Labour Foundation agrees privatisation of social security

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In June 1998, the bipartite Labour Foundation agreed a plan to reorganise the Dutch social security system. The agreement marks a breakthrough: for the first time in 50 years, the social partners have come to terms with major reforms of the social security system. The plan differs on a fundamental point from the cabinet proposal in this area presented in March 1998, as it seeks to privatise fully the administration of social security.

In June 1998, the bipartite Labour Foundation (Stichting van de Arbeid, STAR) reached an agreement on a plan to revamp the social security system. The agreement differs significantly from the memorandum on this topic which was published by the Ministry of Social Affairs and Employment (Ministerie van Sociale Zaken en Werkgelegenheid) in March 1998, and subsequently adopted by the cabinet (NL9804174N).

Employers' associations and trade unions agree that the new social security system should be administered solely through commercial organisations (uitvoeringsinstellingen- UVI s). For the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) this required a major shift in thinking. For years, the FNV had opposed plans to privatise the administration of employee benefits such as disability benefits (WAO) and unemployment benefits (WW). The agreement represents a major breakthrough in Dutch industrial relations, as it is the first time in half a century that the social partners have been in accord over major social security reforms.

The plan completely to privatise the administration of the system clashes with the cabinet's plan, which proposed that the evaluation of benefit claims should remain the responsibility of a public body. This view is based on a fear that privatisation could create a situation where commercial interests might interfere with the processing of benefit requests. According to the employers' representatives on the Labour Foundation, the establishment of a new public body would lead only to more bureaucracy. The social partners therefore rejected the cabinet's memorandum, and proposed that this task be assigned to private administrative bodies. To ensure fair treatment, an independent unit within the private organisation should process the benefit requests themselves under government supervision.

The Labour Foundation's position is shared by the tripartite Social and Economic Council (Sociaal-Economische Raad, SER) one of the government's principal advisory bodies. Moreover, the Social Security Supervision Board (College van toezicht sociale verzekeringen, CTSV) also feels that the social security system should be fully privatised.

The Labour Foundation disagreed with the cabinet on another fundamental point: the role of trade unions in the administration. In the new social security system, employers can conclude contracts directly with the private administrative bodies. While the Government wishes to leave this to the discretion of the employers, all the parties in the Labour Foundation agreed that this should be the responsibility of the unions as well.

In the meantime, the Government reacted to the advice of the SER and the Labour Foundation. Two parties in the so-called "purple coalition" Government warned against rushing through privatisation of the social security system, as negotiations on a second administration comprising the Liberal Party (VVD), the Social Democratic Party (D66) and the Labour Party (PvdA) were still underway, following the May 1998 general election.