Employment, Social Affairs & Inclusion

News 28/10/2019

Social protection expenditure and its financing in Europe

This Synthesis Report produced by the European Social Policy Network (ESPN) examines the changes which occurred in expenditure on social protection and the sources of its financing over the period 2005-2016.

Social protection expenditure and its financing in Europe

© Andrii Yalanskyi / Shutterstock

Comprehensive social protection systems are the cornerstones of welfare systems across the EU and at the heart of the “European social model”. However, over the past few decades, pressure from demographic ageing and changing patterns of work, as well as the Great Recession (2008-2010) and the fiscal consolidation policies which followed it, have challenged national social protection systems in their role of ensuring adequate support to all those in need.

This Synthesis report produced by the European Social Policy Network (ESPN) shows that, while the Great Recession increased the need for spending, cost-containment policies have kept down both expenditure on old-age pensions and healthcare, while the share of social contributions in the funding of social protection has tended to decline, compensated by an increase in the share of funding from taxes.

This shift in the sources of financing, however, seems more a consequence of conscious efforts by governments across the EU to keep down or reduce taxes on employment, especially employers’ contributions, than of any erosion of the base – i.e. income from employment – on which contributions are levied.

The Synthesis report, in addition, examines national debates and reforms on the strengths and weaknesses of the social protection financing mix. It concludes that, while systems which rely on social contributions are not under threat, their financing may need to be diversified in order to maintain adequate levels of protection in the longer-term.

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