Reference budgets, which are priced baskets of goods, and services that are considered necessary to reach an acceptable standard of living for an individual household within a given country, region or city are tools to monitor adequate income support. They are widely used in European countries and serve many purposes. As part of the Social Investment Package, the European Commission proposed reference budgets as an instrument that could help Member states to design efficient and adequate income support, provide mutual learning and facilitate the European Commission’s task of monitoring the adequacy of income support in Europe.

Pilot programme across Member States

However, reference budgets are currently created at Member State level via different methods which makes the results incomparable across countries. Therefore, the pilot project by the EU Reference Budgets Network had a number of aims:

  1. to create a methodology for comparable reference budgets in Europe
  2. to complete reference budgets, so baskets of goods and services, for a selected number of Member States
  3. to develop comparable food baskets for all 28 Member States

Reference budgets intend to represent the minimum resources needed for active participation in society. In the pilot, reference budgets were developed for three ‘model’ households under the assumption that all household members were in good health, well-informed, and self-reliant.

The network used a mixed-methods approach built on the collection of all relevant information, including national guidelines and recommendations, scientific literature, and existing studies into both actual living patterns and normative positions on what is considered adequate by national experts. Moreover, the national teams organised three focus group discussions involving citizens with differing socio-economic backgrounds. Next, national teams drew up lists of prices for goods and services alongside a justification for including these goods and services. The data was then checked by the central and national teams and potential cross-country differences were explained.

Conclusions and next steps

In the final seminar, the results were presented. Researchers stated that although there was little variation in food across countries, there were major differences when other goods than food or services were added - such as housing or health care. In some countries, reference budgets came close to or exceeded the medium income. In terms of usability of reference budgets, some national experts remarked that national customs and the use of reference budgets at local and national level; for example, for debt counselling or debt prevention, should be considered when looking at comparability.

The key takeaway from the pilot project was that it is possible to develop a comparable framework for reference budgets. However, robustness remains a problem for some components of the basket, for example:

  • physical exercise was defined differently across countries
  • the products’ price is not always transparent and their lifespans vary
  • the pilot only addressed only three ‘model families’ and did not include other age groups or dependent people with complex health needs

Ultimately, access to public services needs to be considered when developing minimum income support.

Resources of the pilot project can be found here.