Further proposals to restrict migrants access to benefits

Further proposals to restrict migrants access to benefits Standard Note: SN07145 Last updated: 20 March 2015 Author: Section Steven Kennedy Social Policy Section Since the beginning of 2014 a number of measures have been introduced limiting access to benefits for migrants coming to the UK from elsewhere in the European Economic Area (EEA). People arriving in the UK looking for work now have to wait three months before they can claim Jobseeker s Allowance, Child Benefit and Child Tax Credit. EEA jobseekers and former workers must now satisfy a new, strict genuine prospect of work test in order to continue to receive their benefits. EEA jobseekers can no longer access Housing Benefit, even if they are in receipt of JSA, and will be prevented from claiming Universal Credit. Further information can be found in Library briefing SN06889, Measures to limit migrants access to benefits. In his keynote speech on immigration on 28 November 2014, the Prime Minister set out plans to secure agreement on changes to European law on free movement of persons in order to allow the UK to, among other things, deny EEA migrants in-work benefits for four years and prevent Child Benefit being paid for children living abroad. Proposals to further restrict EEA migrants access to benefits have also been put forward by Labour and by the Liberal Democrats. This briefing looks at the proposals that have been put forward by all three parties, and at some of the obstacles in existing EU law to implementing them. A separate Library briefing, Reforming the EU: UK plans, proposals and prospects, considers the likelihood of agreement being reached on reforming the principle of free movement throughout the EU, to achieve the Prime Minister s vision of free movement to take up work, not free benefits. This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to address the specific circumstances of any particular individual. It should not be relied upon as being up to date; the law or policies may have changed since it was last updated; and it should not be relied upon as legal or professional advice or as a substitute for it. A suitably qualified professional should be consulted if specific advice or information is required. This information is provided subject to our general terms and conditions which are available online or may be provided on request in hard copy. Authors are available to discuss the content of this briefing with Members and their staff, but not with the general public.

Contents 1 EEA nationals and benefits: an overview 3 1.1 Measures introduced since December 2013 restricting access to benefits 3 2 EU law on freedom of movement and access to benefits 4 2.1 The Dano case 6 3 Parties positions on further measures 7 3.1 Labour 8 3.2 Liberal Democrats 8 3.3 Conservatives 8 4 Commentary on selected proposals 9 4.1 Denying EEA migrants in-work benefits 9 4.2 Raising the minimum earnings threshold to limit access to in-work benefits 10 4.3 Stopping Child Benefit and Child Tax Credit for children not living in the UK 10 2

1 EEA nationals and benefits: an overview People coming to the United Kingdom from countries in the European Economic Area (EEA) 1 must satisfy the right to reside requirement to be able to claim certain benefits and tax credits. 2 The test applies to means-tested benefits (Income Support, income-based Jobseeker s Allowance, income-related Employment and Support Allowance, Housing Benefit, Pension Credit and Universal Credit), to Child Benefit, and to Child Tax Credit. An EEA national has a right to reside if they are a qualified person. A qualified person is a: worker (or someone who, though no longer working, has retained worker status); self-employed person (or a person with retained self-employed person status); jobseeker; self-sufficient person; or student (provided they can support themselves) 3 A person may also have a right to reside as a family member of a qualified person. A person may also have a right to reside based on another person s right to reside this is known as a derivative right to reside. For example, a person who was formerly a worker may have a right to reside as a primary carer of a child in education. Once a person has resided legally in the UK as a qualified person or as a family member of a qualified person for a continuous period of five years (or sooner in certain circumstances), they acquire a permanent right of residence. Periods when a person had a derivative right to reside cannot however count towards the five year requirement for permanent residence. Further information on EEA nationals rights to benefits can be found in Library briefing SN06847, People from abroad: what benefits can they claim? 1.1 Measures introduced since December 2013 restricting access to benefits Following an article by the Prime Minister s in the Financial Times on 27 November 2013 4 in which he said he shared concerns about the impact of lifting transitional restrictions on the rights of Romanian and Bulgarian nationals to work in the UK from 1 January 2014, the UK Government has introduced a raft of measures to tighten up our EEA migration rules to ensure our welfare system is not taken advantage of. They include: From December 2013, a stronger, more robust Habitual Residence Test for those claiming means-tested benefits. From 1 January 2014, people coming to the UK must have been living in the UK for three months before they can claim income-based Jobseeker s Allowance. 1 The EEA comprises the 28 EU Member States plus Iceland, Liechtenstein and Norway. Switzerland is not part of the EEA, but Swiss nationals have the same rights to live and work in the UK as other EEA nationals. 2 Additional transitional restrictions apply to Croatian nationals, following their country s accession to the European Union; see Henri Krishna, The accession of Croatia, Welfare Rights Bulletin 235, August 2013 3 Regulation 6 Immigration (European Economic Area) Regulations 2006; SI 2006/1003 as amended 4 David Cameron, Free movement within Europe needs to be less free, Financial Times, 27 November 2013 3

EEA jobseekers or former workers would have to show that they had a genuine prospect of finding work to continue to get JSA after six months (and if applicable, Housing Benefit, Child Benefit and Child Tax Credit). For those with a right to reside as a jobseeker the test is now applied after three months on JSA. From 1 March 2014, a new minimum earnings threshold to help determine whether an EEA national is or was in genuine and effective work, and so has a right to reside as a worker or self-employed person (and with it, entitlement to benefits). From 1 April 2014 new EEA jobseekers have been prevented from accessing Housing Benefits even if they are in receipt of JSA. From 1 July 2014, new jobseekers arriving in the UK would need to have lived here for three months in order to claim Child Benefit and Child Tax Credit. From 10 June 2015, EEA jobseekers will not be able to claim Universal Credit. Library briefing SN06889, Measures to limit migrants access to benefits, looks at the background to the changes, and at their likely impact. 2 EU law on freedom of movement and access to benefits The main provisions in EU law relating to freedom of movement and access to benefits for EEA nationals exercising free movement rights are summarised in a legal annex to the UK Government s July 2014 report, Review of the Balance of Competences between the United Kingdom and the European Union: Single Market: Free Movement of Persons. As regards free movement and associated provision in relation to social security and welfare benefits, key measures outlined in the annex include: The Treaty on the Functioning of the European Union (TFEU), and in particular- o o o o Article 18 TFEU (non-discrimination on the grounds of nationality); Articles 20 & 21 TFEU (as they relate to nationality, citizenship and free movement of persons); Articles 45-48 TFEU (free movement of workers); and Articles 49-53 TFEU (as they relate to the freedom of establishment of selfemployed persons). Directive 2004/38 (the Free Movement Directive) Regulation 492/2001 on freedom of movement for workers Regulation 883/2004 on the coordination of social security systems, and the associated implementing regulation 987/2009 A key provision is Article 45 TFEU which provides that Freedom of movement of workers shall be security within the Union. This right entails in particular the right not to be discriminated against on the grounds of nationality as regards access to employment, remuneration and other conditions of work (Article 45(2)). 4

The legal annex notes that: Workers are able to rely on Article 45(2) TFEU and Regulation 492/2011 as the basis for comprehensive protections against discrimination which go beyond the protections offered by Article 18 [which prohibits discrimination on the grounds of nationality]. They are explicitly protected from discrimination between workers of the Member States as regards employment, remuneration and other conditions of work and employment by Article 45(2). Where someone has ceased to be employed but retains worker status, that person remains within the scope of the Treaty in terms of the relevant protections against discrimination. 5 It further notes that The application of the equal treatment rule in Article 45(2) TFEU means that such persons will be entitled to in-work benefits in the same way as UK nationals. 6 Regulation 492/2011 (which replaced the long-standing regulation 1612/68) sets out details of the free movement rights of workers and defines specific areas where discrimination on grounds of nationality is prohibited. The legal annex states: 53. Article 7(2) [of Regulation 492/2011] guarantees workers the same social and tax advantages as national workers from the first day of the worker s employment in the host state. The ECJ has held that the term social advantage covers all advantages, whether or not linked to a contract of employment, that are generally granted to national workers primarily because of their objective status as workers or by virtue of the fact of their residence on the national territory, where their extension to workers who are nationals of other Member States seems likely to facilitate their mobility within the EU.[43] It covers both financial benefits and non-financial ones and the Court has found that the term covers welfare benefits in their broadest sense.[44] 54. Article 7(2) therefore guarantees access to the full range of welfare benefits available to UK nationals to EU migrants working in the UK and in that sense it covers a wider class of benefits than the EU social security regulation. It covers frontier workers, meaning that benefits have to be paid to workers, who work in the UK but live in other Member States.[45] Article 7(2) does not confer rights directly on family members of workers, but it does confer a right to benefits that the worker can obtain for his family.[46] It applies to both direct discrimination and indirect discrimination. This means that the UK has to design the entitlement conditions for its benefits carefully, making sure that unjustifiable residence conditions are not attached. 43 Martinez Sala v Freistaat Bayern Case C-85/96 [1998]. 44 Such as a child-raising allowance (Martinez Sala v Freistaat Bayern Case C- 85/96 [1998), a funeral payment (John O Flynn v. Adjudication Officer Case C- 237/94 [1994]), a redundancy payment (H Meints v Minister van Landbouw Case C-57/96 [1997]) and a disability subsistence payment. 45 H. Meints v Minister van Landbouw Case C-57/96 [1997]. 46 Centre public d aide sociale de Courcelles v Marie-Christine Lebon Case C- 316/85 [1987]. The Court of Justice of the European Union (CJEU) has made it clear that the definition of a worker is a matter for EU law and not for national law. 7 As the legal annex acknowledges, 5 Para 35, p74 6 Para 38, p75 7 Hoekstra v Bestuur der Bedrijfsvereniging voor Detailhandel en Ambachten Case C- 75/63 [1964]; Levin v Staatssecretaris van Justitie Case C-53/81 [1982] 5

this means that The UK cannot therefore define who is a worker for the purposes of Article 45 TFEU: it has to apply the concepts that have been set down by the jurisprudence of the Court. 8 One of the most controversial aspects of EU law in the area of social security is the provision under which a migrant may claim family benefits from the state in which they reside in respect of dependent children resident in another Member State. The provisions are in Regulation 883/2004 on the coordination of social security systems for people moving between Member States, but they have a much longer pedigree. EC Regulations have direct effect and Member States cannot unilaterally opt out of them. The key provision in Regulation 883/2004 is Article 67: Members of the family residing in another Member State A person shall be entitled to family benefits in accordance with the legislation of the competent Member State, including for his/her family members residing in another Member State, as if they were residing in the former Member State. However, a pensioner shall be entitled to family benefits in accordance with the legislation of the Member State competent for his/her pension. This means that, if an EEA migrant in the United Kingdom is covered by the UK social security system, they can claim Child Benefit and Child Tax Credit for their dependent children even if they are not resident in the UK. Where family benefits are already being paid, overlapping benefits provisions apply to ensure that the family is not paid twice (the total amount they receive will not exceed the amount payable by the state with the higher entitlement). 2.1 The Dano case On 11 November the Court of Justice of the European Union (CJEU) delivered its judgment in the Dano case. 9 The Court found that the Jobcenter in Leipzig, Germany, had not acted contrary to EU law when refusing to grant certain welfare benefits to a Romanian national, Elisabeta Dano, and her son Florin. Ms Dano had attended school in Romania for only three years, and had not obtained any leaving certificate. She had only a basic understanding of German. She had no training in any profession, and had never worked in Romania. She did not enter Germany in order to work, had not done any work since arriving, and was not looking for work. The Court ruled that for the purposes of accessing certain social benefits, EU migrants could only claim equal treatment with nationals of the host Member State if their residence complied with the conditions in the Free Movement Directive (2004/38/EC). Economically inactive persons, the Directive states, have a right of residence if they have sufficient resources for themselves and their family not to become a burden on the social assistance system of the host Member State. 10 The Court found that Ms Dano and her son did not have sufficient resources of their own and couldn t therefore claim a right of residence in Germany. Consequently, they could not 8 Para 38, p75 9 Case C-333/13; see also the Court s press release, Economically inactive EU citizens who go to another Member State solely in order to obtain social assistance may be excluded from certain social benefits 10 Article 7(1)(b) 6

invoke the principle of non-discrimination to gain access to benefits. The Court s judgement states: A Member State must therefore have the possibility of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement solely in order to obtain another Member State s social assistance although they do not have sufficient resources to claim a right of residence. 11 The judgment has been widely welcomed as a clear statement that Member States can take action to tackle benefits tourism. The Prime Minister has described the decision as simple common sense. 12 The full significance of the judgment is not yet clear, but some commentators have suggested that it indicates that the Court is taking greater notice of wider political debates about free movement. It has also been suggested that while the judgment gives Member States powers to deal with more obvious cases of benefits tourism where migrants have no connection with the labour market, are not looking for work, and have moved from one country to another solely in order to claim benefits it does not necessarily give Member States the further scope to limit access to benefits in other situations, e.g. where migrants are in work or looking for work. Further analysis of the Dano case can be found in the following commentaries: Steve Peers, Benefit Tourism by EU citizens: the CJEU just says No, EU Law Analysis blog, 11 November 2014 Daniel Thym, EU Free Movement as a Legal Construction not as Social Imagination, eutopia law blog, 13 November 2014 Iyiola Solanke, The End of Free Movement of persons? The CJEU Decision in Dano, eutopia law blog, 13 November 2014 Michael Emerson, The Dano case Or time for the UK to digest realities about the balance of competences between the EU and national levels, CEPS Commentary, 14 November 2014 Desmond Rutledge, Dano and the exclusion of inactive EU citizens from certain noncontributory social benefits, blog at www.freemovement.org.uk, 19 November 2014 3 Parties positions on further measures Labour, the Liberal Democrats and the Conservatives have all signalled their support for further measures to limit access to benefits for EU migrants, on top of those already introduced. 11 C-333/13, para 78 12 EU 'benefit tourism' court ruling is common sense, says Cameron, BBC News, 11 November 2014 7

3.1 Labour The Shadow Secretary of State for Work and Pensions, Rachel Reeves, announced a credible three point plan for further limits on access to benefits for EU migrants in an article for MaiIOnline on 18 November 2014: 13 extend the period that EU jobseekers need to live and support themselves in the UK before claiming out-of-work benefits from three months to two years. Action on in-work benefits including tax credits, to tackle the problem whereby some employers in Britain undercut wages and working conditions by recruiting temporary workers from elsewhere in Europe on very low pay and with no job security, knowing that the benefit system will top up their income. It is not clear whether the proposals would limit access to in-work benefits for all migrants, or only those on short-term contracts. Ms Reeves said that while some had said it would not be possible to negotiate changes to benefits for people in work, she was determined to look at how we can deliver reform in this area too. work with European countries to end the absurdity of child benefit and child tax credits being claimed for children living in other countries. 3.2 Liberal Democrats The Deputy Prime Minister, Nick Clegg, announced proposals for further restrictions on EU migrants access to benefits in an opinion piece in the Financial Times on 26 November 2014. 14 He said that Britain should- work with other states to stop EU migrants from claiming child benefit for children who are not living here. As a first step, we should pay the same rate as the country in which those children reside. make sure that only migrants who have worked and contributed can receive [Universal Credit]. New jobseekers should not be eligible. look at increasing the earnings threshold for in-work benefits such as tax credits. EU migrants could, for example, be required to work the equivalent of full-time hours on the minimum wage in order to qualify. 3.3 Conservatives In his long-awaited speech on immigration delivered on 28 November 2014, the Prime Minister set out plans to secure agreement on changes to EU law on freedom of movement. 15 In relation to benefits, Mr Cameron said that if he were Prime Minister after the election he would insist that- EU migrants would be denied in-work benefits until they had been in the UK for four years in the future those who want to claim tax credits and child benefit must live here and contribute to our country for a minimum of four years. 13 Labour to ban jobless EU migrants from claiming benefits for TWO YEARS under plan to curb welfare tourism, MaiIOnline, 18 November 2014; see also Labour will curb tax credits for EU migrants, says Rachel Reeves, Guardian, 19 November 2014 14 Nick Clegg, How to tackle immigration without risking prosperity, Financial Times, 26 November 2014; see also Clegg backs migrant benefit curbs, Financial Times, 26 November 2014 15 David Cameron's EU speech: full text, BBC News, 28 November 2014 8

Child benefits would no longer be payable for children of EU migrants not living in the UK If their child is living abroad, then there should be no child benefit or child tax credit at all no matter how long they have worked in the UK and no matter how much tax they have paid. Mr Cameron also said that EU jobseekers would not be able to claim Universal Credit and that this could be achieved within existing EU law. Regulations removing entitlement to Universal Credit for migrants whose only right of residence is as an EEA jobseeker were laid before Parliament on 9 March and come into force on 10 June 2015. 16 Further information can be found in Library briefing SN06889, Measures to limit migrants access to benefits. 4 Commentary on selected proposals 4.1 Denying EEA migrants in-work benefits As outlined in section 2 of this note, the Treaty on the Functioning of the European Union (TFEU) provides comprehensive protections against discrimination for those choosing to exercise their right of free movement in order to work in other Member States. A key provision is Article 45 TFEU which provides that Freedom of movement of workers shall be secured within the Union. This entails the right not to be discriminated against on the grounds of nationality as regards access to employment, remuneration and other conditions of work. The application of the equal treatment rule means that such persons will be entitled to in-work benefits in the same way as nationals of the host Member State. EU Regulation 492/2011 gives further details of free movement rights of workers and defines specific areas where discrimination on grounds of nationality is prohibited. Article 7(2) guarantees workers access to the same social and tax advantages as nationals of that Member State, and the Court of Justice has ruled that social advantages must be interpreted to cover welfare benefits whether financial or non-financial in their broadest sense. Furthermore, Member States cannot unilaterally redefine who is a worker in order to exclude persons who would be a worker under EU law. The Court of Justice has made it clear that the definition of worker is a matter for EU law, rather than national law. CJEU case law states that a person is a worker if the work they do is genuine and effective. For work to be genuine and effective, hours worked or earnings may be relevant, but other factors such as the duration of the employment and regularity of the work may also be considered. Worker status can in some situations be retained if the person is no longer working, eg if the person is temporarily unable to work because of illness. In his blog responding to the Prime Minister s speech Professor Steve Peers of the University of Essex said, in relation to the proposal to prevent EU migrants claiming tax credits, housing benefits and social housing for four years- For EU citizens who are workers (as defined by the Treaties and CJEU interpretation) or former workers (as defined by EU legislation, and the CJEU interpretation of the 16 Universal Credit (EEA Jobseekers) Amendment Regulations 2015; SI 2015/546 9

Treaties), there is a right to equal treatment as discussed in my prior blog post. So this change would require a Treaty amendment. 17 4.2 Raising the minimum earnings threshold to limit access to in-work benefits An EU migrant has a right of residence as a worker or as a self-employed person and with it access to in-work benefits such as Housing Benefit and tax credits if the work they do is genuine and effective. There is no minimum hours or earnings threshold as such; hours worked or earnings may be relevant, but other factors such as the duration of the employment and regularity of the work may also be considered. Worker status can in some situations be retained if the person is no longer working, eg if the person is temporarily unable to work because of illness. From 1 March 2014, a new minimum earnings threshold was introduced to help determine whether an EU migrant is in genuine and effective work. It is set at the level of earnings where employees start to pay National Insurance contributions currently 153 a week. The minimum earnings threshold does not mean that those with earnings below it cannot have worker or self-employed person status. It is merely a mechanism for focusing on cases where there is likely to be greater doubt about whether the person satisfies the criteria. Individuals earning less than the threshold face a more in-depth assessment of their circumstances in order to determine whether the work they do (or did) was genuine and effective. But as noted above, who is and who is not a worker is a matter for EU law rather than national law. The UK cannot adopt its own definition of worker ; it has to follow the case law of the CJEU. Therefore, the UK could not limit entitlement to in-work benefits by raising the minimum earnings threshold. Raising the threshold would, under the current arrangements, merely mean that the authorities would have to assess the circumstances of a larger group. The criteria by which they are assessed would however remain the same. 4.3 Stopping Child Benefit and Child Tax Credit for children not living in the UK The provisions which allow migrants to claim family benefits from the state in which they reside in respect of dependent children resident in another Member State are in Regulation 883/2004 on the coordination of social security systems for people moving between Member States. Member States cannot unilaterally opt out of EU Regulations. Further information is given in the Library s briefing on Child Benefit and Child Tax Credit for children resident in other EEA countries. An amendment to Regulation 883/2004 could be achieved via the Ordinary Legislative Procedure it would require a proposal by the European Commission and would be subject to co-decision with the European Parliament and Council adoption by a qualified majority. However, in his blog Professor Steve Peers argues that stopping family benefits for children in other Member States is arguably indirectly discriminatory and, given provisions on equal treatment of workers in the Treaties, a Treaty amendment would therefore probably also be necessary. 17 Steve Peers, The nine labours of Cameron: Analysis of the plans to change EU free movement law, EU Law Analysis blog, 28 November 2014. See also his previous blog of 24 November 2014, Amending EU free movement law: What are the legal limits? 10