27 November 2014

What is EU free movement vs EU migrants’ access to benefits?

The free movement of people and workers within the EU has the potential to boost growth and competitiveness in both the UK and Europe. In addition, the ability for companies based in the UK to easily draw on a wide talent pool is seen by many firms as an advantage. However, free movement also throws up a huge number of political challenges, such as increased competition in low‐skilled sectors of the labour market, the potential for downward pressure on wages over the short term, and increased demand for public services and infrastructure.

When referring to the “free movement” of people within the EU, it is important to distinguish between, on the one hand, the right to move freely and, on the other, the rights and responsibilities of people who move between EU countries (i.e. their ability to claim welfare benefits). The two issues are linked but politically and legally distinct. While the right to move is locked into the EU Treaties and difficult to change other than by withdrawal from the EU, the rules on EU migrants’ access to benefits have developed largely due to European Court of Justice case law and secondary legislation on the rights of EU citizens.

What has David Cameron proposed?

In response to public and media concerns over the lifting of transitional controls on Bulgarian and Romanian migrants in January 2014, David Cameron has announced a range of measures designed to tighten the rules on EU migrants’ access to benefits in the UK. These include a three-month qualification period for benefits, which would then only be payable for six months. In addition, European migrants falling below a certain income threshold would lose access to some benefits and newly arrived EU jobseekers would not be able to claim housing benefit. He has also suggested further changes to deal with new countries joining the EU and changes to EU law on the requirement to pay child benefit to children living abroad.

Cameron has insisted that all the immediate measures the Government is taking comply with the existing EU treaties. The European Commission has yet to say whether it thinks the proposals are legal. However, it’s clear that the UK Government is reaching the limits of what it can do under EU law as it stands.

To complicate matters further, the UK is already locked into an ongoing legal dispute with the European Commission over the rights of EU migrants to access the UK’s ‘universalist’ welfare system. Cameron’s recent intervention signifies a definite hardening of tone and position in this dispute, and in response EU Commissioner Laszlo Andor has said that the UK risks being seen as a “nasty country.”

Is David Cameron alone?

No. If sold as EU-wide reform, the UK already has the support of Austria, Germany and the Netherlands, for an overhaul of the existing EU rules on access to welfare, particularly the ability for newcomers to claim benefits in another member state.

However, changing the EU’s legislation on access to benefits will not be easy as it would require a qualified majority in favour among national governments and a majority in the European Parliament. If majorities could be secured, the legislative process could take a year or more. This is a long-standing issue of contention between some national governments and the European Commission. In June 2011, ministers from 13 member states, including the UK, Denmark, Germany, Ireland, the Netherlands and Sweden, called for the concept of residence and the interaction between the Free Movement Directive and the EU Social Security Regulation to be “further discussed” with a view to “considering amendments to the current legislative framework, should these be deemed necessary.”

Whilst the Prime Minister’s political stand is understandable, the UK needs allies to change the EU rules and should concentrate its efforts in future on marshalling other member states in favour of reform to ensure more flexibility for national governments to impose domestic safeguards for their welfare systems. The legal process with the European Commission could take several years but if the UK were to lose its ongoing battle at the European Court of Justice it could pose a major political blow ahead of any EU referendum in the UK.

What reform should the UK propose at the EU level?

In order to maintain any public confidence in EU free movement it is essential that EU rules respect differing national welfare systems that have developed through national democratic choices. Open Europe has suggested the following reforms to the EU’s rules on access to benefits to establish a better link between economic contributions and access to benefits across the EU:

  1. Rights of EU migrants to reside in another member state should be more closely linked to being in work or self-sufficient. This could be achieved by removing the right of residence as a job seeker unless someone has been previously employed in the UK for a certain period. When determining whether an EU citizen is a “burden” on the welfare system, national governments should be allowed to apply general thresholds for the income/resources that person is required to have. National discretion to set these rules should explicitly apply to all state welfare.
  2. Secondly, the rules on family benefits should be tightened so that people cannot claim for benefits such as Child Benefit if their child is not living with them in the UK.
  3. The requirement for equal treatment with UK nationals should be removed for EU citizens without a permanent right of residence in the UK when it comes to the provision of state welfare that is in particularly scarce supply, such as social housing.

The EU’s rules on access to benefits and the UK’s ‘universalist’ welfare system

In EU law, welfare benefits are generally divided into two broad categories: ‘social security’ benefits and ‘social assistance’ benefits. The EU’s Free Movement Directive establishes that EU member states are not obliged to provide ‘social assistance’ (e.g. housing benefit and council tax benefit) to nationals of other EU countries during their first three months of residence, or if their only grounds for remaining in the UK for longer than three months is that they are actively looking and have “a genuine chance” of finding work.

Confusingly, ‘social security’ benefits (e.g. sickness benefits, maternity/paternity benefits, and others) are covered by a separate EU Regulation, which establishes that these benefits must be made available to all nationals of EU member states without discrimination but can only be claimed by people who are ‘habitually resident’ in the member state.

The EU’s distinction of ‘social security’ benefits and ‘social assistance’ benefits does not sit well with the UK’s ‘universalist’ welfare system, where payments are not directly linked to an individual’s tax contributions. This issue has been exacerbated by the extension of free movement rights from solely workers to the economically inactive, jobseekers, students and family members.

The UK applies its own ‘right to reside’ test as part of a wider habitual residency test to establish whether EU migrants have a right to reside and therefore claim certain benefits in the UK. The ‘right to reside’ test is currently the subject of legal action by the European Commission. The Commission argues that the test discriminates against non-UK EU migrants and places extra hurdles for EU migrants trying to claim social security benefits, which should be available to UK and EU citizens on the same basis.