“Protecting the Public Purse” in cuts to Social Security: Krajnc v Slovenia

By Dr Ben Warwick (University of Birmingham)

Krajnc v Slovenia continues the ECtHR’s grappling with the interaction between Convention rights and public finance questions. Relying on Article 1, Protocol 1 the applicant successfully argued that a law change, which resulted in a halving of his disability allowance, was a breach of the Convention. The case follows many other cases in the same vein. Despite reaching this positive conclusion, in its reasoning the Court relies upon deeply problematic assumptions about the relationship between rights and fiscal policy, and fails to interrogate harmful stereotypes of disabled persons.

Facts and judgment

The case concerns an individual with a disability that had prevented him from finding work. Slovenian law dating back to 1992 had provided for a ‘waiting period’ allowance, intended to support disabled individuals for whom a new appropriate job had not (yet) been found. Mr Krajnc had had his disability assessed and had benefitted from this allowance in the past. A change to the law in 1999 meant that the relatively generous waiting period allowance was removed for new claimants, and claimants whose circumstances had changed after the entry into force of this new law. It was replaced by a less generous disability allowance.

Having sustained a shoulder injury, Mr Krajnc was reassessed with the conclusion that new, more restricted employment, was necessary. Under the 1992 law Mr Krajnc would have been entitled to the waiting period allowance while waiting for such suitable employment to arise (390 EUR). However, the 1999 change to entitlements meant that he had his benefit reduced to 190 EUR. The medical reassessment, which found Mr Krajnc’s disability to be more severe, had caused the new law to ‘bite’ on his case and resulted in a greater than 50% reduction in his entitlement. As the applicant highlighted in his case, this was far below the minimum wage of approximately 750 EUR in Slovenia (which is set at a level to ensure a decent standard of living).

The fourth section of the Court found a violation of the applicant’s Article 1, Protocol 1 right to the peaceful enjoyment of his possessions, and awarded him the sum of 10,000 EUR in combined pecuniary and non-pecuniary damages. It closely applied the principles developed by the Grand Chamber in Béláné Nagy v Hungary. In particular, it reiterated that the ECHR places no restriction upon a State’s choice of social security scheme. However, the Court restated its position that extant legislation which provided social security entitlements could give rise to Article 1, Protocol 1 rights, and therefore that reductions or removals of existing social security entitlements might require justification. In seeking justification, the Court emphasised the need for the reduction to the scheme to pursue a legitimate aim, and reiterated that it would look at the context of the scheme including the magnitude of the cut made, the function of the scheme and the type of social solidarity that it is intended to provide, the arbitrariness of the reduction, and any excessive or discriminatory burdens that the cut places upon an individual or group.

The Court found in this case that, with this cut, the State was pursuing legitimate aims of “protecting the public purse and motivating disabled adults with a remaining capacity to work to find employment” (on which, see discussion below). The Court focussed specifically on the ‘excessive individual burden’ placed upon the individual (who had lost half of his monthly income as a result of a worsening disability), and the absence of a transitional arrangement between the starkly different levels of benefit. The Court was also at pains to highlight how it was a legal change that had resulted in the cut to Mr Krajnc’s benefit, and not (primarily) because of a change in his own circumstances. Finally, the Court placed significant weight on the government’s promises, made in the 1999 act, that entitlements acquired under the 1992 act would continue. This, it said, gave rise to legitimate expectations that the applicant would continue to be eligible for the higher waiting allowance payments.

Comments

Krajnc v Slovenia is an important clarification of the ECtHR’s approach to State austerity policies. It limits States in some notable ways, while maintaining a (very) wide margin of appreciation for States in choosing which policies to enact. Although the limitations are contained to the arena of social security policy, they prevent States from cutting entitlements without adequate justification.

State justifications will be examined by reference to the sectoral impact of the cuts. This is crucial to a human rights friendly examination of austerity policy; however, it remains to be seen what evidence the Court will require of those disparate impacts. In this case, for example, the Slovenian government submitted evidence from a state-founded economic research institute which looked retrospectively at the impact of the policy change. Amongst the most damning findings of that report was that since the introduction of the new law, ‘the situation of the unemployed disabled workers had significantly deteriorated and those receiving disability allowance found themselves in an extremely bad financial situation’. The credence given to this evidence by the State’s submission of it (a tactical decision it may now regret), and the availability of actual rather than prospective data on the impact of the policy are likely to have affected the Court’s analysis. It is important to note, however, that not all such cases will have evidence of this kind available to them, especially where a State policy is a recent one or where fully disaggregated data is not collected or made public.

Connected to the above, is the Court’s examination of whether an excessive individual burden was borne by the applicant. While the ECtHR is again clear that there is not a numerical threshold at which a cut to an individual’s entitlement becomes excessive, it notes that full removal of the benefit will be more unjustifiable than minor reductions. This has the effect of preventing the State from making radical departures from existing levels of entitlement (unless there is some other overwhelming justification for doing so or mitigation is in place).

The idea of an excessive individual burden, of course, implies that enacting cuts that place a balanced or proportionate burden upon individuals can be justified. Put differently; that individuals acknowledged by the Court as vulnerable and in need of social solidarity can justifiably be subjected to an additional burden as a result of State policy. This, in my view, flows from the Court’s earlier acceptance of the legitimate aim of ‘protecting the public purse’.

Even acknowledging the established breadth of the margin of appreciation given to States in this area of policy, the ease with which this is accepted as a legitimate aim is problematic in three respects. First, the metaphorical way that the Court phrases the aim (‘protecting the public purse’) obscures the actual fiscal aim of the government from scrutiny (is it deficit reduction, a sovereign debt problem, a need to reassure markets, and/or an ideologically driven cutting of State provision).

Second, the failure to explicate the State’s aim leads to weaker analysis of the argued infringement. The Court ‘has no doubt’ that the change to entitlements pursues the legitimate aim. Yet, without any clear understanding of what the legitimate aim is or the actual benefit to the exchequer from these reforms, the Court should have been much more dubious.

Further, without clarity on the nature or extent of the State’s aim, it becomes impossible to accurately assess how excessive the burden upon individuals really is. The applicant in the case, for example, argues that the ‘problem of public finances should be tackled by equal and gradual adjustments and not by a significant reduction to the detriment of only some beneficiaries’. Yet despite the intuitive appeal of his assertion, without the Court explicating more clearly the extent and nature of the State’s public finance problem, it is difficult to unqualifiedly agree with him. This presents a potential harm to the interests of both the State and the claimant as either could be disadvantaged by a balancing act which has clarity about only one side of the balance. The quality of the Court’s discussion would have been much enhanced by requiring the State to specify its fiscal aim in a reasonable amount of detail and to outline the contribution that the reforms to disability benefit made to that aim. If the State is unable or unwilling to do so, the Court should feel empowered to reject the claimed legitimate aim.

Third, the acceptance of fiscal policy measures as a legitimate reason to interfere with an individual’s rights at all, is deeply contestable. It sets rights – even problematic ones such as Article 1, Protocol 1 – with an essential concern with the individual and his or her ability to live in a just and peaceful society, against a set of economic concerns with no necessary interest in such values. In setting the two against each other, the Court also accepts that fiscal concerns will, on occasion, justifiably outrank human rights.

Alongside this public finance aspect, the Court also accepts that a legitimate aim of the State was ‘motivating disabled adults with a remaining capacity to work to find employment’. This is coupled with the Court’s acceptance that cutting social security entitlements pursued this aim. This is a highly objectionable proposition grounded in stereotypes of disabled individuals as ‘workshy’ and ‘scroungers’, which is accepted without proper interrogation.

Conclusions

Despite its positive outcome, this case is a glimpse into the complex questions that the Court would rather avoid. The assumptions made about the State’s (benevolent) economic intentions are antithetical to robust human rights adjudication. While it is important to keep this case in its social security and Article 1 Protocol 1 contexts, it nevertheless shows the potential for States’ fiscal and social policies to spill into the reasoning of the Court in unexpected and uninvited ways. Avoidance strategies will only go so far, and sooner or later a much more encompassing approach to these issues will be required. This will undoubtedly stretch the Court to the edges of its comfort and expertise, but it can take confidence from the established jurisprudence of its sister body (the European Committee on Social Rights) and from progressive constitutional courts around the world.

 

Dr Ben Warwick is a Lecturer in Law at the University of Birmingham and the co-convenor of the Social Rights Collaborative Research Network at the Law and Society Association. His research interests are in economic and social rights and resources, austerity and neoliberalism. You can follow him on twitter @btcwarwick.

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