Commission staff working document - Biennial Report on social services of general interest {COM(2008) 418 final}
Date: 2008-07-02
Institutions: European Commission
Subjects: European social policy, cooperation policy, economic and social cohesion, evaluation method, health care, pension scheme, poverty, social integration, social security

EN 

EN 

   EN 

 
COMMISSION OF THE EUROPEAN 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 

   EN 

 
 
  
Biennial Report on social services of general interest 

TABLE OF CONTENTS 

Executive summary .................................................................................................................... 7 

1. 

1.1. 

1.2. 

2. 

Introduction ................................................................................................................ 10 

The debate on SSGIs at EU level............................................................................... 10 

The structure of the BR .............................................................................................. 13 

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 shift 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 ..................................................................................................................... 34 

3.1. 

Long-term care ........................................................................................................... 35 

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 

2 

   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 access 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 ................................................................................................ 64 

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 modernisation processes in terms of applicable 
Community law.......................................................................................................... 70 

4.3.1.  The strategy put in place by the Commission 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..................................................................................................... 74 

4.4.3.  Financing of SSGIs .................................................................................................... 79 

EN 

3 

   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 social services as a percentage of total 
employment ................................................................................................ 16 

Figure 2.4:  Share and absolute growth in health and social 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 for the EU-15, 2000 to 2007 (in thousands 
with gender breakdown) ............................................................................ 20 

Figure 2.7:  Employment creation in health and social 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 health 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 benefits 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  protection 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  community  (including  people  receiving 
care allowances), 2004 ............................................................................. 39 

Figure 3.3:  Expenditure on long-term care (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 

4 

   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-term 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  policy,  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  strands  of  thinking,  elements 
and tools....................................................................................................... 63 

EN 

5 

   EN 

EXECUTIVE SUMMARY 

In line with the commitment of the Commission to establish a monitoring and dialogue 
tool  on  social  services  of  general  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 relevant sectors, the way in which they adapt to 
evolving  needs  and  face  up  to  socio-economic  challenges,  and  the  impact  of  these 
changes on the organisation, financing and provision 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.  SSGIs  therefore  play  a  central  role  in  the 
implementation of the Renewed Social Agenda 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  within  financial  and  human  resource  constraints. 
While there are wide differences between the different sectors and the approaches in the 
Member States, there are common commitments and challenges across the EU. The BR 
confirms  that  there  is  a  need,  not  to  change  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 sustainability and the commitment to provide quality services 
for all is emerging as a central issue not for policy makers at both national and EU levels. 

The  BR  starts  by  restating  the  objectives  pursued  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  inclusive  society  and  in  enhancing  the  capacity  of 
individuals  to  participate  fully  in  society.  The  contribution  of  SSGI  to  meeting 
fundamental EU objectives, including a high level 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  focusing  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 bridge inequalities in 
starting  points.  By  ensuring  that  all  citizens  can  have  access  to  the  opportunities 
presented to them, SSGIs put into practice the principle of solidarity. The recent growth 
in demand for these services reflect deep-rooted trends in the European economies and 
societies  resulting  from  demographic  ageing,  changes  in  gender  roles  and  family 
structures  as  well  as  technological  change  and  globalisation.  An  increasing  number  of 
people need efficient services that are adapted to diversified needs and choices.  

Social and health services as major drivers of employment and social development… 

Social  and  health  services  represent  a  major  part  of  the  EU  economy,  particularly  in 
terms  of  employment,  as  most  of  them  are  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 

6 

   EN 

                                                 
services.  Working  conditions  are  very  demanding  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 surprisingly, turnover is high, staff shortages are 
frequent, and the influx of workers from 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 these services, it is not clear whether human 
resource  needs  will  be  met  in  the  future.  This  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  the  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 the values of universality, equity, solidarity 
and quality in a period of increasing and diversifying demand, they will be looking for 
modern  pro-active  welfare  strategies  to  ensure  effectiveness  and  efficiency  of  social 
spending. These policies, including promoting inclusive labour markets, prevention and 
rehabilitation,  may  require  more  funds  initially,  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 reorganisation 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 socio-economic factors is particularly strong: long-term care, 
labour market services for disadvantaged persons, and childcare. These three sectors also 
illustrate the contribution of SSGIs to employment growth in the EU. The BR analyses 
the role of these services in European societies, presents an overview of service provision 
and expenditure, and describes the modernisation 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 quality 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  present  needs.  The  sector  relies  heavily  on  the 
participation  of  private  households,  which  still  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 

7 

   EN 

Labour market services for disadvantaged people are a key instrument of the European 
integration  of 
Employment  Strategy,  which  places  particular  emphasis  on 
disadvantaged people. Given the prospect of a shrinking labour force and the EU policy 
agenda of promoting higher economic growth, competitiveness and social cohesion, it is 
crucial to implement active labour market policies targeting disadvantaged people. 

the 

Childcare  services  have  rapidly  expanded  in  many  Member  States  due  to  increased 
labour  market  participation  of  women.  Moreover,  quality  childcare  can  foster  healthy 
development,  socialisation  and education of children,  and enhance social cohesion, and 
facilitate  the  integration  of  children  from  disadvantaged  socio-economic  backgrounds. 
The supply of childcare services has become more diversified in recent years. 

The main modernisation drivers for the three sectors 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 gender equality policy objectives 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 challenges 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  general  aim  of  increasing  efficiency  and 
effectiveness of service provision translates into (i) increased utilisation of performance 
measurement  tools,  (ii)  user  empowerment  and  user  involvement  mechanisms,  (iii) 
integration  of  services,  and  (iv)  decentralisation.  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 processes are a response of Member States 
to  evolving  needs  and  structural  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 but increasingly of a regulator/guarantor, while 
remaining  an  essential  source  of  financing,  there  are  questions  concerning  the 
applicability of Community rules.  

EN 

8 

   EN 

As  announced  in  the  2006  Communication2,  the  BR  reports  on  the  consequences  of 
national  modernisation  processes  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 services of general interest of 20 November 20073, the Commission 
committed  itself  to  providing  stakeholders  with  necessary  guidance.  In  addition  to  a 
series  of  clarification  provided  in  the  Communication  itself,  two  Staff  Working 
Documents,  dealing  respectively  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  service’  (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  results  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 
3 
4 
5 

COM(2006) 177 final. 
COM(2007) 724 final. 
SEC(2007) 1514, of 20 November 2007. 
SEC(2007) 1516, of 20 November 2007. 

EN 

9 

   EN 

                                                 
1. 

INTRODUCTION 

Social services of general interest (SSGIs) play a vital role in European societies: they 
contribute  to  enhancing  the  capacity  of  individuals  to  participate  in  society,  enabling 
them  to  fulfil  their  economic  and  social  potential  and  guaranteeing  that  they  can  enjoy 
their fundamental rights. These services are an important delivery mechanism for social 
policies  focusing  on  promoting  opportunities  for  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 inequalities in European societies, it is crucial to 
ensure  that  everyone  has  access  to  the  services  needed  in  order  to  fully  participate  in 
social life and in employment. The modernisation 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 looks 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 long-term care. Within 
the  Social  Protection  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 function and by highlighting 
their  socio-economic  importance.  It  describes  the  ongoing  modernisation  processes  in 
the Member States and the main issues at stake, with a view to facilitating the dialogue 
between the Commission, public authorities and stakeholders 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. The 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 

7 

8 
9 

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. 
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) preparing 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  two  alternate  members).  The  Commission  is  a  full 
member of the committee and provides the secretariat. 
COM(2003) 270. 
SGIs cover a broad range of activities: e.g. large network industries (energy, telecommunications, 
audiovisual broadcasting and postal services), water supply, waste management, education, social 
or health services. 

EN 

10 

   EN 

                                                 
The Communication on SSGIs of April 200610 (hereafter ‘2006 Communication’) made a 
first step in this direction. Based on an extensive consultation of Member States, social 
partners  and  civil  society  organisations  in  the  area  of  social  services,  it  provided  a 
description of SSGIs in the European Union. In addition to health services, which were 
not covered in the Communication, two groups of services, albeit with varying functions 
and forms of organisation across the EU, were identified: on the one hand, statutory and 
complementary social security schemes covering the main risks of life and, on the other, 
those  services  provided  directly  to  persons  and  playing  a  preventive  and  socially 
cohesive role, such as social assistance services, employment and training services, social 
housing, childcare and long-term care services.  

The consultation process that followed the 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  commissioned  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  OMC  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  organisational  characteristics  set  out  in  the  2006 
Communication. It listed (see below) a number of specific objectives that social services 
are often meant to achieve and explained how these objectives are reflected in the way 
services are organised, delivered and financed.  

10 

11 

12 

13 
14 
15 
16 

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.  
The questionnaire was addressed to Member States, Social Partners and European organisations 
representing  the  civil  society.  The  answers  to  this  questionnaire  are  summarised  in  a  Feedback 
report. See: 
http://ec.europa.eu/employment_social/spsi/docs/social_protection/2008/feedback_report_final_e
n.pdf  
The  study  was  carried  out  by  a  consortium  formed  by  the  European  Centre  for  Social  Welfare 
Policy and Research (Vienna), the International Centre 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, Frankfurt am Main). See: 
http://ec.europa.eu/employment_social/spsi/docs/social_protection/2008/study_social_health_serv
ices_en.pdf  
FINAL A6-0057/2007. 
CESE 426/2007. 
CoR ECOS-IV-006. 
Communication  on  ‘Services  of  general  interest,  including  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 

11 

   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,  designed  to  respond  to  vital  human  needs,  in 
particular  the  needs  of  users  in  vulnerable  position;  they  provide  protection  from 
general  as  well  as  specific  risks  of  life  and  assist  in  personal  challenges  or  crises; 
they  are  also  provided  to  families  in  a  context  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  failings  within  the  families;  they  are  key 
instruments for the safeguard of fundamental human rights 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  services  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 take into account the diversity of users;  

–  when  responding  to  the  needs  of  vulnerable  users,  social  services  are  often 
characterised  by  an  asymmetric  relationship  between  providers  and  beneficiaries 
which is different from a commercial supplier / consumer relationship;  

–  as these services are often rooted in (local) cultural traditions, tailor-made solutions 
taking into account the particularities of the local situation are chosen, guaranteeing 
proximity  between  the  service  provider  and  the  user  while  ensuring  equal  access  to 
services across the territory; 

–  service providers often need a large autonomy to address the 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  ensure  equality  of  access,  independent  of 
wealth or income;  

–  non-profit providers as well as voluntary workers often play an important role in the 
delivery of social services, thereby expressing citizenship capacity and contributing to 
social  inclusion,  the  social  cohesion  of  local  communities  and  to  intergenerational 
solidarity. 

Source: 2007 Communication 

EN 

12 

   EN 

The  2007  Communication  acknowledged  the  difficulties  experienced  by  public 
authorities and service providers active in the social field in understanding and applying 
Community  rules  and  launched  a  strategy  to  provide  stakeholders  with  the  necessary 
guidance.  

On  top  of  a  series  of  clarifications  provided  in  the  Communication  itself,  two Staff 
Working Documents respectively dealing with public procurement17 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  Communication,  the  Commission  launched 
in January 2008  an ‘interactive information  service’  with  the  aim  of  providing  concrete 
guidance to citizens, public authorities and service providers 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 the 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  represented  by  the  2006  and  the  2007 
Communications.  

After this first part which recalls the evolution 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  national  organisations  and  the  drivers  of 
modernisation  in  long-term  care,  labour  market  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 

18 

19 

‘Frequently  asked  questions  concerning  the  application  of  public  procurement  rules  to  social 
services of general interest’, SEC(2007) 1514, of 20 November 2007. 
‘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 Framework for State aid in the form of public service 
compensation’, SEC(2007) 1516, of 20 November 2007. 
COM(2004) 374 final. 

EN 

13 

   EN 

                                                 
2. 

HEALTH  AND  SOCIAL  SERVICES  FROM  AN  EMPLOYMENT  AND  ECONOMIC 
PERSPECTIVE  

This  chapter  describes  the  weight  health  and  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  characteristics.  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  activities  in  these  sectors  whether  or  not  they  are 
considered by Member States as serving a general 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 driver of job creation in the EU Member States. 
Among these industries, health and social services are a particularly dynamic sub-sector, 
one  element  in  the  ‘European  job  machine’  (OECD),  in  many  Member  States.  The 
analysis  in  this  section  is  based  on  statistical  information  from  the  European  Labour 
Force  Survey  and  refers  to  the  ‘health  and  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 comparison to other sectors. Due attention is paid 
to the gender aspect, as this is a sector that 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  employment  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 creation 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  targets,  i.e.  an  overall  employment  rate  of  70%,  60%  for 
women and 50% for older workers, is particularly strong for women 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 

14 

   EN 

                                                 
Figure 2.1:  Change in the employment rate from 2000 to 2007 

Rest of the economy

Health and social work

i

s
t
n
o
p
e
g
a
t
n
e
c
r
e
P

10.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

eu15

eu27

eu15

eu27

eu15

eu27

Total

Women

Older workers

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  relative  to  the  total  working-age  population, 
rose from 2.4% to 2.7% for males and from 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  working-age  women  employed  in  the  sector  is 
especially  high  in  Denmark,  Sweden,  Finland  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 shown 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, Estonia, 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, with employment shares ranging from 8% to 13% of total 
employment,  we  find  Austria,  Luxembourg,  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 provision of health and social services. 

EN 

15 

   EN 

 
 
Figure 2.2:  Employment in health and social work as % of total employment, 2007 

t
n
e
m
y
o
p
m
e

l

l

a
t
o
t

f
o
%

20.0

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

k
d

l

e n
s

i
f

r
f

e
b

k
u

e
d

5
1
u
e

e

i

u

l

a
e

u
e

t

a

t

m

t

p

t
i

z
c

t

u l
h

k
s

i

s s
e

l

p

e
e

r
g

g
b

y
c

v

l

o
r

Source: Eurostat, LFS 

As social services have expanded over time, employment has substantially increased in 
this sector for the EU on average (see Figure 2.3). For the EU-27, the sector’s share in 
total employment grew from 8.7% in the year 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 

t
n
e
m
y
o
p
m
e

l

l
a
t
o
t

f
o
%

11.0

10.5

10.0

9.5

9.0

8.5

8.0

eu15

eu27

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Source: Eurostat, LFS 

The share of this sector in total employment 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 growth was strong in the boom years 1997-
2000, but this coincides with a rather stable share of the health and social work sector in 
total  employment.  That  employment  in  this  sector  is  less  cyclical  than  in  the  overall 

EN 

16 

   EN 

 
 
 
 
 
 
 
 
 
economy is not surprising, as it is largely financed 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 Republic, 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: 
2006) 

Share and absolute growth in health and social services by field of activity (2001 and 

Share of employment by field of activity 

Growth in employment by field of activity 

(percentage points) 

(thousands of persons) 

k
r
o
w

l
a
i
c
o
s
d
n
a
h
t
l
a
e
h
n

i

l

t
n
e
m
y
o
p
m
e
f
o
%

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

2001

2006

t
n
e
m
y
o
p
m
e
n

l

i
e
g
n
a
h
c

l

e
t
u
o
s
b
A

600

500

400

300

200

100

0

-100

Social work activities

Human health activities

Human health activities

Social work activities

AT

CZ

DE

ES

FR

HU

IT

PL

PT

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  services  sector  in  most  Member  States,  namely  the 
Czech Republic, Germany, France, Hungary, 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  already  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 expectancy, 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  different  trends  across  the  EU.  One  group  of 

EN 

17 

   EN 

 
 
 
 
 
 
 
 
 
 
 
Member States (Bulgaria, Latvia, Malta, Poland 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 employment growth in the sector. 

The  group  of  Member  States  where  we  observe  a  relative  fall  in  employment  includes 
four  Member  States  that  entered  the  Union  recently.  Although  the  weight  of  social 
services  in  all  of  these  countries  was  at  the  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 its public sector after reaching a level of public 
expenditure considered challenging for its financial 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 share is moderate, we first find Denmark 
and Finland. In these two Member States, the share of employment was already high at 
the beginning of the period. In the case of Denmark, 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  the  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  collapse  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  represented,  i.e.  the  three  Benelux  Member 
States, France, Germany and Austria. The group also contains the United Kingdom and 
Ireland,  along  with  three  Mediterranean  countries,  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  family  and  household  structures  leading  to 
stronger  demands  for  such  services.  In  general,  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  shrinking,  while  it  rises  very  slightly  in  the 
industrial sector. Due to increasing wage levels, low-skilled manual work in agriculture 
and industry is becoming too expensive in highly developed industrial countries. Figure 
2.5 below shows that from 2000 to 2007 there was 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 

18 

   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 sector turned out to be one of the most dynamic, 
just  after  the  real  state,  renting  and  business  activities  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) 

f

m

Agriculture

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

-2000

0

2000

4000

6000

8000

10000

12000

14000

thousands of persons

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 fell 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 

19 

   EN 

 
Figure 2.6:  Change in sectoral employment for the EU-15, 2000 to 2007 (in thousands 

with gender breakdown) 

f

m

Agriculture

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

-2000

0

2000

4000

6000

8000

10000

12000

thousands of persons

Source: Eurostat, LFS 

The main finding from those figures is that — as part of the continuous 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  sector  in  general  and  the  health  and  social 
services sector in particular is very important in order to achieve higher employment for 
women of all ages and older workers. These  two  major  groups  are  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  increasing  age-dependency  ratios,  therefore  it 
has  become  a  priority  of  employment  policies  to  increase  the  participation  of  those 
groups  that  are  currently  underrepresented  in  the  labour  market.  Since  all  EU  Member 
States  face  the  consequences  of  demographic  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 different sectors by gender, 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  period  from  2000  to  2007  yet  slightly  more 
pronounced.  The  new  jobs  for  women  in  services  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  health  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  growth  in  employment  in  health  and  social 

EN 

20 

   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) 

15-24

25-54

55-64

lu

cy

si

sk

ro

gr

at

pl

pt

hu

ie

cz

be

dk

fi

se

es

it

nl

fr

uk

de

eu27

eu15

-500

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

* or closest year available

thousands of persons

Source: Eurostat, LFS 

2.1.3.  Features of employment in health and social services 

Employment  in  the  health  and  social  sector  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-skilled 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-skilled workers was 25.7% in the 
total economy, but 38.8% in the health and social sector. In recent years, moreover, the 
proportion of high-skilled employees in health and 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 and Denmark and highest in 
Austria,  Malta,  Slovenia  and  Latvia.  The  difference  with  other  sectors  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-standard working hours are more frequent than 
in the total economy. As shown in Figure 2.8, the proportion of people doing shift work 
(26.8%) or working night hours (25.6%) 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 education or training successfully completed. 

EN 

21 

   EN 

 
                                                 
Figure 2.8: 

Skill levels and working patterns in health and social work, 2006 

Total Economy Health & Social services

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

Low-skilled

High-skilled

Shift Work

Night Work

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 working part-time in the total economy, while 
the  comparable  figure  for  health  and  social  work  is  31.4%.  However,  there  is 
considerable variation throughout the European Union. 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 Belgium. In Greece, on the other hand, only 3.5% 
of people working in health and social services work part-time, compared with 5.6% in 
the total economy. Part-time working in health and social services is also rare in Portugal 
and essentially non-existent 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 participating in the labour market and assuming 
care responsibilities within the family, i.e. reconciliation of work and family life. 

Figure 2.9:  Part-time working in health and social work, 2007 

Total economy Health and social work

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

l

n

e
s

e
b

e
d

k
d

t

a

k
u

u

l

5
1
u
e

a
e

u f
r
e

e

i

t

m

t
i

i
f

e
e

l

s p
e

y l
t
c

z
c

Source: Eurostat, LFS 

v s

l

i

k
s

t

u p
h

r
g

g
b

o
r

EN 

22 

   EN 

 
 
Fourth,  temporary  contracts  are  slightly  more  common  than  in  the  total  economy  (see 
Figure  2.10).  In  the  EU,  12.1%  of  people  have  temporary  employment  in  the  total 
economy, while the comparable figure for health and social work is 12.7%. Again, there 
are  significant  differences  across  the  European  Union.  Temporary  work  in  health  and 
social  work  is  more  common  than  for  the  total  economy  in  Finland,  Sweden,  Spain, 
Denmark  and  Germany,  but  not  in  Italy,  Belgium,  Hungary,  the  Netherlands,  Slovenia 
and  Poland.  A  surprising  and  counterintuitive  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 

Total economy Health and social work

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

i
f

e
s

s
e

k
d

e
d

y
c

e

i

g
b

t
p

r
f

a
e

u

l

5
1
u
e

7
2
u
e

t
a

z
c

k
u

k
s

r
g

t
i

e
b

u n
h

l

i

s

l

p

Source: Eurostat, LFS 

Furthermore, gross earnings are lower than in the total economy in most of the Member 
States for which data are available. 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 different sectors, a gap 
can  be  seen  between  the  health  and  social  work  sector  and  the  total  economy.  Starting 
from comparable levels in 1995, average gross hourly earnings for employees in health 
and  social  work  have  remained  fairly  stable  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 increase is registered 
in market services: starting from a lower level in 1995, the gap with the 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 considered 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 employees in the sector in question. 
While  this  is  an  approximation,  it  nonetheless  provides  an  interesting  indication  of  the  relative 
wages paid across sectors. 

EN 

23 

   EN 

 
                                                 
Figure 2.11:  Wage evolution in the health and social work sector, 1995-2005 

Total non-market services

Total economy

Health and social work

Total market services

i

s
g
n
n
r
a
e
y
l
r
u
o
h
s
s
o
r
g
e
g
a
r
e
v
A

28.00 €

26.00 €

24.00 €

22.00 €

20.00 €

18.00 €

16.00 €

14.00 €

12.00 €

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: EU KLEMS, Growth and productivity accounts. 

An even more striking difference emerges if average gross hourly earnings in the health 
and  social  services  are  compared  with  earnings  for  other  non-market  services,  such  as 
education and public administration: here the gap not only is significant, but widens over 
time. For example, in 1995 the average gross hourly 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  earnings  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  sector  than  in  the  total  economy.  Nonetheless,  the  impact  of 
migration in this sector is still rather limited. 

Table 2.1:  Migrants in the health and social work sector 

2000 

2006 

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 

of which*** 

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 

of which 

Health and social work 

Total economy 

2.0 

1.6 

2.0 

3.0 

2.6 

3.3 

1.9 

1.4 

1.9 

4.4 

3.4 

4.8 

0.7 

0.4 

0.8 

3.8 

2.9 

4.0 

EN 

24 

   EN 

 
 
 
 
 
 
 
 
 
 
2000 

2006 

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 

of which*** 

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 

of which 

Health and social work 

Total economy 

0.3 

0.2 

0.3 

0.6 

0.4 

0.6 

0.4 

0.2 

0.3 

1.7 

1.3 

1.8 

0.4 

0.2 

0.5 

1.3 

1.1 

1.3 

* Recent immigrants here defined as foreign nationals who have been resident five 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 only high-quality, high-wage employment but also 
many workers on low wages and in unstable employment, as illustrated by the relatively 
high incidence of temporary contracts in most of the western European Member States. 

The latter characteristics, together with higher 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 strongly 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 sectors 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  Employment  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 increasing employment of women and 
older workers. Health and social services are relevant not only as source of employment 
but also to facilitate labour market participation 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-average educational levels and the higher share of 
non-standard working hours, gross hourly earnings are below average in those Member 

24 
25 

See chapter 3 in Employment in Europe 2007. 
See chapter 3 in Employment in Europe 2004. 

EN 

25 

   EN 

 
 
 
 
 
 
                                                 
States for which data are available, which confirms that sectors with high female shares 
in employment are characterised by low wages. 

Financial  constraints  might  have  contributed  to  keeping  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 increase in migrants from non-EU countries might 
have also played a role. The possible consequence of these developments is that it will in 
future  become  more  difficult  to  attract  qualified  employees,  which  could  lead  to  staff 
shortages or reduce the quality of services, a frequently mentioned concern among policy 
analysts and stakeholders. 

EN 

26 

   EN 

2.2. 

Social expenditure 

The economic significance of health and social services becomes evident when looking 
at  the  funds  used  to  finance  them.  Indeed,  social  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 the 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  analysed,  then  the  composition  of  total  social 
spending  and  the  trends  are  examined.  Finally,  the  relationship  between  social 
expenditure and employment in the health and social work sector is reviewed. 

2.2.1.  Public and private social expenditure 

Social protection expenditure is used both to provide social security 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 statistics that include an estimate 
of publicly and privately financed social expenditure. Not surprisingly, social protection 
spending is mostly financed from the public purse in the majority of Member States, but 
in  some  countries  private  social  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 

Public spending

Private spending

P
D
G

f
o
%

20

18

16

14

12

10

8

6

4

2

0

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

5
9
9
1

3
0
0
2

AT

BE

DE

ES

FI

FR

GR

IE

IT

NL

OECD

PT

SK

UK

US

Source: OECD 

In  all  the  OECD  member  countries,  privately  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 Netherlands (27.1%), the United Kingdom (24.7%) 
and Finland (17.2%). The exclusion of pensions, which account for the bulk of privately 
financed social expenditure, gives a better impression of the privately financed share of 
spending on social services. Figure 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 national 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  only  in  Greece  seems  to  be  explained  by 
relatively low levels of public expenditure. 

EN 

27 

   EN 

 
 
 
The  rise  in  the  share  of  private  financing  should,  however,  not  be  confused  with  how 
such services are provided (discussed in chapter 3). Even in countries that rely fully on 
public  sources  for  funding  the  provision  of  care  or  other  social  services,  the  provision 
might  be  organised  as  a  mix  between  private  market-oriented  enterprises,  non-profit 
organisations and a limited number of direct public institutions. 

The rest of the analysis in this section will 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 disaggregated between cash benefits and benefits 
in  kind.  Among  other  things,  it  includes  cash  benefits  such  as  pensions,  maternity 
payments,  unemployment  benefits  and  social  assistance  and  services  such  as  childcare 
and care for the elderly and disabled. While only part of the spending on cash benefits is 
intended for the consumption of social services, practically all the spending on benefits in 
kind finances social services. Therefore, the rest of this section will refer interchangeably 
to benefits in kind and health and social services. 

Figure  2.13  and  Table  2.2  show  that  between  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 unemployment over the 1995-2005 period. 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 social 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  simultaneous  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 social exclusion not elsewhere classified. ESSPROS 
Manual.  The  European  System  of  integrated  Social  Protection  Statistics  (ESSPROS).  2008 
edition. 

EN 

28 

   EN 

                                                 
Figure 2.13:  Trend in social protection benefits for the EU-15 from 1995 to 2005 

Cash benefits

Benefits in kind

P
D
G

f
o
%

30

25

20

15

10

5

0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: Eurostat, ESSPROS social 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 spending 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 

Social protection, total 

All functions 

Cash benefits 

All functions 

Sickness/health care 

Pensions* 

Family/children 

Unemployment 

Benefits in kind 

All functions 

Sickness/health care 

Care for the elderly and disabled** 

Family/children 

Unemployment 

Housing 

EU-15 

EU-25 

1995 

2005  Difference 
1995-2005 

2000 

2005  Difference 
2000-2005 

26.5 

26.7 

0.2 

25.6 

26.3 

0.7 

18.4 

1.3 

13.3 

1.5 

2.1 

8.1 

6.0 

0.7 

0.6 

0.1 

0.6 

17.6 

1.0 

13.4 

1.5 

1.5 

9.1 

6.7 

1.0 

0.6 

0.1 

0.6 

-0.8 

-0.3 

0.1 

0.0 

-0.6 

1.0 

0.7 

0.3 

0.0 

0.0 

0.0 

17.6 

1.1 

13.3 

1.5 

1.5 

8.0 

5.9 

0.8 

0.5 

0.1 

0.5 

17.4 

1.0 

13.3 

1.5 

1.5 

8.9 

6.6 

0.8 

0.6 

0.1 

0.6 

-0.2 

-0.1 

0.0 

0.0 

0.0 

0.9 

0.7 

0.0 

0.1 

0.0 

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 old age, survivors and disability functions. 
Source: Eurostat, ESSPROS social expenditure database 

EN 

29 

   EN 

 
 
 
 
 
 
 
 
 
 
 
Figure 2.14:  Expenditure on social protection benefits by broad social policy area, in percentage of GDP, in 2005 

5.7

5.1

7

6.3

8.1

6.4

6.6

6.1

6.7

6.6

6.6

5.9

6.6

6

7.6

5.5

6.3

6.6

6.3

4.7

2.1

2.4

1.4

1.9

2.4

1.9

2.2

2.9

3.1

2.2

4

2.5

0.7

1.1

1

1.8

2.1

1.9

5.7

5.3

6.2

Benefits in kind

Health

Other services

15

10

5

5.5

3.9

3.1

0.2

0.9

1.4

2.8

0.8

4.5

4.1

4.9

3.4

3.3

2.5

1.5

0.9

0.5

0.3

1.1

0.3

0.7

0

se
fr
dk
de
be
at
eu15
ea13
eu25
nl
uk
eu27
fi
it
gr
pt
si
lu
hu
es
pl
cz
mt
cy
ie
sk
bg
ro
lt
ee
lv

se (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)

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)

sk (16.4)

bg (15.5)

ro (13.9)

lt (12.8)

ee (12.3)

lv (11.9)

fi (25.9)

it (25.5)

8.7

1.2

2.4

4.1

15.3

0.5

1.4

1.1

9.9

9.2

12.6

12.2

12.5

13.1

11.8

12

11.7

10.2

11.3

11.6

1.8

2.8

0.8

1.2

3.7

4.6

1

3

4.7

4.5

5.4

3.9

1.3

1

1.6

1.6

1.8

1

1.6

1.5

1

1

1

1.6

2.3

2.4

3.2

3.5

3.2

2.6

0.5

1.9

1.9

0.9

1.6

3.2

11.9

10.5

10.1

11.4

7.8

8.6

8

7.6

8.8

8.2

0.6

1

0.4

1.1

2.2

1.7

1.5

2.2

2.5

0.9

1.8

0.7

1.9

1.1

1.3

4.4

2.5

2.6

0.7

1.1

1.3

2.2

0.9

1

2.2

1.7

0.5

3.7

2

1.6

ie (17.0)

4.1

0.7

0.8

3.6

6.7

7.9

0.3

1.3

2.7

0.4

1.2

1.4

5.7

5.8

5.3

5.6

0.1

0.9

2

0.5

1.1

1

0.6

1

0.5

0.8

1.6

1.5

Cash benefits

Pensions

Sickness

Disability

Other benefits

Source: Eurostat, ESSPROS database 

EN 

30 

EN 

0

5

10

15

20

25

 
  
 
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  Latvia  and  Estonia  to  about  30%  of  GDP  in 
Denmark, France and Sweden. Spending on social services, i.e. health services, care for the 
elderly and disabled, childcare, labour market services, social housing and social inclusion, is 
lower than spending on cash benefits in all Member States. Spending 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,  where  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 spending 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 

Invalidity Old age

Childcare

Unemployment

Housing

Social exclusion n.e.c.

P
D
G

f
o
%

8

7

6

5

4

3

2

1

0

e
s

i

k f
d

l

k n
u

r
g

e
d

5
1
u
e

7
2
u
e

r
5 f
2
u
e

u
h

t

3 a
1
a
e

s
e

u

l

e

i

t

e m
b

i

s

t
l

t
p

k
s

z
c

y
c

v i
t

l

g
b

e
e

Source: Eurostat, ESSPROS database 

o p

l

r

Health thus remains the single biggest item of expenditure, but other social 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 employment and social protection benefits 

Finally,  we  can  analyse  employment  in  health  and  social  services  in  relation  to  social 
protection  benefits  by  plotting  the  employment  rate  in  the  health  and  social  work  sector 

EN 

31 

   EN 

 
 
 
 
against  social  protection  expenditure  excluding  pension  expenditure.  This  gives  a  fairly 
informative picture (See Figure 2.16.). 

As expected, there is a strong correlation between 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,  disability  care  or  childcare.  As  noted  in  the 
2006 Communication, these sectors focus on services for individuals delivered by people and 
are therefore employment-driven.  

Figure 2.16:  Employment  in  health  and  social  work  vs  social  protection  benefits  excl. 

pensions, 2005 

25

20

15

10

5

P
D
G
f
o
%

s
a
s
n
o
i
s
n
e
p
.
l
c
x
e
n
o
i
t
c
e
t
o
r
p

l
a
i
c
o
S

0

0

se

dk

be

fr

de

uk

fi

nl

eu

lu

at

ie

gr

cy

pt

si

hu

it

es

cz

sk

mt

ro

bg

pl

lv

ee

lt

2

4

6

8

10

12

14

Employment rate in health and social work

Source: Eurostat, LFS and ESSPROS. 

In Figure 2.16, we can again clearly 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  work  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  Sweden  (21.7%  of  GDP).  A 
second  group  is  near  the  EU  average:  in  Belgium,  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, while 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 social work sector are quite labour-intensive, it 
appears that the gains in terms of employment are higher in those 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  social  expenditures  in  Figure  2.14  in  the  countries  above  and 
below  the  line  in  Figure  2.16.  Countries  below  the  line  spend  relatively  more  on  social 
services than on health and have higher employment 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 

32 

   EN 

 
 
 
 
 
 
 
 
 
comparing France with the United 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 work sector almost only needs employed persons to 
produce the services, i.e. take care of the old, the children, or the unemployed, while there is a 
wide use of high technology in the health sector that increase productivity. 

2.2.4.  Conclusions 

All in all, the analysis shows that the financial resources devoted to health and social services 
are largely public, although the small private component is increasing. 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  approach,  notably  on  childcare.  While  the  largest 
expenditure  item  is  health  care,  we  see  the  strongest  increases  in  care  for  the  elderly  and 
disabled. Finally, because social services are very labour-intensive, there is a high correlation 
between social expenditure and employment in the sector. 

Of course, the strong dependency of these services on public funds makes them particularly 
vulnerable  to  the  development  of  public  finances  in  general  and  the  pressures  coming  from 
the ageing of the EU populations, as demonstrated by the long-term projections carried out by 
the EPC and the European Commission27. It might be the case that 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  stability  and  short-term  financial  constraints.  Such 
constraints  may  also  explain  some  of  the  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 further pressures on wages and impact on the quality 
of  the  services  offered.  If,  on  the  other  hand,  Member  States  pay  attention  to  the  quality  of 
services,  the  need  for  well-trained  and  motivated  personnel  will  increase,  leading  to  further 
increases in the financial resources required. 

One  way to  reconcile  these  needs is to  strengthen inclusive labour markets and anticipatory 
policies  such  as  prevention  and  rehabilitation.  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  efficiency28.  Chapter 3  will  show  how  these 
pressures have emerged in specific sectors and how policies have responded.  

27 

28 

Economic  Policy  Committee  and  European  Commission  (2006),  The  impact  of  ageing  on  public 
expenditure:  projections  for  the  EU-25  Member  States  on  pensions,  healthcare,  long-term  care, 
education and unemployment transfers (2004-50), European Economy. Special Report no. 1/2006. 
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 

33 

   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 family 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  analyses  the  role  played  by  these  services  in 
European societies, presents an overview of service provision and expenditure and describes 
the forms that the modernisation process can take in these three sectors. 

The chapter is based mainly on the results of the SHSGI study 200829, which drew in turn on 
in-depth  country  studies  from  eight  Member  States  (the  Czech  Republic,  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 
the  Netherlands 
and Poland30. 

the Czech  Republic,  France,  Germany,  Italy, 

in 

At the same time, the present chapter draws on various 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 

30 
31 

32 

in 

the 

care 

Report: 

Long-term 

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 study 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. 
We refer to the SHSGI study 2008 for detailed references and sources. 
EU 
2008, 
European 
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 light of the agreed common objectives 
within the Open Method of Coordination. 
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  candidate  countries.  It  provides  the  basic  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. 

Union, 

April 

EN 

34 

   EN 

 
                                                 
3.1. 

Long-term care 

The definition of long-term care, the services and benefits 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,  housing  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  care  services  encompass  three  broad 
groups: (i) services for elderly persons with severe functional limitations who receive care in 
institutions;  (ii)  services  for  persons  with  moderate  to  severe  functional  limitations  who 
receive care in the community, often as a mix of informal and formal care; (iii) social services 
to support care in the community, such as respite 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 institutional and in a community setting.  

Long-term  care  operates  at  the  boundaries  between  health  and  social  care  and  is  usually 
provided to persons with physical or mental handicaps, the frail elderly and particular groups 
that need support in conducting their daily life activities. Different levels of organisation and 
different divisions of responsibility (public-private) 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  and  their  role  within  the  social 
protection systems of the Member States36. 

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  represents  a  policy  challenge  for 
many Member States, as the current 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, financing and provision of long-term care 
services across Member States translates into different responses and strategies to address this 
policy  challenge.  This  influences  several  aspects  of  long-term  care  provision:  the  degree  of 
accessibility of long-term care services and their financing, the role of informal carers and the 
degree of support received, the quality of the care provided and the long-term sustainability of 
the  resources  dedicated  to  the  sector.  Additionally,  better  integration  of  or  cooperation 
between health and social services remains an important challenge in most Member States. 

33 

34 
35 

36 

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. 
OECD 2005 Long-Term Care for Older People. 
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. 
EU Report: Long-term care in the European Union, April 2008, pp. 2-3. 

EN 

35 

   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 need of long-term care. As with childcare, this 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,  these  households  also  have  to  shoulder  a  large 
financial  burden  in  cases  where  out-of-pocket  payments  and  co-payments  for  formal  care 
services are required. 

Demand  for  long-term  care  on  average  is  expected  to  increase.  According  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 almost  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 projections 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  life  expectancy  and  the 
incidence  of  disability  and  dependency  that  drive  increases  in  demand  for  long-term  care. 
Increased  longevity  will  spur  future  demand  for  long-term  care  services  in  both  the  formal 
and  informal  setting.  Increased  longevity  has  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  pensions)  and  various  policies  aimed  at  enhancing 
participation in societal activities 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,  coupled  with  fertility  rates  below  replacement 
level and a prevalence of chronic disease in the older age groups, can serve as a proxy of the 
future  demand  for  long-term  care.  A  higher  prevalence  of  chronic  diseases  and  dependency 
patterns  in  old  age  does  not  mean  that  long-term  care  is  a  concern  solely  for  the  elderly 
population despite their predominance among long-term care recipients37. Steeply increasing 
age-dependency  ratios  will  negatively  affect  the  fiscal  stance  by  increasing  spending  needs 
and reducing the expected amount of contributions from the working-age population.  

Older  people,  however,  not  only  live  longer  lives:  there  is  also  evidence  from  at  least 
some Member States that people stay healthy longer and that the onset of severe disability is 
more and more delayed. The most important element 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  increased  longevity  of  the  population,  a  serious  challenge,  or 
opportunity, in terms of public health is the prevention of ill-health in old age, i.e. delaying 
the  onset  of  disability  or  dependence.  Demographic  developments  increase  the  pressure  on 

37 

EU Report: Long-term care in the European Union, April 2008, pp. 5-6. 

EN 

36 

   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  provision  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 prudent 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 strategies that could help postpone or mitigate 
health  and  disability  problems  among  the  elderly  and  hence  the  costs  of  publicly  provided 
long-term  care  services.  These  uncertainties  together  with  the  uncertainties  related  to  future 
life-expectancy estimations make long-term care projections rather difficult. 

Demographic ageing and societal changes impact on both the provision and supply of long-
term  care  services.  Long-term  care  services  are  provided  both  on  a  formal,  accredited  basis 
and on an informal basis. Informal care has traditionally been undertaken  predominantly by 
women. Societal changes such as the increased participation 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  the  life-expectancy  gap  between  men  and  women 
(on average women live longer) and the identified trend in the evolution 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 dependency 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 general 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 issues for Member States where 
the public supply of services and their funding are 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 regarding pay levels, high staff 
turnover and difficult working conditions. 

In response to these challenges, most Member States have initiated reforms to long-term care 
systems,  often  with  a  special  focus  on  quality  assurance,  improvement  and  accreditation 
initiatives. In some cases, this goes hand in hand with expanding the scope of available social 
services  while  keeping  in  mind  their  accessibility  and,  at  the  same  time,  the  resources 
available.  Concerns  regarding  quality  improvement  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 different long-term care schemes vary between the 
Member  States,  reflecting  more  the  organisational  features  of  each  system  rather  than 

38 

EU Report: Long-term care in the European Union, April 2008, p. 8. 

EN 

37 

   EN 

 
                                                 
population  structure  and  demographic  developments.  The  variations  reflect  the  differing 
national approaches to familial solidarity (occurrence of informal care and support for carers) 
as well as identifiable disparities between the demand for and the provision of publicly funded 
long-term care services39. 

The interaction of different levels 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  legislation  is  often  enacted  at  national  level,  while  detailed 
regulation and the organisation of services is frequently delegated 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 assessment is implemented and in differences in the 
generosity of services, often depending on the allocation and size of local budgets. 

Moreover, there is now considerable competition among different types of suppliers of long-
term care in many Member States, which has in some instances helped to drive the agenda of 
internal  and  external  quality  assurance  and  increased  reporting  to  the  public.  While  public 
providers  are  still  dominant  in  the  Czech  Republic  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, they represent 42% in France and 30% in Italy. 
Non-profit  providers  represent 80%  of  the  supply  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 providers 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 Sweden, Italy and the Netherlands, 7% in France and 
5% in the Czech Republic).  

The  numbers  of  dependent  older  people  who  receive  long-term  care  in  institutions  range 
across Europe from below 2% in Italy and Ireland to more than 7% in Sweden and Hungary. 
But  the  mix  of  services  offered  and  the  type  of  institutions  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,  where  practically  all  nursing  home  inhabitants 
have a choice of a single room or service apartment, whereas many nursing home inhabitants 
will  have  to  share  rooms  in  most  other  Member  States.  With  the  exception  of  Sweden,  the 
average number of persons per room in a nursing 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 European Union, April 2008, p. 15. 

EN 

38 

   EN 

 
                                                 
Figure 3.1:  Long-term care recipients in institutions, 2004 

l

r
e
d
o
d
n
a

s
r
a
e
y

5
6
d
e
g
a

e
l
p
o
e
p
g
n
o
m
a

e
g
a
t
n
e
c
r
e
P

9,0

8,0

7,0

6,0

5,0

4,0

3,0

2,0

1,0

0,0

Italy

Ireland

Germany

Luxembourg
United Kingdom
Austria

Denmark
Czech Republic

Finland
Slovak Republic

Netherlands

Source: OECD Health Data 2006 

France

Belgium

Sweden

Hungary

The reasons why some Member States have lower numbers of reported older people living in 
institutions  are  manifold.  Caring  for  frail  older  persons  is  still  predominantly  a  family 
responsibility in some Member States, such as Italy and Ireland, and public policy has only 
recently become more active in complementing family 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  increasing  supply  of  home  care  alternatives,  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 

l

r
e
d
o
d
n
a

s
r
a
e
y

5
6
d
e
g
a

e
l
p
o
e
p
g
n
o
m
a

e
g
a
t
n
e
c
r
e
P

25

20

15

10

5

0

Luxembourg

France

Germany

United Kingdom
Finland

Belgium
Czech Republic

Sweden

Hungary

Austria

Denmark

Source: OECD Health Data 2006 

Home-care  services  are  in  many  cases  less  developed  than  care  provided  in  institutions. 
Moreover, as shown in Figure 3.2 below, there is a great disparity between Member States in 

EN 

39 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
the  share  of  older  people  who  receive  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,  the  large  number  of  care  recipients  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  threshold  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 ‘home-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 under ‘home’. One ought to remain 
cautious when assessing the statistics on long-term 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 care 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  Report on long-term care in the European Union, the 
Member  States  are  firmly  focused  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, institutional 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 coordination, which is seen as crucial in enabling a 
high level of quality and efficient use of resources in the provision of long-term care services 
in  an  institutional  or  community  setting,  thus  ensuring  an  adequate  continuum  of  care 
irrespective of the different levels 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  patients  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 resources42. 

Community  care,  home  care,  residential  care  and  day  care  are  labour-intensive  sectors  with 
staff costs accounting for the majority of the overall costs in these settings. Labour supply in 
these settings is a major preoccupation for Member States, particularly considering the labour 
shortages in medical, nursing and social care. In the community care setting, the problem of 
insufficient and inadequately trained staff is exacerbated by the fact that the bulk of the care 
provided in that setting tends to be carried out by family or informal caregivers.  

40 

41 
42 

ICT for Ambient Assisted Living is a way to allow for independence and continuity of care at home. To 
this  purpose,  the  Commission  proposed  a  Decision  on  the  establishment  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. 
EU Report: Long-term care in the European Union, April 2008, p. 13. 
EU Report: Long-term care in the European Union, April 2008, p. 26. 

EN 

40 

   EN 

 
                                                 
As informal care will continue to play an important role and given the strong focus on home 
provision,  there  is  a  recognised  need  to  develop  structures  that  support  informal  caregivers. 
Policy  proposals  for  informal  care  include:  information,  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  consideration  of  care  periods  as  part  of  the 
contribution  period  for  pension  purposes),  formalising  their  status  and  including  them  in 
social insurance schemes43. 

Staff  shortages  in  the  long-term  care  sector  in  both  the  institutional  and  home  settings, 
coupled  with  demographic  developments  and  changing  family  structures,  will  most  likely 
result  in  an  increased  demand  for  formal  care-giving  in  both  settings.  The  quality  of  the 
workforce  inevitably  influences  the  quality  of  the  long-term  care  services  provided.  In 
addition to adequate qualifications and constant training, Member States have had to  devise 
ways to support and sometimes formalise the working conditions of informal caregivers44. 

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  States  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 long-term care and projections up to 2050 
AWG Reference scenario 
(ECFIN) 

OECD estimates 

2050 Projection 

Country 
BE 
DK 
DE 
GR 
ES 
FR 
IE 
IT 
LU 
NL 
AT 
PT 
FI 
SE 
UK  
EU-15 
CY 
CZ 
EE 
HU 
LT 
LV  
MT 
PL 
SK 
SI 
EU-25 

Change 
(2004-2050) 
1 
1.1 
1 
Na 
0.2 
0.2 
0.6 
0.7 
0.6 
0.6 
0.9 
0.4 
1.8 
1.7 
0.8 
0.7 
Na 
0.4 
0.3 
0.6 
0.4 
0.3 
0.2 
0.1 
0.6 
1.2 
0.7 
Source: ECFIN 2006, OECD 2006, OECD Health Data 2006 

2004 (Health 
Data 06) (*) 
0.8 
1.7 
0.9 
Na 
0.4 
0.3 
Na 
Na 
1.4 
1.1 
0.7 
0 
0.4 
0.7 
0.4 
0.7 
Na 
0.1 
Na 
0.2 
Na 
Na 
Na 
0.4 
Na 
Na 
Na 

2005 (**) 
1.5 
2.6 
1 
0.2 
0.2 
1.1 
0.7 
0.6 
0.7 
1.7 
1.3 
0.2 
2.9 
3.3 
1.1 
1.3 
Na 
0.4 
Na 
0.3 
Na 
Na 
Na 
0.5 
0.3 
Na 
Na 

2050 
1.9 
2.2 
2 
Na 
0.7 
0.5 
1.2 
2.2 
1.5 
1.1 
1.5 
0.9 
3.5 
5.5 
1.8 
1.6 
Na 
0.7 
0.6 
1.2 
0.9 
0.7 
1.1 
0.2 
1.3 
2.1 
1.6 

2004 
0.9 
1.1 
1 
Na 
0.5 
0.3 
0.6 
1.5 
0.9 
0.5 
0.6 
0.5 
1.7 
3.8 
1 
0.9 
Na 
0.3 
0.3 
0.6 
0.5 
0.4 
0.9 
0.1 
0.7 
0.9 
0.9 

Cost 
pressure 
3.4 
4.1 
2.9 
2.8 
2.6 
2.8 
4.6 
3.5 
3.8 
3.7 
3.3 
2.2 
5.2 
4.3 
3 
3.5 
Na 
2 
Na 
2.4 
Na 
Na 
Na 
3.7 
2.6 
Na 
Na 

Change 
(2004-2050) 
1.9 
1.5 
1.9 
2.6 
2.4 
1.7 
3.9 
2.9 
3.1 
2 
2 
2 
2.3 
1 
1.9 
2.2 
Na 
1.6 
Na 
2.1 
Na 
Na 
Na 
3.2 
2.3 
Na 
Na 

Cost 
Containment 
2.6 
3.3 
2.2 
2 
1.9 
2 
3.2 
2.8 
2.6 
2.9 
2.5 
1.3 
4.2 
3.4 
2.1 
2.6 
Na 
1.3 
Na 
1 
Na 
Na 
Na 
1.8 
1.5 
Na 
Na 

Change 
(2004-2050) 
1.1 
0.7 
1.2 
1.8 
1.7 
0.9 
2.5 
2.2 
1.9 
1.2 
1.2 
1.1 
1.3 
0.1 
1 
1.3 
Na 
0.9 
Na 
0.7 
Na 
Na 
Na 
1.3 
1.2 
Na 
Na 

43 
44 

EU Report: Long-term care in the European Union, April 2008, pp. 31-32. 
EU Report: Long-term care in the European Union, April 2008, pp. 31-32. 

EN 

41 

   EN 

 
  
                                                 
Figure 3.3:  Expenditure on long-term care (in % of GDP), 2003/2004 

Private
Public

2

1,8

1,6

1,4

1,2

1

0,8

0,6

0,4

0,2

0

Portugal

Hungary

France

Poland

Finland

Spain

Sweden

Austria

Source: OECD Health Data 2006 

Belgium

Germany

Netherlands

Luxembourg

Denmark

In all EU Member States, private households take on part or all of the burden of care, either 
by  providing  the  majority  of  care  hours  that  people  needing  long-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-of-pocket spending on care for which no or only 
very  little  public  coverage  (reimbursement  or  exemption)  is  provided.  This  can  also  be  the 
case for systems where access is universal, but where funding is restricted to only part of the 
total care needs (see Figure 3.3 above). 

As many pensioner households in all 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 share 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  are  less  expensive  than  acute  care  in  an 
institutional  setting,  the  resources  allocated  to  the  home  care  sector  vary  between  Member 
States. In the majority of Member States, publicly 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 proportion 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  care  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 expenditure is expected to increase steeply. This 
growth  will  be  determined  by  several  factors  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 European Union, April 2008, p. 15. 

EN 

42 

   EN 

 
 
                                                 
to put public long-term care programmes in place, where these are currently rudimentary, and 
to  enhance  them  where  long-term  care  provision  is  already  developed;  (iii)  the  cost  of 
improving  the  quality  of  care  in  both  the  community  and  institutional  settings;  (iv)  cost 
pressures  arising  from  staff  shortages;  (v)  trends  in  the  incidence  and  prevalence  of 
dependency and disability, which are currently uncertain, and, finally, (vi) trends in the living 
conditions of older people, such as income levels, means available for meeting their long-term 
care  needs,  and  changing  family  structures,  which  can  often  lead  to  the  isolation  of  elderly 
people.  Changing  family  structures  and  the  degree  of  development  of  long-term  care 
provision influence the availability of formal and informal carers, which must be taken into 
consideration  in  addressing  the  quality  of  life  of  long-term  care  recipients  in  a  community 
setting.  

All  estimations  of  future  long-term  care  spending  seem  to  agree  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 OECD  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 important to keep in mind that they are mainly 
driven by estimates of: (i) the future numbers of elderly persons (population projections); (ii) 
the  future  numbers  of  dependent  elderly  persons  (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 levels has proved very difficult.46 

3.1.4.  Modernisation trends in long-term care 

From the analysis in the SHSGI study 2008 it appears that modernisation within the field of 
long-term care is mainly driven by socio-economic 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 social insurance systems. 

–  Changes  in  the  needs  for  care:  twenty  years  ago,  institutions  and  services  mainly 
addressed  people  experiencing  social  difficulties  (insufficient  resources  or  absence  of  a 
family  environment).  With  the  increase  in  the  number  of  dependent  people,  the  level  of 
dependence  and  the  poly-pathologies  of  the  elderly,  long-term  care  services  are 
increasingly called upon to provide more professional and often more medical services to a 
broader and more differentiated segment of the population. This trend will also impact on 
the skills required to provide these services.  

– 

46 

Increased need for combining formal and informal care: the ageing of the population is 
also  taking  place  in  a  social  context  where  the  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 States, ensuring a better combination between 

EU Report: Long-term care in the European Union, April 2008, pp. 9-11. 

EN 

43 

   EN 

 
                                                 
formal and informal care is a topical issue and several have developed specific schemes to 
support informal carers and have even included 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  introduction  of  market-based  regulatory  mechanisms  and  the 
increased  involvement  of  the  private  sector  in  service  provision.  Personal  budgets, 
supplemented  by  professional  case  management,  as 
in  Germany, 
the Netherlands  and  the  United  Kingdom  (England),  increasingly  appear  to  be  a  way  of 
empowering users. The development of ICT applications for health and social care can, in 
most cases, allow for a better adaptation of service provision to users' needs.  

the  case 

is 

– 

Integration of health and social services: in most Member States, the separation of health 
and  social  care  leads  to  difficulties  in  coordinating  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  are  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 mergers 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  context  (increased  weight  of  community  care 
versus institutionalised care, decreasing level of welfare state 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 

Type of driving force 

Demographic change 

Stronger concern to take into account user interests and user 
choices 
Budgetary constraints on public authorities and/or social 
insurance agencies 

More weight for participatory processes 

Evolving concerns/demands (e.g. support for family/informal 
carers, integrated approaches) 
Evolving relationship between public authorities and non-
state service providers (based on contracts, with a stronger 
focus on accountability, efficiency, effectiveness and the 
control of these factors) 
Organisational restructuring (e.g. in the form of integrated 
services) 

EU legal and political context 

Introduction of new public management concepts 

Member State 

CZ 

DE 

FR 

IT 

NL 

PL 

SE 

UK 

2 

2 

3 

3 

3 

3 

1 

2 

4 

1 

2 

2 

3 

2 

4 

3 

2 

4 

2 

2 

1 

2 

2 

4 

3 

4 

1 

2 

4 

1 

5 

5 

5 

1 

1 

1 

1 

2 

2 

5 

1 

2 

1 

1 

2 

3 

4 

2 

3 

2 

2 

3 

2 

1 

3 

3 

2 

1 

3 

2 

5 

Note: Rating from 1 (Very important) to 5 (Not at all important)  
Source:  SHSGI  study  2008  —  results  from  the  questionnaire  for  in-depth  country-studies, 
p. 245 

1 

4 

3 

2 

EN 

44 

   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  unemployment  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 persons into the labour market. In addition, the 
Commission  launched  an  initiative  in  2006  for  the  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 sustainable, disadvantaged people first need to be 
supported  with  sufficient  resources  and  personalised  employment  and  social  services,  to 
enhance their social participation and employability.  

Persons with a long-standing health problem or persons with disabilities are considered as a 
group  at  high  risk  of  being  excluded  from  the  labour  market.  78%  of  the  ‘very  severely’ 
disabled and 49% of the ‘severely’ disabled persons of working age in the EU were inactive 
in 2002, as against 27% for the non-disabled. However, the employment rate of persons with 
moderate  or  mild  disabilities  is  comparable  to  that  of  the  general  population.  The  reasons 
behind  low  participation  rates  among  the  ‘very  severely’  and  ‘severely’  disabled  in  most 
Member  States  are  their  lower  employability,  benefit  traps  (i.e.  risks  of  losing  benefits  on 
starting  work)  and  the  reluctance  of  employers  to  recruit  disabled  workers.  Given  the 
demographic phenomenon of a shrinking labour force in the future and given the EU agenda 
of  promoting  higher  economic  growth,  competitiveness  and  social  cohesion,  it  is  crucial  to 
implement  active  inclusion  policies  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 

48 

49 

50 

The present section only takes into consideration the providers of services that offer “work integration” 
services  in  a  stable  and  continuous  way  for  a  large  category  of  beneficiaries,  and  not  those  which 
concentrate on particular sub-categories of specifically disadvantaged people, 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 report analyses providers that offer various support 
and assistance services with the aim of permanently reintegrating disadvantaged persons back into the 
labour market. 
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.  
On the European Employment Strategy see: 
http://ec.europa.eu/employment_social/employment_strategy/guidelines_en.htm. 
COM(2006)  44 
final  of  8.2.2006  and  COM(2007)  620 
http://ec.europa.eu/employment_social/spsi/active_inclusion_en.htm.  

final  of  17.10.2007.  See: 

EN 

45 

   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 their employability. This goal is mainly achieved 
by creating job opportunities and by providing training 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  persons  into  the  regular  labour  market  calls  for 
individual  counselling  and  support  services.  The  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  integration.  In  many  cases,  the  transition  from  education  and 
training programmes to labour market participation and from sheltered workshops to regular 
jobs goes hand in hand with suitable adjustments 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  working  in  sheltered  workshops  would  be  able  to 
participate more fully and take up work in the 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  and  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 regulations and the delivery of 
services are frequently delegated to regional and local level. However, as with long-term care 
services, the devolution of responsibilities for organising labour market services to local level 
has resulted in differences in the way the services 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 their respective levels, but service provision can be 
in the hands of numerous actors and combine various types of resources.  

Public  employment  services  remain  the  most  important  labour  market  institution.  They 
deliver personalised and tailor-made services to disadvantaged people, by understanding and 
knowing their needs. They play a crucial role, as they have (i) the ability to provide services 
to  all  disadvantaged  people;  (ii)  the  advantage  of  proximity  to  job  seekers  through  full 
geographic coverage of the country; (iii) a life-long perspective, as they offer a large number 
of  training  facilities;  (iv)  a  comprehensive  view  of  labour  market  needs;  (v)  the  capacity  to 
implement mainstream approaches and to implement 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  local  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 currently not part of the labour force but who would 
like to enter the labour market and are disadvantaged in some way. 

EN 

46 

   EN 

 
                                                 
Among  the Member  States  studied  in  the  in-depth  analysis  (the  Czech  Republic,  Germany, 
Poland,  Sweden  and  the United  Kingdom),  the  United  Kingdom  has  60%  of  its  service 
provision in the hands of public entities, while the remaining 40% is divided equally between 
for-profit and non-profit providers. In the other four Member States, public institutions take 
up a larger share (in excess of 80%). 

The new partnership models and modes of provision 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  reintegration  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 reintegration process is a particular challenge, with a view to enhancing 
their  self-confidence  and  their own capacity to reintegrate within  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  expenditure  on  all  labour  market  policies  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  the  services  of  public 
employment  agencies,  active  labour  market  policy  measures  and  passive  labour  market 
income support policies. For instance, in five EU Member States, 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%),  Lithuania  (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  market  policy,  by  category,  as  a  %  of  GDP 
(2006) 

Labour 
market 
services 
(1) 
0.22 
0.22 
0.20 
0.06 
0.13 
0.16 
0.27 
0.02 
0.24 
0.01 
0.10 
0.24 
0.03 
: 
0.07 
0.09 
0.06 
0.09 
: 
0.47 
0.18 
0.09 

Training 
(2) 
0.21 
0.22 
0.20 
0.05 
0.01 
0.54 
0.34 
0.04 
0.21 
0.04 
0.15 
0.29 
0.22 
0.01 
0.10 
0.07 
0.12 
0.06 
: 
0.13 
0.40 
0.10 

Job 
rotation 
and job 
sharing 
(3) 
0.00 
0.00 
- 
- 
- 
- 
0.00 
- 
- 
- 
0.01 
- 
0.00 
- 
- 
0.00 
- 
- 
- 
- 
0.00 
- 

Employment 
incentives 
(4) 
0.12 
0.13 
0.21 
0.05 
0.03 
0.47 
0.06 
0.00 
0.03 
0.02 
0.32 
0.12 
0.18 
0.04 
0.05 
0.06 
0.20 
0.08 
- 
0.13 
0.06 
0.05 

Supported 
employment 
and 
rehabilitation 
(5) 
0.06 
0.06 
0.12 
0.01 
0.05 
0.51 
0.01 
0.00 
0.01 
- 
0.02 
0.07 
- 
: 
0.01 
0.00 
0.01 
- 
- 
0.49 
0.04 
0.16 

Direct 
job 
creation 
(6) 
0.07 
0.08 
0.35 
0.29 
0.03 
0.00 
0.09 
- 
0.21 
- 
0.06 
0.19 
0.01 
- 
0.01 
0.05 
0.06 
0.05 
0.00 
- 
0.04 
0.02 

Start-up 
incentives 
(7) 
0.04 
0.04 
0.00 
0.01 
0.00 
- 
0.12 
0.00 
- 
0.00 
0.08 
0.01 
0.04 
0.01 
- 
0.00 
0.00 
0.00 
- 
- 
0.01 
0.04 

Total 
LMP 
measures 
(2-7) 
0.51 
0.53 
0.89 
0.39 
0.13 
1.52 
0.61 
0.05 
0.46 
0.06 
0.63 
0.68 
0.45 
: 
0.17 
0.18 
0.39 
0.19 
- 
0.75 
0.54 
0.36 

Total 
LMP 
supports 
(8-9) 
1.20 
1.25 
1.81 
0.18 
0.23 
2.66 
2.09 
0.08 
0.86 
0.40 
1.43 
1.39 
0.79 
0.66 
0.30 
0.13 
0.59 
0.36 
- 
1.47 
1.39 
0.71 

Total 
LMP 
1-9 
1.92 
2.00 
2.90 
0.63 
0.49 
4.34 
2.97 
0.15 
1.57 
0.47 
2.16 
2.32 
1.27 
: 
0.54 
0.39 
1.04 
0.64 
- 
2.68 
2.11 
1.16 

EU-27 
EU-15 
Belgium 
Bulgaria 
Czech Republic 
Denmark 
Germany 
Estonia 
Ireland 
Greece 
Spain 
France 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxembourg 
Hungary 
Malta 
Netherlands 
Austria 
Poland 

EN 

47 

   EN 

 
  
 
Labour 
market 
services 
(1) 
0.13 
0.04 
0.10 
0.17 
0.13 
0.19 
0.37 
0.12 

Training 
(2) 
0.25 
0.02 
0.06 
0.01 
0.37 
0.33 
0.02 
0.26 

Job 
rotation 
and job 
sharing 
(3) 
0.00 
- 
- 
- 
0.05 
0.06 
- 
- 

Employment 
incentives 
(4) 
0.13 
0.05 
0.03 
0.02 
0.10 
0.51 
0.01 
0.02 

Supported 
employment 
and 
rehabilitation 
(5) 
0.04 
- 
- 
0.01 
0.10 
0.20 
0.01 
0.13 

Direct 
job 
creation 
(6) 
0.03 
0.03 
0.07 
0.05 
0.09 
- 
0.00 
0.06 

Start-up 
incentives 
(7) 
0.00 
0.00 
0.02 
0.04 
0.02 
0.03 
- 
0.00 

Total 
LMP 
measures 
(2-7) 
0.45 
0.11 
0.18 
0.14 
0.72 
1.13 
0.05 
0.47 

Total 
LMP 
supports 
(8-9) 
1.27 
0.28 
0.39 
0.34 
1.69 
0.96 
0.19 
0.50 

Total 
LMP 
1-9 
1.84 
0.43 
0.66 
0.65 
2.54 
2.28 
0.60 
1.08 

Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 
United Kingdom 
Norway 

Note: Denmark (2004), Greece (2005) 
Source: Eurostat Labour Market Policy Database (Labour Market Policy Intervention, 2006) 

The  European  Employment  Strategy  and  the  OECD  Job  Strategy  recommend  redirecting 
spending  towards  active  labour  market  policies,  mainly  because  these  measures  specifically 
target  labour  market  reintegration  for  disadvantaged  groups.  However,  according  to  the 
SHSGI  study  2008,  Member  States  have  not  made  any  significant  progress  over  the  past 
decade  in  shifting  resources  from  passive  to  active  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 policies. The Netherlands, Sweden and Denmark stand 
out as those Member States that spent a relatively higher proportion on active measures. 

The  European  Social  Fund  (ESF)  and  the  European  Regional  Development  Fund  (ERDF) 
have also invested substantially in active labour 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 ERDF 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  extent.  By  way  of  example,  while  the  share  of  active  labour 
market  policies  in  national ESF spending amounted to 47%  in  Slovakia,  40% in Spain, and 
37% in Latvia, some Member States devoted less then 10% of their ESF budget to this area 
(Belgium: 2%, Ireland and Malta: 6%, Portugal: 8%). 

Figure 3.4:  ESF  breakdown  2000-2006  (as  a  percentage  of  total  ESF  budget  of  70 bn 

euros) 

6%

18%

31%

Active labour market
policy
Life-long learning

Adaptability

Social inclusion

Improving women's
labour market access

22%

Source: European Commission data 

23%

EN 

48 

   EN 

 
  
 
 
In  2004,  out  of  the  total  expenditure  on  active  labour  market  policies  in  the  EU-25,  17.8% 
specifically  targeted  the  integration  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  market  policies  can  take  the  form  of  direct  transfers  to 
individuals, employers or service providers, and there are considerably differences within the 
EU in this respect. For example, more than two thirds of expenditure in the Netherlands and 
the  United  Kingdom  are  direct  transfers  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  expenditure  on  active  labour  market  policies 
comprises direct transfers to individuals (65.2% and 49.2%, respectively). 

In  terms  of  coverage,  only  15.7%  of  working  disabled  persons  in  the  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  and colleagues (15%) or the amount of work to  be  performed 
(13%). In the new Member States, the assistance provided concerned the kind of work (52%) 
and the amount of work to be performed (33%). 

Compared  to  training  programmes,  spending  on  employment  incentives  and  public 
employment services is associated with significantly better outcomes. The evidence suggests 
that job-search assistance programmes in general, and activation policies in particular, feature 
highly  among  the  more  cost-effective  active  labour  market  policy  measures  in  terms  of 
helping the unemployed to find a job and keep it53. 

3.2.4.  Modernisation trends in labour market services for disadvantaged people 

The modernisation process of labour market services 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 human resources and continuous learning, and on 
the development of active labour market policies 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 responsibilities. This trend has translated 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 

53 
54 

This  includes  expenditure  on  regular  and  sheltered  employment  and  other  rehabilitation  and  training 
programmes. 
Employment in Europe Report 2006, p. 162. 
On the European Employment Strategy see: 
http://ec.europa.eu/employment_social/employment_strategy/guidelines_en.htm. 

EN 

49 

   EN 

 
                                                 
–  Rescaling of provision modes, with, in general, local authorities being given greater room 
for  manoeuvre  in  the  choice  of  services  and  their  implementation.  In  certain Member 
States, however, some ‘recentralisation’ has taken 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  has,  for  example,  led  to  the  development  of 
policies targeting unemployment in deprived neighbourhoods. 

– 

Partnership  with  the  third  sector:  this  trend  in  labour  market  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 

Stronger concern to take into account user interests and 
user choices 

Evolving relationship between public authorities and non-
state service providers (based on contracts, with a 
stronger focus on accountability, efficiency, effectiveness 
and the control of these factors) 

More weight for participatory processes 

Introduction of new public management concepts 

Organisational restructuring (e.g. in the form of integrated 
services) 

EU legal and political context 

Evolving concerns/demands (e.g. support for 
family/informal carers, integrated approaches) 

Demographic change 

1 

2 

1 

2 

4 

2 

4 

3 

5 

4 

2 

3 

5 

3 

2 

3 

5 

3 

3 

4 

4 

5 

2 

1 

2 

2 

3 

3 

4 

3 

3 

1 

4 

1 

3 

1 

2 

3 

4 

3 

Note: Rating from 1 (Very important) to 5 (Not at all 
important)  
Source:  SHSGI  study  2008  –  results  from  the  questionnaire  for  in-depth  country-studies,  p. 
248 

3 

2 

4 

1 

5 

EN 

50 

   EN 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
3.3. 

Childcare 

Childcare services have in recent years experienced rapid growth in many Member States, a 
trend  that  is  mainly  due  to  the  increased  labour  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  exceptions,  namely  several  Member  States  in 
Eastern Europe, where the overall supply of childcare 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  three  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 years have been characterised in many Member 
States — in particular in the EU-15 — by diversification in the supply of childcare services, 
regarding  the  types  of  providers,  the  type  of  financing  and  the  way  these  services  are 
regulated. 

3.3.1.  The role of childcare services 

Childcare  services  play  a  crucial  role  for  a  number  of  policy  targets.  Quality  childcare  can 
foster  the  healthy  and  sound  development  as  well  as  the  socialisation  and  education  of 
children,  and  help  parents  to  reconcile  work  and  family  life.  They  also  help  to  strengthen 
social  cohesion  and  inclusion,  to  promote  gender  equality,  to  raise  female  labour  market 
participation55  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  market56,  in  recent  public  discussion  childcare  seems  to  have  shifted 
from being considered as an instrument of labour market policy towards 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  social  cohesion  and  integrating  children  from 
disadvantaged socio-economic backgrounds are gaining importance as issues across Europe.  

Ensuring suitable childcare services is high up on the social agenda of the European Council 
and  the  European  Commission  and  represents  a  policy  priority  in  practically  all  Member 
States. 

In order to remove disincentives to female labour force participation, 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 least 90% of children between 3 years old and the mandatory school 
age in each Member State. In practice, the level of childcare services differs considerably in 

55 

56 

Childcare  services  can  be  seen  as  a  very  effective  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. 
In the Netherlands, in 2002, childcare policy was transferred 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 

51 

   EN 

 
                                                 
the EU-25, but in most Member States it is below the Barcelona targets, notably for children 
below 3 years of age.  

The increased attention given to childcare receiving 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  implementation  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, facilitating access to childcare is recognised as a 
key  element  in  increasing  labour  market  participation  and  can  be  supported  ‘in  its  own 
right’58. In the agreed Operational Programmes over 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 Netherlands and France — is related to traditional 
views  of  childcare:  a  huge  part  of  care  responsibilities  for  small  children  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 Netherlands  are  the  Member  States  with  the 
highest  proportions  of  children  in  the  age  group  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  Denmark  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 formal services for pre-school children, central 
European Member States also lag behind for this service category.  

There is a clear positive correlation between the enrolment rate of children in the age group 0-
3 and the employment rate for women with children 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 and/or women working part-time. Although part of this may be 
due  to  voluntary  decisions,  it  also  indicates  that  there  is  a  ‘hidden’  demand  for  childcare 
resources among working mothers (see Figure 3.4). 

57 

58 

59 

See  Regulation  (EC)  No  1784/1999  of  the  European  Parliament  and  of  the  Council  on  the  European 
Social Fund, Article 3(2)(b)(i). 
Article 3(1)(b)(ii) of Regulation 1081/2006 explicitly mentions ‘measures to reconcile work and private 
life, such as facilitating access to childcare and care for dependent persons’. 
Eurostat EU-SILC (2005). 

EN 

52 

   EN 

 
                                                 
Figure 3.5:  Employment  rates  for  mothers  with  children  under  3  and  access  rates  for 

children under 3 to licensed ECEC services 

90

80

70

60

50

40

30

20

10

0

AT,
01

BE,
04

DK,
99

SF,
02

FR,
04

DE,
04

IE,
02

IT,
02

NL,
04

PT,
01

SE,
03

UK,
03

CZ,
04

HU,
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 flexibility 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-schools  partly  follow  a  half-day 
system. A problem with after-school care centres, which usually cover at least office hours, is 
that  they  frequently  close  during  holidays.  In  many  Member  States,  however,  replacement 
childcare facilities provide services during the holiday season. In general, there is a trend to 
extend the opening hours of childcare facilities. 

In all the Member States analysed in depth in the SHSGI study 2008, childcare services are 
largely  regulated  at  central  level.  In  recent  years,  however,  many  Member  States  have 
delegated responsibilities in the field of childcare from national government to the regions and 
municipalities.  The  latter  are  also  responsible  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  and  mandatory  school  age,  a  broad  system  of 
kindergartens  or  pre-schools  is  usually  available.  In  many Member  States,  childcare  for 
school-age  children  is  organised  around  activities  provided  in  schools  or  in  centres  to 
complement school lessons. Frequently, out-of-school provision is loosely 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  creation  and  diversification  of  services  and  to  limit  public 
expenditure, there is a trend toward the delegation 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-sector  organisations,  commercial  providers,  enterprise-based 
services, user cooperatives, and the like). 

EN 

53 

   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,  care  ratios,  budget,  etc.).  If  these  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 contributions 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  public  support  for  their  current  costs  if  they 
meet some specific criteria and requirements.  

In  addition,  there  are  also  demand-side  measures  in  form  of  tax  deductions  for  private 
enterprises paying crèche fees for their employees or building or renovating company crèches. 
In  France,  for  example,  for-profit  enterprises  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  special  income  tax  or  value-added  tax  rates  for  non-governmental 
organisations active in the field of childcare. 

Moreover, public-private partnerships to provide childcare services are facilitated in a number 
of cases, although there has not been much advanced public-private cooperation in the field. 
The only exception is Germany, with its long-standing cooperation between public authorities 
and non-profit organisations in the childcare sector. Although public-private partnerships are 
encouraged  in  France  through  the  possibility  of  non-profit  or  for-profit  organisations 
participating  in  the  contrat-enfance  (childcare  contract),  so  far  very  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  the  childcare  sector.  In  Poland,  there  are  some  examples  of 
cooperation  between  municipalities  and  non-governmental  organisations  for  kindergarten 
education in rural areas. 

Notwithstanding the trend toward the emergence of new types of providers, public authorities, 
especially regions and municipalities, still remain the predominant providers of childcare. One 
of the exceptions is Germany, where — in accordance with the principle of subsidiarity — the 
current legislation stipulates that public providers (the Länder, municipalities) can step in only 
if the supply by independent providers is inadequate. Generally, 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 and 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  providers  in  order  to  harmonise  strategies  in  accordance  with 
education and labour market requirements, demographic trends as well as interest and demand 
on  the  part  of  citizens.  Thus,  new  planning  and  coordination  mechanisms  that  take  into 
account the new interactions between various levels of public authorities, the for-profit sector, 
non-profit organisations and civil society have emerged in practically all Member States. The 
new  coordination  tools  can  be  seen  as  examples  of  innovative  practices  in  terms  of  their 
regulatory design.  

EN 

54 

   EN 

 
In terms of employment, there is a general tendency towards an increase 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 professionals in childcare services due to the growing 
demand  for  childcare  places.  In  France,  in  particular,  the  employment  of  childminders  and 
specialised educators for young children has increased. Again, exceptions to this trend can be 
seen in a number of Eastern European Member 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  highly  trained.  People  caring  for  children  below 
school age have usually completed secondary vocational schooling but do not normally have 
an  academic  education.  However,  in  many  Member  States,  progress  is  being  made  in 
redeveloping  the  curriculum  to  introduce  a  higher  competence-based  profile.  Thus,  younger 
educators  are  becoming  more  qualified  and  increasingly  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 trained 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 remuneration 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  field  are  also  very  low.  Where  out-of-school 
childcare is mainly provided by teachers, the pay is usually higher. 

One problem in attracting  adequately  trained staff 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 female employees is very high (close to 100%) in 
the childcare sector. This is the case in Germany (96%), France (97%), Italy (close to 100%) 
and the Czech Republic (close to 100%) in services for children below 6 years of age. In the 
Netherlands,  the  share  is  75%  in  primary  education  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  expenditure  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  Netherlands  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 constraints, expenditure has been characterised 
by stop-and-go, rather than steady growth. 

As  a  rule,  regions  and  municipalities  are  responsible  for  financing  childcare,  but  these 
services also receive subsidies from the central budget.  

EN 

55 

   EN 

 
Figure 3.6:  Public expenditure on ECEC services (0-6 years) 

2,5

2

1,5

1

0,5

0

Austria

Denmark

Finland

France

Germany

Italy

Netherlands

Sweden

United Kingdom

Hungary

Source: OECD: Starting Strong II, 246 

Public expenditure as % of GDP

As regards ESF resources, it is estimated that 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  the  reconciliation  of  work  and  private  life,  for 
example  by  facilitating  access  to  childcare  and  care  for  dependent  persons.  In  addition,  in 
their Operational Programmes, Member States plan to spend some 555 million euros from the 
European Regional Development Fund on childcare infrastructure.  

Another source of financing is parents’ co-payments. However, childcare should be affordable 
in  order  to  provide  more  incentives  for  its  utilisation  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  the Netherlands  (from  4 
years), pre-schools and kindergartens are free. 

OECD  research  referred  to  in  the  SHSGI  study  2008  suggests  that  even  after  deducting  all 
relevant  types  of  government  support,  typical  out-of-pocket  expenses  for  two  pre-school 
children can add up to 20% or more of the total 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  parents  making  the  transition  from  inactivity  to 
labour market participation with less disposable income than if they were to stay at home60. 

The  OECD  research  suggests  that  only  sustained  public  funding  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 decade, despite the growing overall participation of men and women in 
employment. 

EN 

56 

   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 family, a growing proportion 
of  single  parents,  etc.),  the  increasing  participation  of  women  in  the  labour  market,  more 
flexible labour market requirements and the resulting increasing demand for these services.  

As  seen  above,  low  birth  rates  and  a  wider  orientation  towards  the  early  socialisation  of 
children are other factors influencing childcare policies. 

Finally, the search for greater flexibility and for innovation, as well as budgetary reasons, are 
prompting increasing recourse to the private 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  division  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.) 

Demographic change 

Budgetary constraints on public authorities and/or social 
insurance agencies 
Stronger concern to take into account user interests and 
user choices 
Organisational restructuring (e.g. in the form of integrated 
services) 

More weight for participatory processes 

EU legal and political context 

Introduction of new public management concepts 

Evolving relationship between 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 

2 

4 

3 

3 

3 

4 

4 

4 

2 

1 

3 

2 

2 

3 

3 

3 

4 

1 

4 

2 

4 

3 

3 

4 

3 

2 

1 

3 

4 

3 

5 

4 

5 

1 

1 

2 

2 

2 

2 

2 

3 

Note: Rating from 1 (Very important) to 5 (Not at all 
important)  
Source:  SHSGI  study  2008  —  results  from  the  questionnaire  for  in-depth  country  studies, 
p. 253 

3 

4 

2 

5 

1 

In  the  Member  States  analysed  in  the  SHSGI  study  2008,  there  is  generally  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  qualitative  terms.  Increasing  parents’  freedom  of 
choice  and  improving  their  access  to  childcare  services  are  part  of  these  strategies.  The 
development of childcare services is also viewed as helping to provide disadvantaged children 
with better conditions and to create equal chances for the future.  

EN 

57 

   EN 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
These  trends  crystallise  as  two  main  strategies  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 between 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 are able to provide both regular care (on a full-
time  basis)  and  occasional  care  for  children  who  usually  depend  on  other  services  (for 
example in France). 

–  Enterprise-based or -financed services as a way of supporting 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,  the  level  of  regulation  of  these  activities 
might differ from one Member State to another.  

Introduction  of  (partly  compulsory)  pre-schools,  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  rise,  while  Poland  introduced  pre-school 
preparation in 2004 for six-year-olds in order to create equal 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, cooperation between local authorities 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 parents have been established and are involved in 
childcare policies, even if their 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 has been introduced in the provision of childcare 
services,  with  the  intention  of  increasing  parents’  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, subsidies to parents, such 
as  cash  benefits,  vouchers  or  tax  reductions,  are  used  more  frequently  compared  to  supply-
side subsidies paid directly to service providers. The ‘free choice’ objective is also at the core 

EN 

58 

   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  process,  but  their  relative 
importance and the segments in which they operate vary across different Member States.  

3.3.4.3.  Outcomes of the modernisation process 

The modernisation trends identified above are leading to an increase in the supply of childcare 
services.  This  is  a  positive  development  both  for  children  of  working  parents,  who  need  to 
reconcile work and family, and for children with 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 regulation 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 limit the access of families with low incomes to 
these services.  

The  OECD  research  quoted  in  the  SHSGI  study  2008  suggests  that,  while  the  benefits  of 
increased  supply  and  choice  that  result  from  the  increased  role  played  by  private  providers 
cannot be ignored, the affordability and quality of childcare services can only be secured by 
sustained public funding and investment in policy, services and management. 

EN 

59 

   EN 

 
4. 

MODERNISATION AND THE QUEST FOR GOOD GOVERNANCE 

As  set  out  in  chapter  3  of  the  present  BR,  SSGIs  are  undergoing  change  in  response  to 
evolving  needs  and  socio-economic  challenges.  These  changes  have  had  an  impact  on  the 
public  provision  and  financing  of  these  services.  Member  States  have  therefore  embarked 
upon  the  modernisation  of  their  social services to  react to these needs and challenges while 
ensuring  financial  sustainability.  In  the  context  of  the  present  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  SHSGI  study  2008,  chapter  3  gives  a  flavour  of  the 
different forms that modernisation processes can take in the various sectors concerned.  

These processes are influenced by the inner logic 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 challenge that long-term care services currently have to face; (ii) 
labour market services have to adapt to the requirements of the labour market and to changes 
in  labour  market  policy  orientations;  and  (iii)  the  development  of  childcare  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  different  levels  of  government,  and  a  variety  of 
structural  changes  in  the  organisation,  management,  regulation  and  governance  of  social 
services can be observed across the EU.  

The diversity of the existing national institutional 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 influence the forms taken by national modernisation 
processes:  

–  the distribution of responsibilities for the organisation, regulation, provision, 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 authorities enjoy some discretion, e.g. with regard to the form these 
benefits can take (benefits in kind, 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  taxes,  social  insurance 

contributions, user fees, donations, own financial resources of providers, etc.), 

–  the extent of user participation in social service provision and evaluation, and 

–  the implementation of consumer protection mechanisms. 

EN 

60 

   EN 

 
Some common trends 

In spite of this diversity, some common trends  regarding the  organisation,  management and 
governance of social services can be identified and are presented in this chapter. 

Modernisation  is  a  response  to  the  main  social  and  economic  challenges  EU  societies  are 
facing  (ageing,  gender  equality,  social  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  where  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 rights also play a role in this process. 

The  tables  depicting  the  drivers  of  modernisation  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 financial constraints. In second place 
come  drivers  relating  to  new  forms  of  organisation,  a  new  role  for  public  and  private 
providers and participatory approaches (reflecting in fact the process of modernisation itself). 
Concerns relating to the EU legal and political context come 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. Modernisation processes are therefore examined 
at two different levels in the following sections: the level of organisation and management, on 
the  one  hand,  and  the  level  of  governance  and  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 their mid- or long-term effects. 

The  present  chapter  builds  on  the  findings  of  two  consultation  exercises  (preceding  and 
following upon the 2006 Communication) and relies in particular on the SHSGI study 2008. 

61 

See pages 40-41, 46-47 and 54-55 above. 

EN 

61 

   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  with  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 increase the efficiency and effectiveness of service 
provision,  characterise  the  organisational  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 increased 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  measurement  tools  are  usually  used  in  order  to  assess  the 
performance  of  social  services:  performance  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),  activities  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 Inspection (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 their residents with respect to 
social services and highlight the progress local councils 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 different 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  not  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 rise to heated controversy. 

The  introduction  of  performance  measurement  tools  within  the  field  of  social  services 
constitutes  an  improvement  in  measuring  efficiency  and  not  only  inputs,  processes  and 

EN 

62 

   EN 

 
compliance.  However,  this  approach  is  not  without  risk,  as  assessing  effectiveness  can  be 
methodologically  and  politically  challenging.  There  is,  for  example,  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),  with  the  consequence  that  the 
service at issue does not address sufficiently those who are most in need. For example, if the 
priority  of  a  given  public  employment  service  is  to  reduce  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 assess the achievement of this priority if it does 
not take into account (i) the specific difficulties encountered in finding jobs for the long-term 
unemployed  and  (ii)  the  extent  to  which  these  persons  stay  on  the  labour  market  for  a 
sufficiently  long  period  of  time.  Moreover,  performance  measurement  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  objective  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 aim 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 these different models.  

The table below shows the main elements characterising each of these three models: 

Table 4.1: 

User involvement in social services. Various strands of thinking, elements and 
tools  

‘Consumerism’  

• Competition 

‘Participationism’  

• Collective self-help 

• Individual choice 

• Volunteering 

research 

(by 

or 

•  Strengthening  user  and  community 
based service providers 

‘Welfarism’  

•  Hierarchical  governance  of  service 
systems 

• Full coverage/ uniform services 

• Equal standards 

Boards 

• 
for corporate governance 

and 

commissions 

• Quality control by state inspection 

• Social rights and patients' charters 

•  Market 
for providers) 

• Vouchers 

• Customer orientation 

• Consumer lobbying 

• Consumer protection 

• 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 providers with the aim of reinforcing users’ rights 
(e.g. obligation to provide information, obligation to involve users in the management of the 

EN 

63 

   EN 

 
structure,  etc.)  generally  corresponds  to  the  ‘welfarist’  logic.  For  example,  this  is  the  case 
in France in the field of residential care. These legislations sometimes mix the ‘welfarist’ and 
the ‘consumerist’ approaches (in the field 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 ‘consumerist’ 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, particularly in the field of long-term care.  

Examples of a ‘participationist’ approach can be found where the 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 increasingly 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  not  always  the  case  in  the  social  field,  where 
beneficiaries often do not have the necessary information (on their needs, the providers, the 
possible choices, the level of quality, etc.) to make informed choices. Support mechanisms are 
therefore needed to make user orientation effective. This is the case for example in the UK, 
where volunteers assist users in managing direct payment schemes.  

4.1.2.2.  Access to social rights 

Concrete access to social services strongly depends on the architecture of social provision: the 
applicable  legal  framework  and  the  status  of  the  rights  to  services,  but  also  the  resources 
allocated, the process and procedures for realising rights (e.g. how the service is financed and 
delivered, enforcement mechanisms, etc.) and the 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 cooperation 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 coordinated delivery of a range of services to beneficiaries. It is 
usually  implemented  through  ‘integrated  gateways  to  services’  and  through  ‘service 
platforms’ that make access to services more user-friendly. 

An  example  of  service  integration  is  the  integration  of  legal  and  social  consultancy  for 
persons  in  excessive  debt  with  placement  services  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 towards providing integrated 
care for the elderly is an important modernising trend. Historically, health and social services 
have been organised by different institutional actors, provided by different professionals and 
even  fragmented  into  specialised  services.  However,  the  integration  of  health  and  social 
services  is  a  complex  process  where  professional  histories  and  practices  as  well  as  cultural 
contexts  often  differ.  Examples  of  service  integration  in  the  field  of  long-term  care  can  be 
found in Italy, where the use of integrated (social and health) home care vouchers has recently 

EN 

64 

   EN 

 
been introduced in Lombardy. The debate is also ongoing in the Netherlands, where several 
mergers have taken place between home-care 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 social assistance have been combined.  

In  many  areas  of  social  policies,  the  integration  of  social  services  is  a  powerful  tool  for 
increasing  the  effectiveness  of  social  services  and  avoiding  the  undesirable  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  towards  decentralising 
responsibility for social policy from the central state to sub-national authorities. The idea that 
local authorities have a better knowledge of their citizens’ local needs than central authorities, 
the  increasing  demands  for  regional  autonomy  and  the  search  for  cost-effectiveness  and 
efficiency are among the many reasons for initiating these reforms. However, decentralisation 
should  be  accompanied  by  the  allocation  of  sufficient  budgetary  resources  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 enacting legislation and formulating 
policy aims and directions, the state has regulatory 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 centralised 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 

65 

   EN 

 
                                                 
4.2. 

Changing forms of regulation and governance of SSGIs 

This  section  examines  the  changes  characterising  the  regulation  and  governance  of  social 
services  and  discusses  three  major  developments  in  greater  detail:  the  increased  role  of 
market-based regulation, the introduction of new forms of public-private partnership, and the 
development of new governance practices.  

4.2.1.  The increased role of market-based regulation 

Two  main  regulatory  mechanisms  can  be  identified  in  the  area  of  social  services:  (i)  public 
programming regulation and (ii) market-based regulation. One of the major trends that can be 
observed  is  the  shift  from  public  programming  regulation  to  market-based  regulation.  The 
latter usually requires the use of corrective mechanisms to tackle market failures. 

4.2.1.1.  Public programming regulation vs. market-based regulation 

Public  programming  regulation  is  based  on  budgetary,  planning,  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 between 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 procedure of authorisation and approval, together with a budgeting 
procedure based on the principle of reimbursement 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 providers  (either  profit-making  firms  or  non-profit 
organisations).  Under  this  approach,  consumers  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  orienting  demand,  influencing  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 authorities 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,  and  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 regulation 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  implemented  for  the  regulation  of  childcare 
services in France, Italy and the Netherlands. They are also used for the regulation of labour 

EN 

66 

   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 service 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 services 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  generated  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  services  predominantly  provided  by  the  independent 
sector.  Similarly,  residential  care  has  increasingly  been  provided  by  the  independent  sector. 
The commissioning of services involves decisions about the types of services required to meet 
local needs, decisions on the service and sector balance in order to ensure 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 played 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 drive 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 delivery 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  mechanisms  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  asymmetries,  i.e.  the  fact  that  in  general  the 
provider has more information about the nature and quality of the service 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 the provider and the beneficiary can in general not be equated 
with a commercial supplier/consumer relationship.  

In  order  to  achieve  certain  public  objectives,  public  regulation  is  therefore  often  needed 
(hence  the  reference  to  ‘quasi-markets’,  where  competition  is  introduced  but  where  certain 
conditions  are  put  in  place  to  ensure  that  public  policy  objectives  are  met,  in  particular 
through regulation).  

Market  regulation  can  take  different  forms,  from  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 requirements, can also be imposed on providers by 

EN 

67 

   EN 

 
public authorities in the course of public procurement procedures or as a condition 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  specifically,  different  instruments  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 paid by the user and may benefit either 

the service provider or the user; 

–  vouchers, which are subsidies granting limited purchasing power to an individual to choose 
among a restricted set of services. Vouchers are an interesting example as this instrument 
combines the two objectives pursued by quasi-markets in the social field. By increasing the 
possibilities  for  beneficiaries  to  choose  between  different  providers,  they  contribute  to 
enhancing competition on the market. By reducing 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 services 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 modernisation processes, the state is less than before a direct provider of 
SSGIs but is playing an increasing 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 investment costs are shared between public authorities 
and providers. It also leads to new forms of partnership between public authorities and private 
organisations.  

Public-private partnerships (PPPs) are a specific form of partnership and cooperation between 
public authorities and private entities. 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 

68 

   EN 

 
The consultation process did not provide evidence of any widespread usage of public-private 
partnerships in the field of SSGIs. The national reports of the Member States examined in the 
SHSGI  study  2008  also  show  that  PPPs,  involving  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  willing  to  invest  money  and  to  take  risks  in 
activities  that  are  mainly  publicly  funded  and  where  the  profitability  is  non-existent  or 
minimal.  

Some  Member  States  (including  Austria,  Ireland,  Poland  and  Spain)  have  expressed  their 
intention to make increasing use of PPP-type models 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 concern essentially the construction of housing and 
not  the  operation  of  social  housing  or  related  services.  As  most  authors  and  experts  agree, 
PPPs  are  only  likely  to  be  used  or  needed  where  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 stakeholders. It also entails new forms of user 
participation,  civic  involvement  and  dialogue  with  civil  society.  Such  negotiated  social 
governance embraces a diverse range of actors: social partners, local authority representatives, 
social  entrepreneurs  and  other  NGOs  as  well  as  community-based  groups,  voluntary 
organisations and self-help initiatives. 

Consequently,  new  forms  of  governance  are  needed  in  order  to  promote  cooperative  and 
strategic partnerships between a variety of actors, to enhance horizontal coordination and to 
foster  civil  society  initiatives.  These  new  forms  of  governance  entail  the  development  of 
institutionalised  partnerships  where  the  role  of  public  authorities  is  transformed  from 
hierarchical  centralised  command  to  horizontal,  more  complex  and  multi-faceted  network-
based coordination. 

In  France,  new  forms  of  local  governance  can  be  observed  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, ‘childcare coordinators’ have been put in place 
in order to facilitate the implementation of the ‘contrats-enfance’ (childcare contracts) and to 
support the development of a common childcare culture at local level. They mainly work with 
non-profit  organisations  participating  in  the  ‘contrat-enfance’.  Locally,  these  institutional 
tools  are  implemented  in  different  ways,  leading  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  social  solidarity’  and  self-help  associations  of 
families (referred to as the ‘fourth sector’), for which part of the regional funding is generally 
reserved. 

Source: SHSGI study 2008, p.238-239. 

EN 

69 

   EN 

 
4.3. 

Consequences  of  national  modernisation  processes  in  terms  of  applicable 
Community law  

As highlighted in the previous sections of this chapter, Member States have embarked upon 
modernising  SSGIs  in  order  to  meet  evolving  needs  and  societal  challenges.  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  authorities,  service  providers  and  beneficiaries)  in 
most Member States. Moreover, as a consequence of these changes, a growing proportion of 
social  services  in  the  European  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 local 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  2006  Communication,  has  revealed  a  lack  of 
familiarity  with  and  understanding  of  the  correct  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 during 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  that  the  interaction  between  Community  rules  and  the  organisation, 
provision and financing of SSGIs is relatively recent63, the opening-up of SSGIs markets to 
private actors is relatively new and the case-law is limited.  

In particular, when existing legislations and provisions are considered, notably by those who 
have to apply them, as being ‘problematic’ or difficult to apply in the light of the nature of 
SSGIs,  it  is  most  often  because  the  rules  are  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 provision 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  documenting  the  impact  and  consequences  of  the  application  of  EU  rules’ 
(see the overview of chapter 13, p. 262). 

EN 

70 

   EN 

 
                                                 
should compete for the provision of the service concerned. These perceptions create fears 
that a ‘market-oriented’ approach would put at risk the objectives pursued by services that 
are generally driven by the principle of solidarity.  

This  is  however  not  the  case:  public  authorities  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 providers, to ensure that several service providers 
are present in the market or to abolish existing special or exclusive rights that are necessary 
and proportionate for the provision of the service. 

–  stakeholders in the social field often argue that the application 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 rules is not correct. The underlying objective of public procurement 
is  to  obtain  the  best  value  for  taxpayers'  money.  This  however  does  not  translate  into  an 
obligation to choose the cheapest option. The applicable rules enable public authorities to use 
criteria focused on quality and to incorporate their social considerations 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  authority  to  a  service  provider  entrusted  with  a 
mission  of  general  interest  does  not  over-compensate  the  costs  incurred  by  this  service 
provider. This obligation has often been interpreted as a requirement to provide in advance 
detailed calculation  where  it is  often impossible 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 overcompensation will be paid in the end.  

4.3.1.  The strategy put in place by the Commission 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 therefore not to change the applicable rules but to 
provide more practical guidance and support aimed at ensuring that these rules are correctly 
understood  and  applied  and  that  the  possibilities  they  offer  are  fully  exploited.  The 
Commission sets out its commitment in the Communication on ‘Services 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  applying  Community  rules 
and launched a strategy to provide stakeholders 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 

71 

   EN 

 
                                                 
Two Staff Working Documents65 dealing respectively with State aid and public procurement 
rules accompanied the Communication. These two documents bring concrete answers to the 
most frequently asked questions and are particularly relevant for the social 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  raised  in  this  field  by 
citizens, public authorities and service providers, the Commission has created an ‘interactive 
information service’ (IIS).  

Questions  can  be  sent 
(http://ec.europa.eu/services_general_interest/registration/form_en.html).  

the  Commission  by  filling  out  a  specific  mail  form 

to 

This  service  has  been  operational  since  the  end  of  January  2008.  Even  if  it  is  too  early  to 
evaluate the system, the results so far are positive as they show that the IIS is responding to a 
concrete  demand  to  help  stakeholders  develop  a  good  understanding  of  the  application  of 
Community rules to SSGI.  

Most  of  the  questions  received  so  far  fall  within  the  scope  of  the  IIS.  Key  themes  raised 
include the interpretation of concepts such as ‘general interest’, ‘economic’ activities, ‘act of 
entrustment’  and  ‘overcompensation’.  The 
interaction  between  public  procurement, 
concessions and state aid rules and the scope and  obligations deriving from the principle of 
transparency have also been raised. The most relevant and interesting questions will regularly 
enrich the two Staff Working Documents 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  process  initiated  by  the  2006  Communication.  The 
working  group  on  SSGI  is  not  an  institutionalized  group,  but  an  informal  working  group 
gathering the experts of those Member States willing to participate. It works under a concrete 
mandate given by the SPC. 

the  working  group 

The SPC  mandated 
the  work  undertaken  by 
the Commission  and,  notably,  to  analyse  the  answers  provided  in  the  two Staff  Working 
Documents, to identify more examples derived from the SSGI sector and to review whether 
further questions or problems arise. 

to  contribute 

to 

The  working  group  held  a  first  exchange  of  views  at  the  beginning  of  March  2008,  which 
provided an occasion to clarify doubts and misunderstandings raised by stakeholders  and to 
enhance the mutual understanding between the Member States and the Commission services. 

65 

66 

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. 
The role and tasks of the SPC are explained in the introduction to this BR. 

EN 

72 

   EN 

 
                                                 
In the field of State aid, the debate showed that the application of the ‘SGEI package’67 still 
raises  various  questions.  The  working  group  will  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, the interaction between 
public procurement and State aid rules and the notions of ‘contract for pecuniary interest’ and 
of ‘cross-border interest’. The relevance of institutionalised public-private partnerships (IPPP) 
in  the  social  sector,  the  national  legal  frameworks  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-profit 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  identified  by  the  working  group  as  meriting  further 
analysis. 

The  results  of  the  working  group,  including  analysis  of  and  responses  to  the  questionnaire, 
will be reflected in a Final Report from the SPC to the EPSCO Council of December 2008. 

67 

68 

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 operation 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. 
Commission Regulation n° 1998/2006 of 15 December 2006 on the application of articles 87 and 88 of 
the Treaty to de minimis aid, OJ L 379/5 of 28.12.2006. 

EN 

73 

   EN 

 
                                                 
4.4. 

Answers already brought to concrete questions raised by stakeholders 

The present section sets out the most frequent and relevant questions identified in the context 
of the consultation and refers to the answers 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  authorities  as  well  as  service  providers 
underlined their uncertainty in relation to the definition of ‘undertaking’72, of ‘services’73 and 
of ‘economic activity’ in the field of SSGIs. In view of the local nature of many SSGIs, the 
interpretation  of  the  criteria  of  ‘affectation  of  trade’  under  competition  rules  and  the 
boundaries of the scope of internal market rules have also raised questions. 

these  concepts  are  brought 

General  clarifications  of 
the  2007 
Communication.  Moreover,  the  Staff  Working  Document  on  State  aid  gives  concrete 
examples of activities that have been considered as non-economic (see reply to question 2.4), 
or  not  affecting  trade  between  Member  States  (see  replies  to  questions  2.9  and  2.10).  The 
Staff  Working  Document  on  public  procurement  also  gives  indications  of  what  could  be 
considered as low-value contracts which have no relevance to the internal market (see reply to 
question 2.3).  

in  section  2.1  of 

The  Staff  Working  Document  on  State  aid  also  recalls  that  even  when  an  activity  is 
considered  economic,  thereby  subject  to  competition  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  abolish  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 choice of the provider, i.e. public procurement rules, do not 
apply when public authorities provide the service directly or through an internal provider (this 

69 

70 

71 

72 

73 

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  ‘services’  within  the  meaning  of  the 
Treaty, namely services corresponding to an economic activity. 
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 there is no impact on trade between Member States. 
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. 
According to well established case-law, an undertaking 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). 
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 

74 

   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  provision.  More  specific  questions 
concern the scope and limits of the ‘in-house provider’ exception. 

The Staff Working Document on public 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 partnerships (PPPs) contributes to this clarification exercise by 
specifying the practical ways of carrying out a tender procedure to entrust 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 provision of an SSGI might choose to regulate the 
market  in  order  to  ensure  that  certain  objectives  of  general  interest,  for  example  social 
objectives, are met. 

During the consultation process, some stakeholders expressed concerns 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 quality and access, and distributing supply over the entire national 
territory).  

The questions raised in this context have generally speaking been related to the interpretation 
of the concepts used by the ECJ in its case-law 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 guidance to Member States 
in the implementation process. The services of the Commission are also providing support to 
Member States in the ongoing screening process. 

74 

75 

76 
77 

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 itself, regardless of whether the SSGI corresponds to an 
economic activity or not, as in this case the public authority concludes a contract for pecuniary interest. 
The Services Directive was adopted in 2006. Directive 2006/123/EC of the European Parliament and of 
the Council of 12 December 2006 on services in the internal market, OJ L 376/36 of 27.12.2006. 
See Feedback report, section 4.3. 
http://ec.europa.eu/internal_market/services/docs/services-dir/guides/handbook_en.pdf 

EN 

75 

   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  obligation  to  be  compensated  with 
public funding. Similar obligations to specify the scope and nature of the service exist under 
public procurement rules, where the characteristics of the service must generally be described 
in the technical specifications.  

In  these  two  areas,  stakeholders  expressed  their  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 specificities of SSGIs. This was translated into 
more specific questions, e.g. 

–  how  can  the  requirement  for  an  ‘act  of  entrustment’  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  respect,  according  to  their  constitutional/legal 
framework?  Such  question  relates  to  the  fact  that,  historically,  in  some  Member  States, 
these  service  providers  have  themselves  taken  the  initiative  to  develop  the  services  in 
question well before public authorities became involved in social policy.  

The 2007 Communication recalls that in order to provide legal certainty and transparency, it is 
important  that  public  authorities  assign  missions  of  general  interest  to  service  providers 
through acts of entrustment. It notes that in the 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 
interest 
and Community rules by providing that the latter only apply insofar as they do not obstruct 
the performance of these missions.  

the  reconciliation  between  missions  of  general 

On the specific aspect of the autonomy of service providers, the Staff 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  Document  on  State  aid  provides  clarifications.  It 
shows  that  the  acts  of  entrustment  can  take  different  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 the service (see reply to question 5.3). It also 
explains  that  the  concept  of  ‘act  of  entrustment’  is  fully  compatible  with  an  integrated 
approach  (see  reply  to  question  5.4)  and  is  adapted  to  changing  situations  (see  reply  to 
question 5.5). 

–  how to draft detailed specifications for a public procurement procedure concerning SSGIs? 
In  this  regard,  public  authorities  and  service  providers  have  stressed  the  risk  that:  (i) 
tenders  focus  only  on  prices  ignoring  other  criteria  such  as  long  term  sustainability  and 

EN 

76 

   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 between the recipient and the service provider).  

As recalled earlier in the present report, the underlying objective of public procurement is to 
obtain  the  best  value  for  taxpayers'  money,  which  does  not  translate  into  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  focused  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  service  providers  are  very  active  in  this 
sector and are generally considered to be well equipped to deal with situations that have a 
strong local dimension. This is notably because these organisations generally have a strong 
cultural and ethical focus on supporting the disadvantaged. Similar issues were raised by 
stakeholders as regards the selection of service providers and the financing of SSGIs.  

On  this  aspect  in  particular,  both  Staff  Working  Documents  provide  useful  information  on 
how the existing rules aim at limiting administrative 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 Regulation 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 replies to questions 2.7 and 2.8).  

For all other cases, the aid will be considered compatible and even exempted from notification 
if  the  conditions  of  the  Commission  Decision  of  28  November  2005  are  met.  The  Decision 
exempts from notification annual compensation inferior 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 irrespective of any threshold. 

For  larger  amounts  of  compensation  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  general  -  is  precisely  to  provide 
greater certainty for financing SGEI.  

The Staff Working Document on public procurement explains the legal framework applicable 
if a public authority decides to externalise the provision of SSGIs. It points out the wide range 
of  possibilities  provided  for  by  the  Public  Procurement  Directive  2004/18/EC79,  and  in 

78 

79 

See Feedback report, section 4.1 on the difficulties in drafting detailed specifications and a reference to 
the fact that ‘the risk of public tender focusing on prices’ has often been mentioned. 
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 

77 

   EN 

 
                                                 
particular the possibility to define quality criteria. It recalls that only a few provisions of the 
Directive  apply  to  social  services,  which  means  that  in  this  field,  public  authorities  already 
benefit from a larger margin of discretion compared to other sectors (see in particular replies 
to questions 2.1 and 2.3). 

c) 

Selection of the service provider 

The  application  of  European  public  procurement  rules  seems  a  particular  source  of  concern 
for  stakeholders  in  the  field  of  SSGIs.  There  is  considerable  misunderstanding  of  the 
applicable  framework.  Here  also,  general  concerns  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 with in the replies to questions 2.1 and 2.4, which provide clarifications 
regarding  the  applicable  framework,  notably  on  the  distinction  between  a  public  service 
contract  and  a  service  concession  and  on  the  obligations  deriving  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 specifies that public procurement 
procedures do not aim at limiting the number of service providers 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 possible 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  the  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  important  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  potential  service  providers  is  therefore  sometimes  necessary  to 
help public authorities to define these requirements. 

This aspect is dealt with in the reply to question 2.8, which explains that negotiation remain 
possible insofar as the operators selected to participate in a negotiated procedure are treated 
equally. 

–  to  what  extent  do  public  procurement  rules  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 

78 

   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  describes  different  possible  types  of  cooperation  between  public 
authorities. 

–  to what extent do public procurement rules apply to public-private partnerships? 

This  aspect  is  dealt  with  in  the  reply  to  question  2.10.  Moreover,  a  Communication  on 
institutionalised public-private partnerships 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 the 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 stakeholders in the social field, e.g.  

–  the parameters for cost compensation, which have to be established ex-ante 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 various stakeholders in the social field as an 
obligation  to  provide  in  advance  a  detailed  calculation  of  these  costs  while  in  this  sector 
unpredictable changes in care intensity, in the number and profiles of users and in the level 
of revenues often lead to a high degree of cost unpredictability82 and to the risk of ex-post 
deficit.  

The Staff Working Document on State aid clarifies that the applicable 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 specify that the costs will be compensated on the 
basis  of  a  price  per  day  based  on  an  estimation  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 questions 6.1 and 6.2). More generally, section 6 of 
the document answers a series of questions on compensation 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 different 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  service  provider  or  a  comparison  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 incurred by the service provider 
for the provision of the SSGI can be compensated (see replies to questions 6.10 and 6.11).  

81 
82 

C(2007) 6661. 
See section 4.4 of the Feedback report. 

EN 

79 

   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 notification to the Commission, which is perceived as burdensome.  

In  this  regard,  one  should  note  that  Member  States  have  not  yet  reported  on  the 
implementation of the ‘SGEI’ Decision, which already 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  certain  sectors.  The  submission  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 problems they have encountered.  

EN 

80 

   EN