Benefits tourism – an EU/UK dust-up
3 October 2011
A niggle has broken into a very public row between the British government and the European Commission which may yet become a bare-knuckle fight – not over the Eurozone crisis or bailouts or anything in the headlines, but over the availability or not of certain classes of benefits to EU claimants who do not satisfy this country’s “right to reside” test.
British social welfare arrangments provide for a class of non-means tested benefits such as Child Benefit and Income-based Employment Allowance that are only available to people who have resided legally in the UK for five years. The European Commission has declared this fencing-off to be in breach of EU law since it indirectly discriminates non-UK nationals coming from other EU Member States. EU rules on the social security coordination (EC Regulation EC 883/2004) allow the UK to grant social benefits to those persons who habitually reside in the UK; this EU test is satisfied by those who have been resident in the UK for two years or less. It is a common law test – a question of fact on the balance of probabilities, to be determined by looking at all the circumstances in each case. But those who pass this latter qualification can only claim means-tested benefits.
Confusing? Yes, and it gets worse. First, nowhere in the huge Regulation is “habitual residence” defined, but Article 4 prohibits Member States from imposing any additional requirements which might result in any indirect discrimination against EU nationals. The British residence test apparently offends this provision because it does not apply to British citizens so they can apply for non-means tested benefits even if they have resided abroad. 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 from other Member States in order to claim generous UK welfare payments – see our post on the Patmainiece case. The European Commission strongly disagrees with the Supreme Court’s interpretation of the position in that decision, and has declared that the habitual residence test provides sufficient safeguards against benefits tourism. The trouble is that even when it puts its mind to it the Commission doesn’t seem to be able to come up with a hard-edged definition:
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.
What on earth is “centre of interests” supposed to mean, other than a beanfeast for lawyers? As Aiden O’Neill QC notes in his post on the issue, the hostility to the Commission’s position comes from the usual quarters, such as the Daily Telegraph, which predicts that 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.
and
These new proposals pose a fundamental challenge to the UK’s social contract. They could mean the British taxpayer paying out over £2 billion extra a year in benefits to people who have no connection to our country and who have never paid in a penny in tax. This threatens to break the vital link which should exist between taxpayers and their own Government.
This kind of “land grab” from the EU (Ian Duncan Smith’s description) is perhaps not the best way forward just when the European authorities are battling to convince recalcitrant member states of the legitimacy of their bailout proposals. Bagehot for the Economist has sought a direct explanation from the Commission as to why the habitual residence test is deemed to be sufficient for safeguarding against benefit tourism, but was only given the answer that they are a “powerful tool”. Obviously they are not sufficiently powerful, which is why the UK is sticking to its stricter residence test. No prizes for guessing which way the European Court will vote on this dispute.
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I do think this story gets a fair few of the legal points wrong as already pointed out. Just to add some points for the sake of clarity:
The requirement for most of the benefits affected is that the claimant is
habitually resident in the Common Travel Area.
Habitual residence in the UK tests is then defined to mean that you cannot meet that test unless you also have a right of residence. For some of the benefits that is further qualified by a condition that certain sorts of residence rights will not count.
An EU national may have a right of residence in less than 5 years. Indeed a person who comes to the UK and obtains work on day one of their stay has such a right (and is also passported through the habitual residence requirement).
Residence rights for EU nationals are in the main set out in Directive 2004/38. One such right is the permanent right which will ordinarily accrue after five years of legal residence (although what is meant by legal residence for these purposes is the subject of ongoing clarification- see CJEU Cases of McCarthy, Lassal, Dias and the pending Ziolkowski case). That however is not the only qualifying right.
As far as what counts as habitual residence then in UK law the answer to that is given in the House of Lords case of Nessa. Generally speaking particularly cogent reasons are required for finding someone habitually resident in a shorter period than one month or failing to so find after a longer period than three months.
It is correct that whilst Regulation 883/04 does not define habitually resident the implementing regulation 987/2009 does actually contain further clarification at Article 11:
“Article 11
Elements for determining residence
1. Where there is a difference of views between the institutions of two or more Member States about the determination of the residence of a person to whom the basic Regulation applies, these institutions shall establish by common agreement the centre of interests of the person concerned, based on an overall assessment of all available information relating to relevant facts, which may include, as appropriate:
(a) the duration and continuity of presence on the territory of the Member States concerned;
(b) the person’s situation, including:
(i) the nature and the specific characteristics of any activity pursued, in particular the place where such activity is habitually pursued, the stability of the activity, and the duration of any work contract;
(ii) his family status and family ties;
(iii) the exercise of any non-remunerated activity;
(iv) in the case of students, the source of their income;
(v) his housing situation, in particular how permanent it is;
(vi) the Member State in which the person is deemed to reside for taxation purposes.
2. Where the consideration of the various criteria based on relevant facts as set out in paragraph 1 does not lead to agreement between the institutions concerned, the person’s intention, as it appears from such facts and circumstances, especially the reasons that led the person to move, shall be considered to be decisive for establishing that person’s actual place of residence.”
I won’t go into the politics of the issue other than to point out that for most British people the existence of a class of EU nationals who are denied access to social security in the event of being out of work can only serve to allow employers to drive down wages for British workers as well. In the end of the day equal treatment is designed to protect British workers as much as migrants.
Oh dear…
“…Child Benefit and Income-based Employment Allowance..are only available to people who have resided legally in the UK for five years”
Child benefit is available to anyone with a right to reside (so a EU jobseeker, worker, self-employed person, family member of a worker etc.) not only for those who have been here five years. Income-related ESA is also available to EU nationals who were working here, but then, following accident or temporary illness, ‘retain their worker status’. They cannot, however, claim this benefit if they have permanent incapacity and expect never to work in the UK again.
“…this EU test is satisfied by those who have been resident in the UK for two years or less”
The habitual residence test, as codified in UK law, can be satisfied after around 3 months of being here, so long as you’ve set up with a GP, opened a bank account, you’ve brought your family to the UK, sold your house in the former member state you lived in etc. that sort of thing. I advised a Portugese national who claimed Jobseeker’s Allowance 4 weeks after arriving in the UK and though he had a right to reside as a jobseeker, his claim was refused on ‘habitual residence’ grounds. He claimed again 6 weeks or so later, and the claim was accepted as he had taken some of the steps above.
“…those who pass this latter qualification can only claim means-tested benefits.”
Again, incorrect, people who are habitually resident, can claim non-means tested benefits too. Disability Living Allowance doesn’t even have a residence test. You simply have to be present in the UK (for 26 out of the last 52 weeks). No right to reside is needed.
“The British residence test apparently offends this provision because it does not apply to British citizens so they can apply for non-means tested benefits even if they have resided abroad.”
The residence tests as codified in UK law applies to both non-UK EU nationals and returning UK nationals. It consists of two parts; you must have a right to reside (which UK nationals automatically do) and be habitually resident (which, as stated above can be shown after a few months of being here by starting to make ties with the UK). I have had British clients fail the habitual residence test because they’d only been in the UK 2 weeks before trying to claim JSA. They had no place to live, still had a girlfriend who lived aboard who he might return to when he saves up enough cash etc. He did not show a settled intention to remain in the UK.
This is why the Supreme court found the test to only be ‘indirectly’ discriminatory; because the right to reside test is just one part of the two-part test which applies to both non-UK and UK nationals alike. It’s just easier for UK nationals to pass, but they are still subject to the test as a whole.
I hope this clarifies things.
The real question is, if we remove the ‘right to reside’ part of our test, will the habitual residence test alone be enough to prevent benefit tourism? I say it would need to be completely redrafted and strengthened.
A European doesn’t need to live in the UK for five years to have a right to reside. R2R reflects exercising treaty rights under 2004/38. What’s Income-based Employment Allowance? Should that be Income Related Employment and Support allowance?
Our trouble is we want to remain in the EU and at the same time we want the benefits of being outside of it. There in lies the core problem. Either stay in and live with treating all EU citizens equally or get out.
There’s a pop song I remember that goes “if everybody looked the same, we’d get tired of looking at each other”. Surely equal treatment means treating one another with equal respect – I don’t believe any one should expect the taxpayers of another nation to routinely pay for their welfare. I understand universal benefits paid for by ordinary members of the public via taxes to mean the provision of welfare from cradle to grave ie one’s life span as an ordinary member of the UK public who is actually at large in the UK public space –
Thus said I think universal benefits are the best because they are so simple. It’s all this means tested tax credit nonsense that wonts abolishing in my view.