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ESF Conference 23 June 2010 Daniel Tarschys

The future of the ESF

1. For all the talk about a crisis of the European social model, it is quite obvious that the Member States share a lasting commitment to ambitious policy goals in the social sphere. Accents differ a bit between different forms of redistribution, social insurance and service provision (with varying shares assigned to public funding, employment-linked schemes, corporate social responsibility, outsourcing, voluntary programmes, and families) but the essential features are very much the same. Whether we call it “the Rhineland model”, “l’état-providence”, “der Sozialstaat”, “the welfare society” or “the social market economy”, Europeans are basically agreed on the need for social protection, extensive social services and an active labour market policy.

2. But which of these tasks should be handled by the European

Union? In its conclusions on the 2020 Agenda, the March 2010 European Council spoke of “a mix of national and EU level action”. Now as far as social policy funding is concerned, we all know what this mix looks like: for every € included in the EU budget, there are 20 or 40 or even 100 € in national, regional and local budgets. Social policy in the broad sense of the term is by and large a responsibility of the Member States and sub-national levels of government.

3. Compared to the extensive social commitments of the Member

States, EU action in this field is marginal and will remain marginal. We may distinguish different contributions of the ESF - process effects, role effects, volume effects - but let us never forget that these effects are small compared to the national efforts, in fact very small at least in the net contributor countries.

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4. For this reason, interventions will have to be exceptionally well

targeted. Given the scarce resources in the European budget, we must concentrate our efforts on highly strategic activities, with a leverage not provided by the Member States on their own. The main question about the future of the ESF is not whether its interventions have been effective (many have) or whether the success stories are impressive (many are), but in which fields and types of intervention there is genuine and exceptional European added value in the years to come.

5. The answer cannot be “everywhere”. Just invoking the 2020 grand

objectives does not make sense, because these goals are too broad and sweeping. If an Occam’s razor is needed to make sharp decisions, the 2020 priorities are simply too blunt. Smart growth, sustainable growth, inclusive growth - fine, such rallying cries may be good for marketing and legitimacy but they do not provide much guidance. The do not help us identify the areas where EU contributions are particularly efficient and effective.

6. Another non-starter is pretending that the goals of “social Europe”

are invented at common European gatherings and then translated into national action. This perspective of the policy process is often found in documents released by the EU institutions, but it has few supporters elsewhere. The welfare state has deep if slightly divergent roots in each and every one of our countries. Reducing the many agents and agencies involved in its realisation to mere implementers of European decisions is a harmful centrifugal illusion.

7. In this context, a particular word of warning is due against the

concept of “delivery”. This term signals a crude and distorted conception of who-achieves-what and what-achieves-what in public policy interventions. Some texts seem to convey the image of a fleet of delivery vans dispatched from Brussels to the European periphery, with their load of social cohesion. A question often asked is, “how should the ESF be delivered”?

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First of all, deliver us from this misleading word which conceals the essentially supplementary and supportive nature of the ESF.

8. Speaking of support, there is every reason to recognise the wide-

spread popularity of cohesion policy. This is confirmed by the Euro-barometer and several other studies. The various structural funds have strong constituencies among beneficiaries, implementers, politicians and a wide community of service providers.

9. But about the lasting impact of the programmes we know far less.

When funding streams from different sources are fused it is notoriously difficult to isolate the specific contributions of each and every one of them. This is one reason why the efficiency of the various structural interventions is so difficult to assess, despite the fortunes sunk into evaluation ex-ante, ex-post, mid-term and now even continuously. Even the meta-evaluation reports make clear how little we know about wider and longer-term impacts.

10. Exaggerations abound, however. Sometimes we are told that

the Structural Funds “mobilise” so-and-so much capital from national and sub-national governments and from business. In good cases this may be perfectly true, but many such reports should be digested with a grain of salt. The lower-level response to higher-level money takes many forms, ranging from commendable institutional and policy innovations and to less commendable exercises in creative accounting.

11. As a strong supporter of the European project, I would

gladly see a doubling or a trebling of the EU budget. But we also need some order in the division of public funding between different levels, and I see little point in using precious European money on things that are essentially national or local in character. We have so many important collective needs in Europe that we must be utterly careful with the few billions that we

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manage to wrest from the Member States to our common budget.

12. What, then, is the role of the Union in the development of

this “social Europe” which, even if it is increasingly infused by common principles, can only remain a nationally-based undertaking? It is by no means insignificant. Let me sketch out five points.

(i) To borrow a term from medical ethics, primum est non nocere. First of all, make no harm. There is a strong need to avoid messing up many already well-functioning and carefully devised national systems for social protection, social services, labour market support, etc. Even where the national systems are not so well-functioning and not so carefully devised and valuable impetus for change may come from the European level, the burden of adjustment should largely fall on national political processes.

(ii) For this reason, the regulatory powers of the Union must be used with caution and restraint, and social aspects should always be given due weight in the application of common market rules. We have a lot of principles and practicalities that must be upheld and enforced at the European level, so this balancing act is by no means easy, but many complex issues of social policy and labour relations require a special Fingerspitzgefühl when dealt with by the institutions of the Union, not least the European Court of Justice. (iii) When it comes to the budgetary side, we should give strong priority to the truly collective needs. Many interventions are of course mixed, producing on the one hand private and individual benefits and contributing on the other to common endeavours, including those covered by the Lisbon and Europe 2020 objectives. But the greater the purely private

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gain, the less reason is there normally for public funding. There are many exceptions to this rule in the social sphere, but the degree of collective benefits should be an important criterion in project selection. (iv) Another important criterion should be that of sustainability and long-term effects. Investment-type spending should as far as possible trumph out consumption-type spending. Now that distinction is not so easy to make: current spending on health and education may contain significant investment components while some capital spending for ill-conceived projects may be a short-sighted waste of money - all our countries have some experience in “political investments”. But we should at least aim for considerable long-term effects. To give but one example: if we want a robust and sustainable welfare state, investing in better fiscal systems and insurance mechanisms may be far more effective than short-term redistributive measures. Unfortunately, such structural ambitions are often absent from the interventions of the structural funds. A particular cause for suspicion is the frequent reporting of “jobs created” and “jobs maintained”. Measuring results in this undefined currency says nothing about long-term impact. (v) Finally, there is a strong need to refine, develop and specify the criterion of European added value. All too often this formula is used as an all-purpose mantra, serving to justify almost any type of spending. But if it is to serve as sharp instrument to identify the most meritorious policies and policy instruments, high thresholds must be established for admission to this particular category of expenditures. The best qualified programmes and projects will normally be those where economic externalities reduce the propensity of

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Member States to take action on their own and where there is substantial contribution to the sense of European community.

13. Many worthy projects compete for EU funding. Established EU objectives laid down in solemn documents are often advanced to support such pleas, but the multiplicity and wide coverage of these objectives renders this advocacy unhelpful and unconvincing. Among the goals there is a need to make clear distinction between various types, as for instance:

• Historical goals which already have been attained, such as the

promotion of the internal market, the promotion of the monetary union and the promotion of various stages of the enlargement.

• Utopian goals which are noble but unlikely ever to be attained.

• Grand goals which do not seem to exclude any type of action

(smart growth, sustainable growth, inclusive growth). While the structural funds have already done their job as far as the historical goals are concerned, the utopian and grand goals may still serve some very good purposes. They provide legitimacy and a general sense of direction, but apart from that they give little guidance and help when it comes to setting priorities and making tough choices. For this we need sharper tools.

14. In seeking to define the future tasks of the ESF, the challenge is not simply to identify policies that contribute to the 2020 objectives. We must, more specifically, look for programmes and interventions that do so in an exceptional way through very significant elements and dimensions of (i) public goods, (ii) long-term effects, (iii) trans-frontier interaction and (iv) symbolic or emblematic substance. Only in such areas is there a sufficient measure of European added value to justify inclusion in the programmes of the next Financial Perspective.

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15. So, in conclusion: passing the 2020 test is not enough. We must look for elements in the ESF agenda that pass that test with fanfares and flying colours.