency (e.g., it might be sufficient to spec ify that the costs will be compensated on the 
basis of a price per day based on an esti mation of the number of potential users). 
Clarifications on these aspects have been brought  in section 6 of the Staff Working Document 
on State aid (see in particular replies to ques tions 6.1 and 6.2). More generally, section 6 of 
the document answers a series of questions on co mpensation issues (see for instance reply to 
question 6.7 for the meaning of ‘reasonable profit’). 
– Some stakeholders have also asked whether the definition of the parameters for cost 
compensation requires a comparison between di fferent operators and a judgment on their 
efficiency. 
The Staff Working Document clarifies that the application of State aid rules does not involve 
any judgement on the efficiency of a servi ce provider or a compar ison between service 
providers. If there is an act of entrustment, if the parameters for cost compensation have been 
clearly defined and if there is no over-compensation, all costs in curred by the service provider 
for the provision of the SSGI can be compensa ted (see replies to questions 6.10 and 6.11).  
                                                
 
81 C(2007) 6661. 
82 See section 4.4 of the Feedback report. 
 
EN 80   EN – some stakeholders pointed out that, with the exception of social housing and hospitals, aids 
exceeding the thresholds defined in Article 2a ) of the ‘SGEI decision’  have to go through 
the process of prior notifica tion to the Commission, which is  perceived as burdensome.  
In this regard, one should note that Memb er States have not yet reported on the 
implementation of the ‘SGEI’ Decision, which al ready provides a very favourable framework 
for public service compensations. There is no evidence that the thresholds provided for in the Decision are not adequate for the needs of ce rtain sectors. The subm ission by the Member 
States of the reports on the implementation of  the SGEI Decision by the end of 2008 is an 
occasion for Member States to provide more information on their experience in implementing 
the package and on possible prob lems they have encountered.