Connect the dots! Financing universal social protection in light of systemic challenges

Normative frameworks for universal social protection

In theory, we have comprehensive normative frameworks for universal social protection, with the Universal Declaration of Human Rights, the ICESCR and the ILO fundamental labour standards. In reality, four billion people are excluded from social protection. The three planetary crises – climate change, biodiversity loss and pollution – exacerbate risks. The ‘social’ Sustainable Development Goals (SDGs), including access to decent work and social protection, are desperately off track. Protracted and new violent conflicts destroy even the most basic forms of social protection. Women, children, the elderly, communities which are socially, politically, and/or culturally excluded, workers in the informal economy and people in climate-vulnerable countries are the worst off. This dystopian situation is attributable to hyper-globalization, which has dismantled governments’ regulatory responsibilities.

Response options: expand fiscal space for social protection

Tackling the dystopian situation and overcoming the systemic challenge requires a new impetus for the right to universal social protection and to galvanize the necessary financial resources to make it a reality.

Ideas for expanding fiscal space abound (Watkins et al., 2024; Yeates et al., 2023). The least contentious option is to abolish fuel subsidies, with consensus among climate activists, the G20 and the International Monetary Fund (IMF). Indeed, some countries, such as Indonesia and Nigeria, have replaced fuel subsidies with a cash transfer to cushion the impact of higher fuel prices and knock-on inflation rises. If well designed and transparently implemented, such measures can have the doubly positive effect of enhancing social protection and supporting decarbonization.

Also doable is for donor countries to ringfence Official Development Assistance and allocate a greater share of these flows into social protection (Manuel, 2022).

Rescheduling, swapping or cancelling debt would free up considerable fiscal space. Countries could issue new bonds, swaps and similar instruments (debt for SDGs; debt for nature; debt for social protection, among others); there are also proposals to enlarge and re-channel IMF Special Drawing Rights (SDRs) from high- to low-income countries (United Nations (UN), 2023). Currently, almost 70 countries are facing debt distress or are at risk of it (International Monetary Fund (IMF), 2024), spending more on debt servicing than on social sectors. In these cases, outright debt cancellation is a precondition for improving social protection spending.

Politically more difficult is for governments to introduce supplementary consumer taxes, such as surcharges on harmful consumption items (‘sin taxes’) (Yeates et al., 2023), luxury goods or weapons exports. In these cases, tax revenues could be earmarked for social protection. A carbon tax, like the aviation tax introduced in France in 2005, can combine climate and fiscal space goals. Windfall profit taxes are under discussion in some countries; the UK government introduced an energy profits levy in 2022.

Regarding international co-funding, the proposal for a standalone international social protection fund has been on the table for over a decade (Sepúlveda and De Schutter, 2012). It may be easier to tap into existing or emerging global funds (Kaltenborn, 2023; Watkins et al., 2024). Apart from large well-known funds such as the International Development Association (IDA), the Bill and Melinda Gates Foundation or the Global Fund to Fight AIDS, Tuberculosis and Malaria (Yeates et al., 2023), there are numerous global thematic funds devoted to social and climate change issues, emergencies or peace. Given the cross-cutting relevance of social protection, any of these thematic areas would benefit from building in a social protection financing window.

One example of such a fund is the Loss and Damage Fund, proposed at COP28, even if funding disbursements have yet to materialize (Schalatek and Richards, 2024). It will be important that the Fund links up with national social protection systems. Other conceivable ‘piggy back’ avenues include the Indigenous Peoples’ Fund or the UN Central Emergency Relief Fund (CERF).

Given immense income and wealth inequalities within countries, governments need to increase the progressiveness of income, inheritance or wealth taxation. The world is awash with capital, with soaring stock markets and a surge in privately-held wealth. However, tax reforms frequently trigger political (and civil) conflict and progressive taxation is difficult to implement in a hyper-globalized economy which aids and abets tax evasion. It will require the international tax body proposed by the UN to set common standards and monitor capital flight. Hence, the splash made by a proposal from the G20 (G20 Brasil 2024, 2024) to create a Global Alliance Against Hunger and Poverty, building on Brazil’s Zero Fome and Bolsa Família experiences. A minimum domestic wealth tax on billionaires equal to 2% of their wealth, coordinated internationally, could raise $200–250 billion per year globally from about 3000 ultra-high-worth individuals. This could help address tax avoidance and the current ‘race to the bottom’ (as it’s not meant literally). (Zucman, 2024).

New normative orientations: connecting all the dots

Social protection in a global economic system that perpetually generates inequalities risks remaining a mere palliative response unless it is part of a well-established internationally-agreed redistributive system embedded in human rights. This would require connecting all the dots, from freeing domestic fiscal space and reforming grants and taxation internationally to redressing hyper-globalization. In this vein, the UN (2021) and the International Labour Organization (ILO) (2024) have put forward visions for renewing the social contract to ‘tackle the injustices, inequalities and insecurities’ (p. 5). The United Nations Research Institute for Social Development (UNRISD) (2022) adds the concept of an eco-social contract with compulsory co-attention to planetary health and fiscal justice.

Opportunities to launch new ideas, with universal social protection systems as a basic element, will present themselves in a range of multilateral fora in 2025. The Commission on the Status of Women will re-visit the Beijing Declaration, which for 30 years has been advocating for social security and environmental protection. At the Financing for Development Summit and the UN Social Summit, social protection supported by ample, steady and systemic funding should be core demands. These forums should be used to reinstate the normative umbrella and match it with a clear plan to globally finance it.