REPORT ON THE DANISH WELFARE BENEFITS IN AN EU LEGAL PERSPECTIVE

REPORT ON THE DANISH WELFARE BENEFITS IN AN EU LEGAL PERSPECTIVE December 2015

REPORT ON THE DANISH WELFARE BENEFITS IN AN EU LEGAL PERSPECTIVE The Confederation of Danish Employers Managing editor Christiane Mißlbeck-Winberg Published: December 2015

Foreword With this report, The Confederation of Danish Employers (DA) wants to contribute to the debate on how we could have the free movement of labour in the EU in the future and simultaneously secure the Danish welfare system against unwanted use. Contribution to a current political debate The Danish welfare system is built on a societal contract between government and citizen where the individual citizen contributes to the financing of the welfare system mainly through taxation. The system is characterised by universal benefits that are easy to get access to and which are relatively high. The Danish welfare model seems attractive to citizens from a range of EU countries, whose systems are labour market based, i.e. where participation in the labour market is a key parameter for the granting of benefits and where the benefits are also generally lower than in Denmark. The debate on EU citizens access to Danish welfare benefits has at times a strong presence in the media and the Danes awareness. Now when DA takes up the topic and presents proposals for adjustments that herald increased control and partly a tightening in relation to the applicable rules and applicable legal practice, we are not saying that we believe that we face, here and now, a comprehensive problem with EU citizens misuse of our welfare system. On the other hand, we are saying that we take the Danes concern seriously and that we will ensure the Danish population s openness to foreign labour. The time is also chosen based on a consideration that the proposals may come into play in the political discussions on Great Britain s future role in the EU. Over the coming months, negotiations will be in progress between Great Britain and the EU and here, the EU citizens access to the British welfare benefits will be a key theme. The topic has a strong presence for Danes The UK s negotiations are an open window

Access to competencies as a condition for growth Contents of the report Structure of the report It is important to make it clear that DA works to ensure that the free movement of labour is not weakened and that the companies have the optimal conditions to create growth through, for example, easy access to competencies from outside. At the same time, DA wants welfare schemes that can interact with an open and international labour market. It is thus also clear that DA wants a support system where public benefits are lower than the minimum wages agreed in the private sector and where there is a financial incentive to take a job and to be closer to the labour market rather than further away. Consequently, the report supplements the DA community s earlier initiative in the welfare area with 28 specific proposals to increase employment in Denmark (Ways to increase employment in Denmark, March 2015). The report reviews the most important Danish welfare schemes, gathers knowledge on the topic in other European countries and follows-up with proposals on how national and European rules can be adjusted so they minimise the risk of inadvertent use and increases the population s acceptance and understanding of the need to attract and retain foreign labour in Denmark and Europe. The first chapter of the report provides a brief overview of the challenges in the European labour market. The second chapter describes the problems which Danish and European legislation face today when it comes to the free movement of labour and the countries different welfare systems. In conclusion, the third chapter presents proposals on how the welfare schemes can be made more robust and up-to-date.

Table of contents 1. Danish welfare schemes in a European context 9 2. Frameworks and applicable main principles in European and Danish legislation 15 3. Specific proposals for changes 35

1. Danish welfare schemes in a European context 1.1 Challenges in the European labour market 9 1.2 The Single European Market s freedoms create growth and jobs 10

1. Danish welfare schemes in a European context Denmark is on the way out of the economic crisis, which was triggered by the financial crisis. However, the prognoses for the coming years economic development still look somewhat bleak and the demographic development is pointing in the wrong direction. We need to get more hands and heads out into the Danish labour market if we want to continue being one of the most affluent societies in the world. There are several paths to a larger labour force and one of them is to supplement the Danish labour market with sought-after international colleagues. 1.1. Challenges in the European labour market Companies access to a well-educated and sufficiently large labour is a fundamental prerequisite for a high welfare level in the EU. The same applies in a Danish context so Danes can continue to enjoy a high welfare level. Access to the right competencies accounts for an important part of the framework conditions that will ensure Danish industry s and commerce s competitiveness on the global market. Access to sufficient labour crucial Danish companies emphasise already today the bottle-neck within certain industries and lack of labour especially in the long-term as well. The need to attract labour from outside to secure growth and competitiveness is increasing and there is indication of a lack of labour within the low-wage industries as well as highly educated labour and specialists within certain industries. The demographic development will also mean that it can become more difficult to get hold of the competencies we need within a relatively foreseeable future. The number of foreign employees has increased over recent years. Figures from Jobindsats.dk and Statistics Denmark show that especially Poles and Germans The demography is pointing in the wrong direction 9

come to Denmark to work and that every 16th employee in Denmark today is a foreign citizen. This corresponds to six percent of all employees. Other countries in Europe have a similar demographic development Figure 1 We will have difficulty coaxing Germans and Poles in particular to Denmark in the future. Germany and Poland are experiencing an economic upturn with increased employment and, therefore, will come to lack labour themselves, see figure 1. A prognosis from the EU s statistics office, Eurostat, shows that the number of German and East Europeans of working age (15-64-years old) will drop significantly in the coming years. Up towards 2030, the population of working age will, on the whole, drop by almost 17 million in the 28 EU member countries, while the population outside of the working age will increase by 28 million. Labour shortage 2014-2030 Age 15-64, 2014-2030, change in pct. ½ mio. more Swedes < 10 pct. 10 pct. 3 pct. 3 pct. 3 pct. 3 pct. 10 pct. 10 pct.< 6 mio. less Germans 3 mio. less Poles NOTES: Albania, Montenegro, Bosnia and Herzegovina, Macedonia and Serbia lack data. Cyprus and Malta are not included in the map. SOURCE: Eurostat, 2010-based Population Projections (EUROPOP2010). 1.2. The Single European Market s freedoms create growth and jobs The Single European Market ensures freedom to trade and move freely across Europe s borders and these are significant prerequisites for growth as well as job creation in the EU. 10

Denmark s increasing need for more who will contribute to the Danish labour market requires that we safeguard the free movement of labour in the EU and support initiatives that try to reduce barriers to mobility. 11

2. Frameworks and applicable main principles in European and Danish legislation 2.1 The foundation for the EU regulation of the welfare systems 15 2.2 Neighbour check what do other countries do? 20

2. Frameworks and applicable main principles in European and Danish legislation The report s recommendations as described in chapter three are based on an analysis of the EU regulation of the labour market oriented welfare benefits, split up into three legal sub-analyses and an analysis of other countries conditions and practices in the area 1. Recommendations build on analyses of the EU regulation The purpose of the analyses is to provide a professional, well-founded insight into key conditions regarding migrating labour and its access to the Danish support systems and other countries practices as well as political considerations in the area. The analyses will thus support an assessment of to which extent it is possible to achieve the goal of more robust support systems for immigration through European initiatives or whether the challenges must be solved primarily within Denmark s borders. 2.1. The foundation for the EU regulation of the welfare systems Since the Rome Treaty in 1957, the principle of creating a still closer cooperation (ever closer union) has been a central aspect in the member countries efforts to create a joint European space. However, this does not mean that through harmonisation of the countries and their systems a more uniform Europe is created. To the contrary, the individual countries differences, including the cultural and linguistic diversity, must be protected and strengthened. Support cross-national cooperation and respect for diversity 1 It concerns the following analyses: The Treaty, the Charter and the regulation no. 492/2011 on freedom of movement for workers. The Free movement of Citizens Directive. Regulation no. 883/2004 on the coordination of social security systems. A neighbour check: EU mobility and social security systems in Denmark, Germany, Sweden, Belgium and Great Britain. 15

The member states differences are manifested in many ways, e.g. in the structure of the states welfare systems where there may be differences in the size of the benefits and in how finely meshed the social network is arranged. The EU regulation is built on the diversity in the social systems in the member states being recognised and respected in the supranational regulation. At the same time, the approach in the EU regulation must be based on common sense so that there is a healthy balance between the EU regulation and national room for manoeuvre. Recognition of the European welfare systems diversity must go hand-in-hand with a close cooperation between the countries so that the diversity does not place obstacles in the way of the labour s mobility or invite misuse. The regulation has been developed over many years and in various contexts. Therefore, the European regulation appears, in some points, as out of date and with an increasing need for adjustments that ensure that the member countries can continue to regulate their respective social security systems nationally. The main part of the European set of rules within the area of social security has been developed before the enlargement by 10 new countries in 2004. As a result, the rules are developed with regard to social systems that are more homogenous than they are today where differences between the 28 countries social security systems are substantial. The juridical analyses point specifically to the following points of attention: Fundamental principles The leading principles in the EU regulation the equality principle, the aggregation principle and the exportability principle are important instruments to support the mobility of labour because they ensure that the migrating employee is not treated differently and does not lose his rights when he moves across the bor- 16

der. At the same time, the principles can, however, be used by EU citizens who do not move in order to seek employment and thus support inadvertent use. The principle of equal treatment The equal treatment principle ensures that citizens in a member state, in relation to access to social security benefits, are in an equal position as the citizens in the member state in which they are residing or employed. The reverse also applies, in that they must contribute to the system they are covered by. The equal treatment principle also means a prohibition against both direct and indirect discrimination, e.g. by setting out granting criteria, which the state s own citizens can fulfil more easily than the other EU/EEA citizens. Fact box The principle of aggregation The principle of aggregation ensures that people do not lose rights because they move to another member state or gain employment in another member state. Aggregation in order to acquire the right to a benefit means that where a country s legislation contains regulations that a person must be insured or employed for a certain period before the person can achieve the right to benefits, the decision on whether these conditions are fulfilled, consideration is taken of the person s residence, insurance or employment periods (qualification period) in another member state. The principle of exportability The principle of exportability means that the social security benefits can be paid out everywhere within the EU/EEA. The principle is based on ensuring the entitled person against loss of income as a result of moving to (or living in) another member state than from where the benefit is being paid. The principle of exportability thus protects acquired rights. There may be exceptions from this principle, which are particularly relevant to unemployment benefits. These can only be exported for 3-6 months and under special conditions. 17

Lack of coincidence between financing and control The term employee is interpreted broadly The EU regulation ensures, for example, that there is always coincidence between the EU country that will finance the social benefits and the EU country that checks whether the conditions to receive the benefits are fulfilled. The term employee is determined in a number of different EU legislative acts, including among others, in the Treaty. The concept is, therefore, an EU legal concept which the member countries cannot interpret. Only the Court of Justice of the European Union can and the Court of Justice s interpretation is very broad. The term employee is not defined further in the EU legislative acts. For a large number of rulings, the Court of Justice of the European Union has interpreted and filled in the concept. The Court of Justice of the European Union s practice shows that quite modest requirements are made on earnings and working hours when it is decided whether one is an employee or not. For example, the Court of Justice of the European Union has made it clear that one is an employee even though the earnings are below the host country s set subsistence minimum or even though one only works just a few hours per week (10-12 hours). It seems obvious to suggest a further detailed EU legal definition of the term employee in the EU law. The issue that the concept is developed by the Court of Justice of the European Union on the basis of, e.g. the Treaty s provisions, raises however the question of how such a further detailed determination of the concept should occur and which type of legislative act would be necessary. However, it seems natural that the EU member countries can define the term employee in the legislative acts that ascribe special rights to employees. For example, some principles could be formulated in regulation no. 883/2004 on the coordination of the social security systems, in The Free Movement of Citizens Directive, in the regulation on freedom of movement for workers, etc. 18

However, one needs to consider whether such a concept clarification, on which all the member countries must agree, would be able to achieve the desired goal. The Court of Justice of the European Union s practice builds on various primary legislation and in order to be sure of being able to achieve the desired effect, all legislative acts must probably be changed, including the provisions of the Treaty. Consequently, it is not certain that it would be enough with an isolated limitation of the term employee in the individual legislative acts. The rules on aggregation of periods with employment or insurance in EU countries means that on the basis of brief stays in Denmark combined with periods of employment or insurance in other EU countries, an EU citizen can fulfil the requirements which the Danish rules set up for access to benefits. For example, this applies in relation to access to disability pension where for Danish citizens, permanent residency in Denmark for three years is required, while EU citizens need one year permanent residency or employment in Denmark combined with periods of residency or employment in other EU countries to be able to be granted an disability pension. The principle of aggregation challenges the perception of earning requirements Another example is the rules for maternity benefits where EU citizens can receive the benefit by consolidating periods of employment or insurance in other EU countries with quite shortterm paid employment in Denmark. A possible rule adjustment at national level must, however, take into account relevant rules at EU level. Especially regulation no. 883/2004 contains a number of provisions that are relevant in connection with the changing of national requirements regarding, e.g. earnings or criteria for granting of a given benefit. It is in Denmark s interests that the attractive welfare systems, in a European context, are not used in an inappropriate way. Therefore, it is also important that Danish authorities regularly ensure that the rules for Lack of control and cooperation 19

granting and payment of benefits to EU citizens are complied with. Despite the fact that in recent months Denmark has entered into several bilateral agreements with selected EU countries, there is still a need to improve the authorities possibilities as far as control and cooperation are concerned across national borders. The control of payment of benefits to other countries is insufficient and the cooperation with other countries authorities needs to be built up and expanded. 2.2. Neighbour check what do other countries do? The juridical analyses are supplemented by a review of four countries practices and experiences in the area. In the following, the essence of the country review is represented and a careful conclusion is ventured on where inspiration could possibly be obtained for a Danish handling of the issue. Denmark as reference point Increased unemployment among EU28 citizens The neighbour check begins with a presentation of the labour mobility in Denmark in order to serve as a reference point for the subsequent review of the four selected countries; Germany, Sweden, Belgium and Great Britain. Over the past seven years, Denmark has experienced increasing employment participation for EU citizens. Unemployment for the group in the same period has increased, which means that the employment frequency has dropped. However, employment for EU citizens continues to be higher than for Danes. 20

The calculation of EU28 2 citizens draw on the Danish welfare benefits shows that 5,739 unemployment benefit recipients, which corresponds to 4.8 percent of the total number of unemployment benefit recipients, came from another EU country in 2013. Even though the total number of EU citizens continues to constitute a small proportion of unemployment benefit recipients, they are overrepresented in the unemployment statistics. In comparison, EU citizens constitute 4 percent of the fulltime employed employees in the first quarter of 2015, see Jobindsats.dk. The figures from the first quarter 2014 show that 115 newly unemployed people from Eastern Europe, which corresponds to 10.8 percent, were not employed in Denmark in the year up to their unemployment period, but there is a handful that has come to Denmark just before their unemployment period. Relatively larger draw on unemployment benefits However, extremely limited application for Danish unemployment benefits from newly unemployed Eastern Europeans Out of the 115 newly unemployed people from Eastern Europe, there are just 12 people who moved to Denmark in the year immediately before the unemployment benefit period. This corresponds to almost one percent of the commenced unemployment periods for the Eastern Europeans in the first quarter. By far the majority of Eastern Europeans who begin receiving unemployment benefits in Denmark have thus been employed and/or have resided in Denmark for a long time prior to receipt of unemployment benefits. So saying, there is no basis for a suspicion that Eastern Europeans would travel here purely due to the prospect of Danish unemployment benefits, possibly with the exception of an extremely limited number of instances. 2 EU28 stands for the 28 EU member states, however, without the reporting country. EU10 stands for the Eastern European member countries, Bulgaria, Poland, Romania, Slovenia, the Czech Republic, Slovakia, Hungary, Estonia, Latvia and Lithuania. EU11 is the EU10 countries plus Croatia. EU13 stands for the member countries that have been included since 2004, i.e. Estonia, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, the Czech Republic, Hungary and Cyprus. In 2007, Bulgaria and Romania were included and in 2013, Croatia was added. EU15 stands for the old EU countries, i.e. the members before 2004. 21

Table 1 Number of recipients of unemployment benefits Citizens 2010 2011 2012 2013 All recipients 130,758 128,022 128,676 118,529 Of which EU/EEA/EFTA in total 3,842 4,249 4,975 5,739 - proportion of all, percent 2.9 3.3 3.9 4.8 NOTES: Unemployment benefits incl. education benefit - both re-training and passive unemployed are included. SOURCE: The Danish Ministry of Employment, EUU ordinary part, final answer to question 11 of 6 February 2015. Same draw on child benefits as Danes In 2012, a total of almost 690,000 people received child benefits. The number of EU citizens who received child benefits was 25,600 people. Of which 10,700 citizens from EU10 (Eastern European member states) received child benefits, see table 2. EU citizens constituted 3.7 percent and EU10 citizens 1.5 percent of the total number of recipients, which corresponds to their proportion of the Danish population between 16 and 66 years of age. Table 2 Number of recipients of child benefits Citizenship 2009 2010 2011 2012 EU/EEA/EFTA in total 21,900 22,600 24,200 25,600 - proportion of all recipients, percent 3.1 3.2 3.5 3.7 NOTES: Based on information on payments in the fourth quarter in the relevant year. The law model calculation on a random sample of 33 percent of the population. SOURCE: The Danish Ministry of Taxation, Folketinget's European Affairs Committee 2013-2014, EUU ordinary part, appendix 286 of 18 February 2014 - table 2. The below figure 2 shows that the number of foreign citizens who received benefits for children residing outside of Denmark has increased from approx. 2,700 in 2008 to approx. 4,800 in 2012. 22

Number of foreign citizens receiving child benefits for children residing outside of Denmark Figure 2 SOURCE: The Danish Ministry of Taxation's memo to Folketinget's European Affairs Committee, "Facts on migrating employees' right to child benefits" of 18 February 2014. A total calculation of Danes who receive child benefits for children who live outside of Denmark does not exist. However, figures from 2013, for example, show that the German state paid Kindergeld in 2013 for 2,750 Danish children living in Germany 3. Included in the total calculation is also that regardless of their draw on welfare benefits and an increase in unemployment, Eastern Europeans are net contributors to the Danish coffers, see figure 3. 3 SOURCE: Bestandsstatistiken Kindergeld der Bundesagentur für Arbeit (BA). 23

Figure 3 20.000 Eastern Europeans contribute to the state coffers Net contribution to state coffers, DKK per person (full year), 2012/2013 (2014-prices) 20.000 15.000 15.000 10.000 10.000 5.000 5.000 0 0-5.000-5.000-10.000 Danes Eastern Europeans -10.000 NOTES: Eastern Europeans are citizens from Poland, Hungary, Estonia, Lithuania, Slovenia, the Czech Republic, Slovakia, Bulgaria, Latvia and Romania. Danes are people with Danish citizenship (including also immigrants and descendants who are Danish citizens). In the calculation, all public income from and expenses to Eastern Europeans are included. The calculations are a snapshot of Eastern Europeans' contribution to the public income, e.g. income taxes and VAT and possible draw on public coffers, including social security recipients and hospital expenses. The statement also includes costs that are not related to people, e.g. expenses for defence forces and road construction. Since these expenses would probably also have been paid if Eastern Europeans had not come to Denmark, the calculations may be an underestimate of the net contribution to the state coffers. The actual contribution can, therefore, be far higher. SOURCE: Own calculations on Statistics Denmark Income Register 2012, Migration Register, Population Register as at 1 January 2012 and 1 January 2013 as well as DREAM. EU citizens generally have high employment One of the conclusions from the neighbour check is that generally, EU citizens have a high occupation and employment frequency in all the selected countries. This supports our assumption that these citizens move in order to work. It is also worth noting that there has been an increase in the number of employed EU citizens in Denmark and in the four selected countries, of which Denmark has experienced the largest relative increase, see figure 4. As far as EU citizens draw on the welfare benefits selected in the report are concerned, a less clearcut picture appears. As far as some benefits are concerned, we can establish an overrepresentation of the national population compared to EU28 or one of the sub-groups, EU13 or EU15, while the situation is the reverse for others. For example, the British constitute 6.3 percent of illness benefit recipients and EU28 citizens for just 1.9 percent, while the situation is reversed for unemployment benefits where 2.7 percent of the 24

British are recipients compared to 3.1 percent of EU28 citizens. 250 200 Growing number of employed EU citizens Developement in employed EU citizens in Denmark and the four chosen countries, age 16-64, index 2008=100 250 Denmark (106.900) 200 Great Britain Figure 4 150 (50.500) Belgium 150 100 Germany Sweden 100 50 50 0 2008 2009 2010 2011 2012 2013 2014 0 SOURCE: Own calculations, Eurostat [lfsq_egan]. 2.2.1. Germany The German (and central European) welfare model builds on a principle of employment for the individual as the basis for the right to benefits. Thus, the model is mainly based on mandatory labour market insurances pension insurance, unemployment insurance, health insurance and care insurance which are financed by employees and employers, respectively, with half each. The German welfare model In the labour market based welfare model, the access to and scope of welfare benefits is best for the employed and increases with the number of years in the labour market. On the other hand, those who find themselves outside of the labour market are, to a great extent, dependent on social networks and family. For example, the extended family breadwinner concept in German social legislation means that adult children have a financial responsibility for their parents. The demographic development in Germany is characterised by the population group of working age both Demographic challenges 25

shrinking and becoming older a tendency that puts the labour market under pressure and increases the need for immigration. The existing system for work migration is therefore, to a great extent, driven by demand and is an integrated part of the German government s demography strategy. Focus on the positive effect of immigration In Germany, focus is thus primarily on the lack of labour looking forward. Therefore, the discussion is about how to increase immigration. Even though the interest is not to have more people on public benefits, from the political side in Germany, one is heedful of mentioning the subject as problematic as ultimately it may harm immigration. Focus in Germany is therefore on ensuring a positive discourse on EU immigration. However, cases also come up where it is clear that the administration is also willing to test the right to reject EU citizens who have proved not to be active in the labour market. One example is the Dano case where one was willing to reject payment of cash benefits to a woman, as it was believed that she had not proved that she was active in the labour market which was also supported by the Court of Justice of the European Union. Also, in the Alimanovic case, the European Court of Justice consolidated Germany s decision to exclude EU citizens from certain non-contributory social benefits. 2.2.2. Sweden The Swedish welfare model Sweden s welfare model is often termed as the universal model, under which also Denmark and the other Nordic countries primarily belong. The model is characterised by solidarity since, as a basis, there is equal access to welfare benefits for the entire population without it being connected to prior financial contribution. In the universal welfare model, it is primarily the public sector that offers and bears the responsibility for welfare benefits. 26

Compared to the other selected countries, Sweden has a smaller demographic challenge. Up to 2050, Sweden will have 700,000 extra people over the age of 65, but in the same period there will also be a growth of almost one million people of working age. More in the working age A look at EU citizens employment and draw on the relatively generous Swedish welfare system shows that especially central and Eastern Europeans have a significantly higher relative consumption of the benefits. For example, 25.7 percent of EU13 citizens receive child benefits, while the proportion is 16.9 percent for EU15 citizens and 17.6 percent for Swedes, respectively. The tendency applies especially to unemployment, maternity and child benefits. In Sweden there has so far not been any initiative (neither in terms of legislation nor case processing) to change the Swedish immigration patterns from other EU countries. It can be mentioned, though, that Sweden recently as a consequence to the growing number of refugees seeking asylum in the country introduced temporary border checks. No initiative 2.2.3. Belgium The main features of the Belgian welfare model resemble the German one and thus belong to the Central European welfare model. The Belgian welfare model Just like Germany, the Belgian model has participation in the labour market as a key parameter for the granting of social benefits, but also here, there is a desire for a high degree of employment and a certain equality level. Employers and employees pay to social insurance schemes (approx. 13 percent, respectively 34 percent of gross salary), which will insure the individual. The state s role is to insure a certain minimum for people who are not covered in the labour market. In Belgium, there is no general public debate on the free movement of labour in Europe. The country is Used to immigration 27

used to large immigration from, e.g. Southern Europe and North Africa, and the country s divided structure makes a national debate difficult. However, there is major political focus on the steadily growing group of inactive people, e.g. job seeking EU citizens who come to Belgium and slide into the country s social system. Over a six-year period, (2008-2014) Belgium has experienced a large increase in the inflow of EU citizens and at the same time, a relatively large proportion of these citizens are outside of the labour market and draw on public social benefits and healthcare systems. Stricter case processing and control As a reaction to this development, the Belgians have chosen to focus on the case processing and have not, as such, introduced new legislation in the area. Consequently, Belgium uses the Right of Residence Directive, to a great extent, to reject EU citizens who become a burden on society. The Belgian employment service has created a close cooperation with the social benefit payers in the municipalities. If EU citizens are registered who are considered as working too little or receiving too large support amounts, the Belgian Immigration Service will be immediately contacted. This interprets the right of residence very stringently and therefore, large groups of EU citizens are ordered out of Belgium. Spain and France especially are very dissatisfied with the Belgian practice and, therefore, there is a certain risk of legal proceedings with the Court of Justice of the European Union. 2.2.4. Great Britain The British welfare model The British welfare model is also called the residual or liberal and is mainly found in the English-speaking countries. This model is characterised by a small public sector and low taxation rates. 28

Since the social benefits are primarily reserved for the low-income group, it is difficult to qualify for the benefits, which are also limited in both scope and value. One of the reasons for the limited access is that according to the model s own assumptions, there would be a tendency to utilise the welfare benefits instead of working. Great Britain s welfare system is thus also characterised by considerably lower rates than, e.g. the rates in Denmark and Sweden, which belong under the universal model. With Cameron s re-election and the coming referendum on Great Britain s participation in the EU, clear lines have been laid for Cameron s current negotiations with the EU. In a letter to the President of the European Council, Donald Tusk, Cameron presented his requests to Great Britain s future role in the EU. One of the demands in the letter is new and more restrictive rules for EU citizens access to Great Britain s support system. Focus on changing legislation Great Britain s national initiative in the area has primarily been a legislation change and thus the introduction of Universal Credit (UC) 4, which will reduce the power of attraction of the British social security system and the British ordinary support system for EU citizens. At the same time, work is being done on stopping the payment of child benefits to children who do not live in Great Britain, just as the housing subsidy for EU citizens has been done away with. 4 Universal Credit (UC) is a new overall social benefit that replaces the earlier contributions such as housing subsidy, income deduction, child benefits and cash benefits. The expectation is that UC will be fully implemented in 2018. The amount will be offset from income and wealth and will be set individually. The benefit requires British citizenship or residency in Great Britain for three months for EU citizens. From 1 March 2015, new and stricter rules apply for migrants, which mean that EU citizens cannot receive UC without being in employment. In addition, newly arrived EU citizens will not have access to housing subsidy and must leave the country if they are not in employment after three months in the country. 29

Currently, it is unclear whether the initiatives are in conflict with the EU law and can end up being rejected by the Court of Justice of the European Union. 2.2.5. Tentative conclusions Two possible approaches In general, there are two kinds of reactions in the surveyed countries: Stricter/changed national legislation. Increased control of immigration via stricter case processing. Both initiatives open up for legal proceedings from either the EU Commission or other European countries with the Court of Justice of the European Union. Which effect do the approaches have? If you look at the figures, it is difficult to assess which effect the two approaches have. Great Britain has the lowest proportion of EU citizens on public benefits, but this was also the case before Universal Credit was introduced (which is also not fully implemented yet). However, something works in Great Britain. EU citizens have high employment and low consumption of welfare benefits when compared with both the British and with other countries. It seems that a very useful group of EU citizens have been attracted in Great Britain. At the same time, the relatively low benefit level may be of importance. General conclusion Just like in many other contexts, it is sensible and fruitful to be inspired by other countries experiences, but it is just as difficult to transfer specific practice from one country to another. The same applies to the member states social security systems and the handling of the free movement of labour. 30

With this important condition in mind, we can establish that Great Britain, despite the so far open systems, is not exposed to inadvertent use of their welfare benefits and is obviously able to attract EU citizens who come and are able to work and contribute to society. Moreover, there is something that indicates that Belgium seems to be better equipped to prevent inadvertent use of their welfare system than the other countries through, among other things, a relatively tightknit control and strict interpretation of The Free Movement of Citizens Directive. The neighbour check also shows that the member states are, to a certain extent, willing to explore the EU frameworks when national legislation is being drawn up. A clarification of whether the national legislation in such case would be in conflict with EU legislation, will subsequently be tested by the Court of Justice of the European Union. When you look at the actual figures for EU citizens draw on the Danish welfare systems, there is generally no indication that EU citizens seek towards Denmark in order to get access to Danish welfare benefits. However, there is a certain overrepresentation of EU citizens on cash benefits in relation to Danes, also when the relative sizes of these groups is taken into account. At the same time, figures for the draw on, e.g. state education grants (SU), shows that there is a significant increase in the payments to EU citizens from the new EU member countries. It is also clear that other EU countries are better at carrying out checks of whether the conditions for residency, etc. according to the EU regulations are fulfilled and to cooperate with authorities in other EU countries. 31

3. Specific proposals for changes 3.1 Introduction 35 3.2 General considerations on adjustment of the EU sets of rules 37 3.3 Cash benefits 39 3.4 Disability pension 42 3.5 Child benefits 44 3.6 Unemployment insurance 45 3.7 Sickness benefits 52 3.8 Maternity benefits 55

3. Specific proposals for changes 3.1. Introduction The current European political landscape is characterised by a number of events that play a significant role in the discussion on free movement. Partly, it is the British government s current negotiations with the EU on the coming referendum on a possible Brexit. Partly, it is the EU Commission s presentation of a mobility package with prior analyses of and negotiations on, e.g. the Posting of Workers Directive. Moreover, negotiations are in progress on regulation no. 883/2004 on the coordinating of social security in the administrative committee established for this. Considerations about the European political context are included in the drawing up of the proposals below for adjustments. The proposals have been prepared on the basis of the analyses of the EU Treaty s rules on the free movement of labour, the regulation on the free movement of labour, the Right of Residence Directive and the regulation on the coordination of social security systems with associated legislation acts. The political context Analysis basis The goal of the proposals is to ensure that the rules on the free movement of labour remains undisputed while also ensuring the possibilities for adjustments in the Danish welfare systems so that these always contain the necessary incentives to seek towards employment instead of towards passive support. The assessment is, however, that the proposals will not affect the free movement of labour. With a view to avoiding the prevention or limitation of free movement in the EU, DA has therefore initially chosen to focus on the following social systems that are directed towards the EU citizens who are not in the labour market: Cash benefits 35

Disability pension DA has also taken a look at the options to formulate proposals that can counteract inadvertent use of the following labour marketrelated social benefits without limiting or preventing free movement of labour: Child benefits Unemployment insurance Sickness benefits Maternity benefits Proposals for changes in Danish rules Proposals for changes in the secondary EU rules Treaty amendments require a very comprehensive process Not proposals for change to the term employee in the EU Treaty The proposals are split into two categories. The first category is for administrative changes and changes in the Danish rules of law that can be implemented within the applicable EU legal frameworks. The second category is for a change of the EU rules. Most often, there will not be proposals in both categories in relation to the individual social system. The proposals for change in the EU rules are focused on changes in the secondary legislation acts, i.e. proposals on actual treaty amendments are not included. The reason for this omission is the very comprehensive process that applies to the adopting of treaty amendment proposals. The assessment is that proposals that require treaty amendments will not have the sufficient realism to be implemented within a shorter number of years. Possibilities to be able to implement an effective limitation of the term employee in the individual legislative acts, which would function in connection with other EU legislative acts, will, in our perspective, be very limited. Therefore the report does not contain a proposal to have a change to the term employee changed in EU law with a view to ensuring that it includes economically active citizens to a higher degree. 36

The debate on the challenges facing the member countries welfare systems is not new. Therefore, various stakeholders have analysed the problems and formulated proposals as to how one meets these challenges. This applies to within the EU system in the form of The Administrative Commission for Coordinating Social Security Systems, which is established by all member states with a view to establishing a forum where one can discuss common challenges with regulation no. 883/2004. It also applies to the Advisory Committee on Free Movement of Workers and the Advisory Committee on Coordination of Social Security. The think-tank tress has prepared a number of reports on regulation no. 883/2004 and in this regard, has indicated proposals for improvements. Finally, the thinktank Europa, has formulated a number of proposals in the report Social benefits and free movement four suggestions on the way ahead from June 2014. The proposals build on inspiration from other stakeholders proposals 3.2. General considerations on adjustment of the EU sets of rules The possibilities for inadvertent use of the social welfare systems will generally increase when the paying or financing authority does not have the option to check whether the recipient of the benefit fulfils the conditions to receive the benefit. The EU sets of rules build fundamentally on a coupling between the paying and controlling authority. However, a disconnect occurs of this connection in regard to the exportability of the benefits. For example, this applies to unemployment, illness and maternity benefits. Limitation in exportability with the insufficient control possibility 37

The consequence of a lack of symmetry is that different rules apply to EU citizens who live in Denmark and EU citizens who live in other EU countries. Considerations on coincidence between financing and control Therefore, looking forward, one should ensure that there is coincidence between the financing member state and the member state that can/must check that the conditions for the individual s right to the social benefit are fulfilled. Specific proposals have been drawn up under unemployment, illness and maternity benefits. A more general protection of the member states social systems against inadvertent consequences of the rules on the free movement and coordinating of social security are described in a consideration for the regulation on coordinating of social security. One could consider a kind of protective clause, which the member states can use in special situations where the rules lead to some inexpedient results. The challenge with a protective clause such as this is, however, the Court of Justice of the European Union will interpret this clause as restrictive and probably de facto disregard it if it goes against more fundamental EU legal principles. Thus, completely similar considerations apply to such a protective clause, as applies to a limitation or clarification of the term employee in specific EU legislative acts. Consideration to introduce a protective clause One could consider setting a few criteria in the EU, which determines when a member state can oppose providing social benefits to an EU citizen because the equal treatment principle leads to objectively unreasonable results. 38

Subsequently, specific proposals for the individual types of benefits are presented. 3.3. Cash benefits Cash benefits must establish a financial safety net for people who cannot provide for themselves in Denmark. The foundation for the set of rules is Paragraph 75 of the Danish Constitution. In order to be considered for cash benefits, people must have been exposed to a social event, i.e. unemployment, illness, change of cohabitation relationship, etc. The rules are apparent in the law on active social policy. EU citizens must have legal residency in Denmark in order to have access to Danish cash benefits. Cash benefits are primarily regulated by the rules in the Right of Residence Directive and the regulation on the free movement of labour. Purpose EU citizens must fulfil residency requirements Denmark is not obliged to provide cash benefits to people who reside in Denmark without working for the first three months. If EU citizens are not selfsupporting and not seeking a job, the EU citizen can be expelled from Denmark after three months stay. EU citizens who are seeking jobs can stay in Denmark as selfsupporting for up to six months. These people will only be given help for the return home if they do not find employment. Cash benefits cannot be taken back to the home country upon relocation from Denmark. The municipality can accept that cash benefits are taken abroad during shortterm periods. Firsttime job seekers are given help for the return home Cash benefits are not exportable If the EU citizen has had a job in Denmark and has become unemployed through no fault of his own, the EU citizen reserves the right to stay in Denmark as a job seeker. The EU citizen has the right to a social benefit for up to six months as job seeker, as long as he or she 39

meets the Danish requirements. The EU citizen can be expelled from Denmark after the expiry of these six months if the EU citizen has not found work. If the EU citizen has had a job in Denmark for more than one year, the above mentioned six months limit does not apply. The EU citizen s situation will then be assessed according to the rules on availability for job seekers and must, among other things, be registered with the job centre. Access to permanent residency after five years in Denmark Resource development benefit will be treated as cash benefits If an EU citizen resides in Denmark legally for five years, the EU citizen has the right to permanent residency in Denmark. Thus, the EU citizen will have access to social benefits on equal terms as Danes. The right to permanent residency will only be lost upon absence from Denmark for two consecutive years. The Danish government has assessed that the resource development benefit is a benefit similar to cash benefits and is thus not covered by regulation no. 883/2004. The benefit is a social advantage like cash benefits. This means that when an EU employee has achieved the status as employee in Denmark and has also fulfilled the conditions for this, the person can be referred to resource development. Doubts can be raised about this assessment. Improvement potential administrative rules The State Administration s control of whether a person is selfsupporting is not systematic when they have only once checked whether the conditions are fulfilled. There should be a closer followup on whether the conditions are fulfilled. This followup must be within the EU legal frameworks, which forbids systematic control. There should be special focus on people who reside in Denmark as selfsupporting; given that after five years these people achieve the right to permanent residency in Denmark. 40

There should likewise be a thorough control of whether EU citizens who have the status as employees, but are without a job after six months, are deprived of their basis for residency in Denmark. Improvement potential EU rules According to the Right of Residence Directive, a member state can refrain from provide social benefits to a person who is not an employee if the person would be an unreasonable burden on the country of residency. Most recently in the Dano case, C-333/13, the Court of Justice of the European Union ruled that Germany could easily refrain from paying social benefits to a person who had no intention to work or be available to the labour market in Germany. One should revise the rules in the Free Movement of Citizens Directive with a view to clarifying that the member countries may refrain from providing social assistance to EU citizens who are not available to the labour market. The proposal assumes that the EU citizen has not been given the right to indefinite residency in the relevant member state. Proposals to change the rules of the right of residence directive regarding the burden on a country s social system The EU rules contain a prohibition against starting up a systematised control of EU citizens who are not a native of the member state. However, the neighbour check shows that Belgium has success in conducting a comprehensive control of whether EU citizens fulfil the conditions for legal residency, etc. and the necessary legal basis so that other countries can initiative effective control measures, should be ensured. 41