The European Union adopted in December 2001 a set of common indicators for social inclusion. This paper describes the background to the adoption of the indicators, and the work undertaken as part of the Belgian Presidency. It sets out principles for the construction of social indicators for this purpose, emphasising their role as performance indicators: the concern is with "outputs" not "inputs". The principles apply to single indicators and to the portfolio of indicators as a whole. These principles influence the structure and presentation of indicators. We propose a three-tier approach: a small number of common lead indicators for the main fields that we believe should be covered, a larger number of (again common) secondary indicators providing greater detail, and a third level of indicators that Member States decide to include. Finally we discuss the process for taking forward the development of indicators for social inclusion.