Study: EU should back social insurance for poor nations

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The European Union could help reduce entrenched poverty by supporting social insurance systems in developing nations, says a new European Parliament study.

The study calls on the EU to encourage the growth of social schemes for poor nations through aid as well as offering expertise drawing on Europe’s own experience in providing universal health and pension systems.

Francesca Bastagli, a researcher at the Overseas Development Institute in London and author of the assessment, told MEPs on Monday (18 March) the “poorest of the poor” were being excluded from social protection and that the EU and other donors could help governments in developing nations close the gap.

“There is a very clear case for the role of government to provide coverage for the poorest of the poor and to ensure that the services are of decent quality,” Bastagli said in testimony before the Parliament’s overseas development committee.

“This reflects broad support, in light of the crisis, for investment in social protection schemes that can ensure social protection in future crises,” she said.

Recommendations include more than money

The study – Feasibility of Social Protection Schemes in Developing Countries – comes amid rising global support for giving social safety nets to the 5.1 billion people, or nearly 75% of people worldwide, who lack them. It recommends ways the EU could help, including:

  • Providing initial funding to support the introduction of social schemes;
  • Offering the technical expertise to help donor recipients improve their revenue, though better tax collection and accountability, to support tax-financed social insurance;
  • Assisting in the development of community-based insurance schemes, which have shown promise in Brazil, India and other other emerging nations.

The European Commission’s overseas development policy, the Agenda for Change, and its proposed Decent Life for All communication both call for investing in social insurance for the world’s poorest nations.

The World Bank and the African Union also advocate the expansion of social protection schemes.

Globally, the 184-member nations of the International Labour Organization (ILO), including the 27 EU states, in June 2012 adopted a resolution urging all countries to provide minimal social protections in the build-up to the UN Conference on Sustainable Development.

Global fund to reduce poverty

Olivier De Schutter, the UN special rapporteur for food rights, and his colleague Magdalena Sepúlveda, the UN's independent expert on extreme poverty, last October urged advanced countries to create a Global Fund for Social Protection that developing nations can tap to co-finance insurance schemes.

De Schutter also said recently that improving social protections for women farmers, who work the fields and then juggle domestic duties, could ease rural poverty and improve food security.

European donors already support healthcare or social insurance schemes, including programmes in Ghana and Rwanda. Britain last week resumed financing for Rwanda’s social protection system after freezing aid on grounds that the Rwandan government was supporting rebel groups in neighbouring Congo, the daily Guardian reported on 13 March.

Tight budgets

But officials concede that finding money or the political will to fund schemes abroad in austere times won’t be easy. The development committee is drafting a non-binding resolution, to be presented in April, that calls for EU governments to live up to their commitment to devote 0.7% of their gross national income to development by 2015 amid concerns that they will miss the target.

The largest sources of development assistance, the EU, United States and Japan, are all under budgetary stress and poverty-fighting groups fear that foreign aid will be among the first casualties of long-term austerity measures.

And budget cuts are not only a risk to overseas aid.

Referring to Europe’s vaunted social protections that are targets of austerity reforms, Spanish Socialist MEP Miguel Angel Martínez Martínez said: “If you look at the current economic crisis, we are seeing these things broken down … We thought they would always be with us and then they are being taken away from us.”

The International Labour Organization, based in Geneva, says that access to adequate social protection benefits and services remains a privilege, mostly in advanced countries.

Despite 12 years of efforts to combat poverty through the Millennium Development Goals, UN figures today show that about 5.1 billion people – or nearly 75% the Earth’s population - are not covered by basic social insurance schemes and 1.4 billion people live in extreme poverty.

Some emerging economies, including Brazil and South Africa, have well-developed safety nets. And a recent ILO-World Bank report shows that 66 out of 77 countries studies expanded social protection systems such as unemployment, pensions and health care during the economically troubled years of 2008-2010.

The ILO has estimated that safety nets could cost developing countries between 2.2% and 5.7% of their gross domestic product. The EU average is around 3%.

  • 23 April: European Parliament's development committee expected to vote on resolution on a successor to the UN Millennium Development Goals
  • 2015: Deadline for countries that joined the EU before 2004 to devote at least 0.7% of their gross national income to overseas development aid

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