Benefits Tourism and EU Law

Aidan O’Neill QC

Article 34(2) of the EU Charter of Fundamental Rights states that:

“everyone residing and moving legally within the European Union is entitled to social security benefits and social advantages in accordance with Union law and national laws and practices.”

The relevant EU law which this Charter provision implicitly refers to is now contained in European Parliament and Council Regulation (EC) 883/2004 ([2004] OJ L166/1) on the coordination of social security systems. This regulation came into effect on 1 May 2010. Unlike directives, there is no need for any intermediate national implementing measures:  an EU Regulation is “directly applicable” – see Article 288 of the TFEU.  It may be relied upon – if necessary in preference to any contrary requirements of national law – before national courts, tribunals and administrative bodies applying the Member State’s social security system.

EU law in the area of social security provides for the coordination of national legislation, rather than its harmonisation. Thus EU law does not provide for uniform rates and conditions for social security benefits across the EU, but does require that all Member States grant social benefits to EU nationals who “habitually reside” in that Member State. And Article 4 of Regulation 883/2004 prohibits Member States from imposing any additional requirements which might result in any indirect discrimination against EU nationals. In Borawitz v Landesversichterunganstalt Westfalen (Case C-124/99)  the CJEU observed that:

conditions imposed by national law must be regarded as indirectly discriminatory where, although applicable irrespective of nationality, they affect essentially migrant workers or where the great majority of those affected are migrant workers, as well as conditions which are applicable without distinction but can more easily be satisfied by national workers than by migrant workers or where there is a risk that they may operate to the particular detriment of migrant workers … It is otherwise only if those provisions are justified by objective considerations independent of the nationality of the workers concerned, and if they are proportionate to the legitimate aim pursued by the national law.”

Instead of applying the single EU law test of “habitual residence”, the UK social security system currently requires all those claiming Child Benefit, Child Tax Credit, State Pension Credit, Income-based Allowance for Jobseekers, Income-based Employment and Support Allowance to have a “right to reside” in the UK. Almost all UK (and Irish) nationals automatically have such a right to reside in the UK, but other EU nationals have to fulfill additional conditions in order to pass this test. Yet the principle of equal treatment requires that EU citizens may not be treated differently from the nationals of a Member State. On the face of it, then the right of residence test would appear to be indirectly discriminatory against other (non-Irish) EU nationals.  The question then becomes: can it be justified ?

The UK Government has said that the “right to reside” test is a necessary and proportionate response on its part to combat the problem of “benefits tourists” who would move to the UK form other Member States in order to claim generous UK welfare payments.  In Patmalniece v Secretary of State for Work and Pensions [2011] 1 WLR 783 the UK Supreme Court upheld the lawfulness of making entitlement to “state pension credit” (a means tested non-contributory benefit) dependent on a right to reside in the UK. The right to reside in the UK test was said by the court to have the legitimate purpose of ensuring that only those who were economically or socially integrated within the UK (and/or Ireland) should have access to the UK’s social assistance system. The imposition of this test was said to be aimed at the legitimate end of safeguarding the UK’s social security system from exploitation by those who had not contributed to its funds.  The UKSC accepted (Lord Walker dissenting) that this justification was independent of the nationality of the persons concerned and thus compatible with Union law (see case comment here).

The European Commission disagrees, and on 29 September 2011 issued a “reasoned opinion” giving the UK two months to abolish the “right to reside in the UK” test, keeping only the EU law “habitual residence in the UK” test.  The Commission noted:

“The concept of habitual residence has been defined at EU level as the place where the habitual centre of interests of the person is located. The Commission considers that the criteria for assessing habitual residence are strict and thus ensure that only those persons who have actually moved their centre of interest to a Member State are considered habitually resident there. This is a powerful tool for the Member States to make sure that these social security benefits are only granted to those genuinely residing habitually within their territory.”

The Daily Telegraph has reported the issue thus:

“If the European Court of Justice upholds the Commission’s view, economically inactive people will be able to move between EU member states just to claim benefits, without any intention of working or contributing to the member state’s system. They could then use those benefits to acquire the right to reside there. … The row is the latest example of Coalition ministers appearing powerless to halt the EU overturning UK policy. Last year, a European Court judgment forced David Cameron to agree to allow prisoners the vote.”

The prisoner’s right to vote case – Greens and MT v. United Kingdom has, of course, nothing to do with the CJEU and the EU, being a decision of the European Court of Human Rights.

But that aside, in any event the Telegraph’s is, perhaps, not a wholly accurate account of the existing state of EU law in this matter. Where ‘non-workers’ (for example, the independently wealthy or students – and their families) have exercised their EU citizenship free movement rights but have then become dependent on the social assistance system of the host Member State, Article 14(3) of the Citizenship (Free Movement) Directive 2004/38/EC allows that expulsion is a possible – though never automatic – option. Expulsion might be justified on this ground only if, and in so far as, the non-workers’ social security dependence may be said to constitute, or have become, an unreasonable burden on the system. Whether or not there is such unreasonable social security dependence requires examination on a case-by-case basis, taking into account such factors as whether the need for such social assistance arises as a result of temporary difficulties, the duration of residence, the personal circumstances of the non-worker and the amount of aid granted. But also writing in the Daily Telegraph the Work and Pensions Secretary, Iain Duncan Smith has said:

“There is growing concern being heard from a number of member states that the European Commission has overstepped the mark, basing decisions more on ideology than on the fundamental rules governing the European settlement. …. This decision confirms the worry that the EU is pulling more areas of national competence into its fold. Yet these are decisions taken outside of national democratic processes by unelected and unaccountable institutions.”

The democratic deficit grumbles on ….

1 thought on “Benefits Tourism and EU Law

  1. There is a difference at EU level between social security (e.g. old age pension, maternity benefit, health care) and social assistance benefits (e.g. benefit that ensures a minimum income for everyone) in that social security benefits are subject to the European rules on coordination of social security systems. These rules are designed that moving EU nationals are protected at any time, either by their home country or the host country. EU rules essentially lay down a complicated set of rules of conflict which pick up the applicable legal regime but do not change it on substance.
    All those benefits attacked by the European Commission are social security benefits of mixed nature – they have characterictics of both security and assistance. In the past, upon the request of the UK authorities, all those benefits were included in the material scope of the EU coordination regulations with the purpose to exclude those benefits being paid to UK nationals living abroad.
    As benefits falling under EU social security rules, they are unlikely to fall under the rules of the Citizenship Directive which cover social assistance benefits only. As you have correctly pointed put, EU nationals may become an unresonable burden of social assistence scheme under the Citizenship Directive but they may not become a burden on social security scheme. Given that the mixed benefits fall under the scope of the EU coordination of social security rules which provide for no right-to-reside test, they cannot be subjected to such a test under the Citizenship Directive, otherwise the Directive would make much of the EU coordination rules (which are, moreover, directly applicable) ineffective.
    If the attacked benefits are predominantly social assistance benefits (i.e. paid to those in need), then the UK Government shouldn’t have proposed to have them included in the material scope of the EU social security laws … they have done so and now are surprised about what that means …

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