Opinion of the European Economic and Social Committee on the Commission Staff Working Document — Evaluation of the State subsidy rules for health and social services of general economic interest (‘SGEIs’) and of the SGEI de minimis Regulation (SWD(2022) 388 final)
Date: 2023-04-27
Institutions: European Economic and Social Committee
Subjects: State aid, application of EU law, control of State aid, health service, provision of services, services of general interest, social services








C_2023228EN.01015501.xml










29.6.2023   


EN


Official Journal of the European Union


C 228/155






Opinion of the European Economic and Social Committee on the Commission Staff Working Document — Evaluation of the State subsidy rules for health and social services of general economic interest (‘SGEIs’) and of the SGEI de minimis Regulation
(SWD(2022) 388 final)
(2023/C 228/25)






Rapporteur:



Giuseppe GUERINI





Co-rapporteur:



Paulo BARROS VALE











Referral


European Commission, 8.3.2023




Legal basis


Article 304 of the Treaty on the Functioning of the European Union




Section responsible


Single Market, Production and Consumption




Adopted in section


4.4.2023




Adopted at plenary


27.4.2023




Plenary session No


578




Outcome of vote
(for/against/abstentions)


138/0/1




1.   Conclusions and recommendations









1.1.


The European Economic and Social Committee (EESC) observes that it is necessary to reinforce health and social services across the EU considering the progressive ageing of the population and the increasing number of disabled and disadvantaged people requiring appropriate assistance. Such a situation requires an increase in long-term care and support sustained by relevant public investments, businesses and civil society in order to achieve social innovation and to promote an adequate response to the current challenges.












1.2.


The EESC deems that the effort to ensure adequate social and health services will have to be supported with suitable financial resources, deployed in adequate public investments, as well as with specific State aid targeted at such sectors. The current State aid rules, approved in 2012, would therefore need to be adapted to ensure fair competition and the achieving of general interest objectives. Having said that, the EESC notes that the SGEI State aid package approved in 2012 was effective in improving the previous legal framework, dated back to 2005, in terms of simplification and predictability.












1.3.


As noted in a previous opinion (1), the EESC reiterates that the current ceiling of de minimis aid for the SGEIs sector set forth by Commission Regulation (EU) No 360/2012 (2), amounting to EUR 500 000 over three financial years, should certainly be increased, in particular with regard to social and health services, considering the past and future impact of inflation and also the particular role played by these services in favour of the weakest parts of the population and social cohesion.












1.4.


The EESC therefore recommends a significant increase of the de minimis ceiling for health and social services higher to the one recently envisaged in the proposed amendment of the horizontal de minimis ceiling set forth by Commission Regulation (EU) No 1407/2013 (3), taking into due consideration the increasing strategic role of social and health services across the EU.












1.5.


The EESC also recommends that, in addition to the modification of the maximum de minimis thresholds, some clarifications be put forward with regard to: (i) a more extensive definition of ‘social housing’; (ii) a better definition of the ‘reasonable profit margin’ concept, considering a distinction for the social economy enterprises whose economic margins are linked to a social purpose; (iii) the concept of ‘market failure’.












1.6.


With regard to the concept of ‘reasonable profit margin’, the EESC observes that it would be useful if the Commission could identify criteria and indicators able to correlate the profit margin to be allowed in favour of economic operators in line with their ability to pursue purposes of general interest, thereby creating positive social impacts.




2.   General comments









2.1.


With the staff working document Evaluation of the State subsidy rules for health and social services of general economic interest and of the SGEI de minimis Regulation, the Commission summarises the results of its evaluation of the Almunia Package, in force since 2012.












2.2.


The main objectives of the 2012 package with regard to health and social services were: (i) simplifying the compatibility criteria; and (ii) reducing the administrative burden for Member States willing to compensate undertakings entrusted to provide SGEI to the vulnerable part of the population at fair and affordable conditions.












2.3.


The Commission evaluation, therefore, seeks to establish to what extent the rules applicable to health and social services have achieved their objectives and whether such rules are still appropriate in the current social and economic scenario.












2.4.


More specifically, the Commission evaluation assess the effectiveness, efficiency, coherence and EU added value of SGEI rules applied to health and social services in the last 10 years, focusing on understanding the concrete issues faced by Member States in implementing the SGEI rules so far. The evaluation also seeks to gauge how the SGEI de minimis Regulation has been applied.












2.5.


The Commission analysis suggests that the 2012 SGEI Package is quite effective in terms of clarification and simplification, since it simplified the 2005 SGEI Package introducing, for instance, an SGEI-specific de minimis Regulation. It also clarified and refined certain basic concepts relevant for the application of SGEI rules.












2.6.


However, the evaluation indicates that there is still room for improvement, in particular the clarification of certain key concepts related to the scope of application of both Article 107 TFEU and the SGEI-specific legal framework, such as: (i) economic/non-economic activity; (ii) effect on trade; (iii) reasonable profit; (iv) market failure; (v) social housing. The evaluation also highlights the possibility of increasing the SGEI de minimis ceiling currently applicable and the widespread consensus among stakeholders in this respect.












2.7.


With regard to efficiency, the evaluation indicates that the SGEI de minimis Regulation and the modification of the SGEI Decision implemented in 2012 were able to reduce the administrative burden for public authorities, even though this burden might be further decreased. Other evidence collected suggests that costs associated with the application of the requirements set by SGEI rules should be reduced.












2.8.


With regard to coherence, the evaluation suggests that the State aid rules enshrined in the 2012 SGEI Package are internally coherent and able to ensure a better division of tasks between Member States and the Commission, bringing about an EU added value largely acknowledged by both public and private stakeholders.












2.9.


In general terms, there is consensus that the 2012 SGEI Package managed to guarantee a stable legal environment for Member States and is appropriate to meet needs within the EU. However, the impact and the uncertainties determined by both the COVID-19 crisis and Russia’s invasion of Ukraine could not be fully evaluated yet and some further improvements might be pursued in the future.












2.10.


Welfare and health protection systems across the EU should in the first place be guaranteed and supported by adequate public investments, coupled with the growing role of private economic operators and of social economy entities. All the players, public or private, involved in delivering social and health services should observe adequate standards and criteria able to reconcile competition with general interest objectives.




3.   Specific comments









3.1.


The EESC appreciates the extensive consultation and subsequent evaluation work carried out by the Commission in assessing the impact and the current effects of the 2012 rules on State aid in order to compensate SGEIs with particular regard to health and social services.












3.2.


The EESC welcomes the consideration the Commission devoted to its own-initiative opinion State aid rules applicable to health and social services — SGEI in a post-pandemic scenario. Thoughts and proposals on the Commission evaluation to amend the 2012 legislative package (4), as well as to the work carried out on the same subject matter by the Committee of the Regions.












3.3.


The EESC appreciates the public consultation conducted by the Commission between 31 July 2019 and 4 December 2019 and the expert study developed between June 2020 and May 2021. Such consultations contributed to making the evaluation process more transparent and democratic, notwithstanding the highly technical nature of the subject matter under examination.












3.4.


The EESC would like to emphasise, once again, that the 2012 package laying down rules on State aid applying to SGEI was definitely useful in updating and simplifying the previous rules, which dated back to 2005. The regulatory approach taken by this package should therefore be retained in future, simply updating certain matters and pursuing further simplification, clarity, and legal certainty.












3.5.


The EESC deems that the enlargement of the notification exemption threshold for certain social services brought about by Commission Decision 2012/21/EU (5) — and evaluated by the Commission in its working document — has facilitated the provision of health and social SGEIs at national level. Indeed, it reduced the administrative burden on public authorities, ensuring more legal predictability and flexibility for enterprises. Such an extension practically demonstrates that the Commission considers health and social services as a subgroup with autonomous features within the broader framework of SGEI.












3.6.


The EESC believes that the definition of ‘social housing’ could be slightly extended. The current definition reads as follows: ‘undertakings in charge of social services, including the provision of social housing for disadvantaged citizens or socially less advantaged groups, who due to solvency constraints are unable to obtain housing at market conditions, should also benefit from the exemption from notification provided for in this decision’. It would therefore be important to include in the definition other serious, duly verifiable situations of people not strictly ‘disadvantaged’ or ‘less advantaged’ and not technically ‘insolvent’ or with ‘solvability constraints’, such as vulnerable individuals including women subject to domestic violence and also elderly people. Moreover, access to housing is an essential condition for social inclusion, and the situation of young people in Europe would justify public investment policies in housing intended for them.












3.7.


The EESC reiterates its request for further clarification about the concept of the ‘reasonable margin of profit’ SGEI suppliers can receive in addition to compensation of the costs incurred delivering the service. On this point, the EESC shares the Committee of the Regions’ observation pointing out that ‘local and regional authorities are insufficiently equipped to determine the reference points for a reasonable profit’. In addition to further clarification about the concept of the ‘reasonable margin of profit’ the Commission could provide additional guidance on this matter, to support public authorities. The EESC emphasises the importance of local authorities being able to know and manage the relevant rules clearly and easily. Establishing what can be considered a reasonable margin of profit should involve an evaluation of the concrete contribution to the attainment of the general interest made by enterprises involved in the provision of social and health services.












3.8.


As highlighted by the Commission evaluation, the situation is made even worse by the fact that certain Member States indicated that ‘they do not allow SGEI providers to get a reasonable profit as part of the compensation due to the complexity of the concept’.












3.9.


The EESC deems that, in the ‘reasonable profit margin’ definition, a distinction should be made in favour of social economy enterprises, which are bound to reinvest the economic margins generated into their own statutory activities, thereby creating a virtuous economic effect which should be encouraged and supported.












3.10.


The EESC underlines the necessity to take into consideration the most recent case law of the European Court of Justice on the notion of ‘economic activity’ for the purpose of adapting the 2012 SGEI Package rules in the future, underlining that specific activities related to health and social services might not be economic in nature. In the event that an entity concurrently carries out both economic and non-economic activities, keeping separated and clear accounting is a very useful tool to ensure transparency and avoid cross-subsidisation.












3.11.


The EESC would like to reiterate that within individual Member States, health services and almost all social care services are organised by region, county or even town. This means that user mobility between regions or counties in a given country is very limited, which a fortiori excludes a credible effect on trade between Member States.












3.12.


In their evaluation, the Commission services note that it is a priori difficult to exclude an effect on trade for all health and social services and that the relatively small amount of aid or the relatively small size of the recipient undertaking does not a priori mean that trade between Member States may not be affected. Although the Commission position is understandable and in line with ECCJ case law, the EESC points out that competition and inter-state investments could be ensured by allowing a stable financing of health and social services at the local level and, at the same time, keeping public incentives open on a non-discriminatory basis for entities wishing to enter a given market from another Member State.












3.13.


A large number of stakeholders considered that the clarification of the notion of ‘market failure’ enshrined in the 2012 package facilitated compliance with the SGEI rules applicable to health and social services, at least partially. In this respect, the EESC wishes to note that a market failure can be flagged not only in the event that a given service is not delivered by the market, but also and especially when the market is not able to deliver adequate quality, as well as fair and affordable access for everybody to the service, with adverse consequences on social cohesion and equal opportunities.












3.14.


The EESC supports the view of the majority of stakeholders consulted by the Commission in considering that the current ceiling of EUR 500 000 set forth by Regulation (EU) No 360/2012 is not adequate to the current financing needs required for the operation of an SGEI, since the de minimis ceiling appears to be easily reached in many cases, with the average amount of State support substantially increasing on average since 2012. Such a threshold should be increased even further for entities which, in accordance with their statutes and the law, are required to reinvest the revenues obtained in accordance with the social objective they pursue, as is the case for social enterprises (6).












3.15.


As to the matter at hand, the EESC emphasises the impact of the COVID-19 pandemic on social and health services, as well as the impact of inflation, which has massively increased in the last three years. It follows that an increase of the de minimis ceiling possibly even higher than the one recently proposed and the adapting of Regulation (EU) No 1407/2013 would be justified in light of the strategic role played by health and social services across the EU and should therefore be seriously considered, even though the ordinary ceiling under (EU) Regulation No 1407/2013 was in force for a longer time.












3.16.


The EESC observes that the increasing of the de minimis threshold currently set at EUR 500 000 over three financial years would provide legal certainty to operators, as well as to local administrations and authorities willing to support social and medical infrastructure. The situation of access to care in many Member States is worrying and the Commission must support the efforts of Member States wishing to invest in such areas.












3.17.


As expressed in the opinion An action plan for the social economy (7), the EESC highlights the importance of the social economy to health and social services, whose activity should be supported by clarifying the access requirements regarding the SGEI sector as well as the amount of support available under State aid for social economy entities.












3.18.


The EESC points out that the consequences of the COVID-19 pandemic and Russia’s war of aggression against Ukraine on the 2012 SGEI package are not fully analysed in the Commission working document, but they are considered where relevant. In this respect, it is worth noting that both the COVID-19 pandemic and the invasion of Ukraine made the role of health and social services even more relevant and crucial than in the past (8) and adversely impacted on the activity and functioning of the players involved in delivering such services. A legal framework able to ensure a stable, effective, and simplified public financing of social and health services is therefore even more necessary.












3.19.


The EESC finally observes that the European Commission has recently started working on a more flexible and effective legal framework for financing the green transition in order to adequately adapt EU policies to the Inflation Reduction Act adopted by the United States of America. The international competitiveness of the EU is certainly a good reason to adapt the current legal framework on State aid. By the same token, an adaptation and an adequate simplification of the current rules on health and social services would be equally justified and certainly conducive to better services for people also given the growing assistance needs highlighted by the documents concerning the European Care Strategy for care givers and care receivers (9).












3.20.


Lastly, the EESC reiterates the particular importance of carefully monitoring the use of State aid in the field of health and social services with the aim of avoiding irregularities or abuses by the economic operators involved in such critical sectors.





Brussels, 27 April 2023.


The President of the European Economic and Social Committee

Oliver RÖPKE




(1)  OJ C 429, 11.12.2020, p. 131.

(2)  Commission Regulation (EU) No 360/2012 of 25 April 2012 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid granted to undertakings providing services of general economic interest (OJ L 114, 26.4.2012, p. 8).

(3)  Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid (OJ L 352, 24.12.2013, p. 1).

(4)  OJ C 323, 26.8.2022, p. 8.

(5)  Commission Decision 2012/21/EU of 20 December 2011 on the application of Article 106(2) of the Treaty on the Functioning of the European Union 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 7, 11.1.2012, p. 3).

(6)  OJ C 429, 11.12.2020, p. 131.

(7)  OJ C 323, 26.8.2022, p. 38.

(8)  As highlighted by the increase in social and health services expenditure by Member States in recent years highlighted by the Commission evaluation.

(9)  https://ec.europa.eu/social/main.jsp?langId=en&catId=89&furtherNews=yes&newsId=10382#navItem-relatedDocuments.