CSB Working Paper, 2021, 11: Delivering on the European Pillar of Social Rights: Towards a needs-oriented distribution of the social funds?

The European Social Fund (ESF) and the Fund for European Aid to the Most Deprived (FEAD) are instruments by which the European Union (EU) acts as a ‘material supporter’ of national welfare states. Originally, these funds served social objectives only in a derived form. Today, however, the merger European Social Fund Plus (ESF+), integrating both ESF and FEAD, is presented as the main instrument to implement the European Pillar of Social Rights (EPSR). This raises the question of what these lever…

The European Social Fund (ESF) and the Fund for European Aid to the Most Deprived (FEAD) are instruments by which the European Union (EU) acts as a ‘material supporter’ of national welfare states. Originally, these funds served social objectives only in a derived form. Today, however, the merger European Social Fund Plus (ESF+), integrating both ESF and FEAD, is presented as the main instrument to implement the European Pillar of Social Rights (EPSR). This raises the question of what these levers can do in terms of financial support, especially for Member States with greater social needs. In this paper, using the Social Scoreboard indicators that monitor the EPSR implementation, we analyse the size and the distribution of ESF and FEAD allocations according to Member States’ economic capacity, social needs, policy outcomes and efforts required to meet the European social goals. We find that the funds benefit relatively more the poorer Member States who also tend to have greater social needs. However, especially in the case of ESF, there are significant deviations from this general pattern. Some countries consistently receive less funding than others with similar levels of social needs, and vice versa. Moreover, if we express ESF and FEAD budgets as a percentage of the efforts required to lift all income-poor citizens to the European 60% poverty line, it appears that countries who need to make the greatest efforts get relatively less funding. This outcome seems to be significantly driven by the funds’ allocation rules, which give only little importance to the great social discrepancies between countries. Ultimately, this raises the question whether social needs should be taken more into account in the distribution of the funds, while paying attention to the risk of moral hazard.