Finance and Social Affairs Ministers discuss social investments.

A well-organised social policy is not a cost factor, but one that promotes productivity and economic growth. With this message, the Belgian Council Presidency of the European Union (EU) convened the first joint meeting of the European Finance and Social Affairs Ministers, stemming from the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) and the Economic and Financial Affairs Council (ECOFIN), on 12 March. After the meeting, the Belgian Council Presidency emphasised that there was agreement between the two Councils of Ministers to view economic and social policy from an integrated perspective and that they would jointly focus on the topic of social investment.

Reform of economic governance as a starting point

On 26 April, the European Commission presented a Proposal for a reform of economic governance with the aim of strengthening the sustainability of public budgets and promoting them by taking investment into account. This raised the question of the extent to which social investments should also be incorporated. Spain and Belgium subsequently took up this issue together and made it the subject of their Council Presidencies. The revisedeconomic governance ultimately did not follow the Commission's proposal. Some Member States, including Germany, have spoken out against the inclusion of investments. The focus now remains solely on budget consolidation. Investments are not considered. This also applies to social investments.

A new narrative

Nevertheless, the work on social investments will be pursued further. Now, even as a joint topic of EPSCO and ECOFIN. At the joint meeting of the two Councils of Ministers, there was agreement that well-functioning and inclusive social protection systems are key components of a socially and economically resilient society. Social investments improve people's opportunities and abilities to better manage current and future social risks. Social investments pursue the goals of increasing both labour force participation and the productivity of the employed.

The categorisation of social investment as an important growth-promoting contribution is therefore an important building block in further strengthening the importance of social issues and social insurance at European level.

Evidence

Belgium and Spain have jointly launched an informal working group on social investment (IWGSI) in connection with their Council Presidency in July 2023. The aim is to compile well-founded arguments in favour of the added value of social investments and reforms in promoting social cohesion, economic growth and fiscal sustainability. This is because, at European level, only what is measured is taken into account.

In the end, all Member States, together with the European Commission, the European Parliament and delegates from the EPSCO and ECOFIN Council committees, were involved in this informal working group. The social partners were also involved. This demonstrates the importance that these players attach to social investment.

Five policy areas

The informal working group has identified five policy areas for social investment which allow empirical proof of a positive correlation to economic growth and fiscal sustainability. These are:

(1) lifelong learning, up- and re-skilling,

(2) education and work-life balance,

(3) health and safety measures and rehabilitation,

(4) active labour market policies and

(5) reduction of labour market segmentation and marginal tax burden.

What happens next?

The EU's technical working groups will be tasked with developing proposals on how to measure the impact of social investment on productivity, economic growth and the sustainability of public finances.