EU reform—proposals on in-work benefits payments to EU migrant workers

March 1, 2016

Public Law analysis: Dr Gunnar Beck, barrister at 1 Essex Court, considers the possible impact the negotiations around the proposed new settlement for the UK within the EU could have for in-work benefits paid to EU migrant workers.

 

What are the key changes that have been proposed in this area?

 

Draft decision of the Heads of State or Government, meeting within the European Council, concerning a new settlement for the United Kingdom within the European Union

 

If the Tusk proposal were implemented the EU would recognise that the ‘social security systems of member states’ are ‘diversely structured’ and that, as a consequence, Member States may, in accordance with a proposal to be drawn up by the EU Commission, restrict certain in-work benefits for a period of up to four years. Any such restriction adopted at national level would, however, have to comply with the EU’s prohibition of direct and indirect discrimination between nationals of Member States and the other general principles of EU law. The prohibition of discrimination on the grounds of nationality has been applied and interpreted expansively by the Court of Justice of the European Union (CJEU) in numerous cases.

 

In addition, the Tusk proposal would allow Member States concerned about the inflow of non-national EU workers to limit child benefits exported by the migrant worker from his host to his home country to an amount index-linked to the standard of living of the Member State in which the child resides.

 

How significant are these changes? Do they represent a significant departure from the existing law/position in this area?

 

The proposed temporary emergency brake on the payment of in-work benefits to migrant workers is fully compatible and does not require changes to the existing EU Treaties. The EU Treaties are in fact silent about the extent to which EU migrant workers are entitled to claim in-work benefits including child benefits for non-migrant children in another member state. There is additional secondary EU legislation (especially the Citizens’ Rights Directive 38/2004/EC) which applies the general non-discrimination principles recognised in the EU Treaties to freedom of movement for workers and non- workers, while it also establishes that EU citizens moving to another country must have sufficient resources to maintain themselves and their families. It does not specify in detail the benefits EU citizens are allowed to claim in an EU Member State other than their home country.

 

Through its case law, the CJEU has established that, as a general rule, EU migrant workers have a right to the same tax and welfare benefits and credits in their host country as home workers (principle of equal treatment). The CJEU has further established that in certain circumstances a Member State may derogate from the equal treatment principle on public policy grounds if the granting of tax and other benefits to migrant workers can be shown to threaten the cohesion of its national tax and/or social security system—see, for example:

 

  • C-204/90: Bachmann v Belgium State [1994] STC 855, para [28(ff)]

  • C-209/01: Schilling v Finanzamt Nürnberg-Süd [2003] All ER (D) 185 (Nov) [2005] STC 1756, paras [40]– [42]

  • C-300/90: Commission v Belgium para [21]

The Tusk proposal, including any restriction of any in-work benefits as well as the indexed payment of child benefit at a lower rate based on the living standard in the migrant worker’s home country, if implemented, would therefore not go beyond the existing treaty public policy exception to the equal treatment principle which is recognised by the EU Treaties and which has been applied and upheld from time to time by the CJEU. It cannot be described as repatriation of competences from the EU to the UK Parliament. The general legislative competences of the EU are laid down in the EU Treaties in accordance with the principle of conferral and can only be amended or repatriated by Treaty change. Specific powers such as the entitlement to certain in-work benefits including the payment of child benefit to non-resident children are governed by secondary legislation and the result of the specific decisions of the CJEU. The proposed ‘emergency brake’ does not amend these specific powers nor the general competences of the EU as defined in the EU Treaties, but merely provides for an exceptional and, in all probability, time-limited specific national derogation from the general principle of equal treatment.

 

The Tusk proposal does not therefore represent a significant departure from the EU’s competences nor do they clearly redress or overrule the current case law of EU migrant workers’ benefits law as developed by the CJEU. At present, Member States may plead the need to maintain the cohesion of their tax and social security systems in defence of any restrictive benefits measures applicable to migrant workers which they could already adopt under the ‘public policy’ derogation in Article 45 of the Treaty on the Functioning of the European Union (TFEU). Under the Tusk proposal the adoption of such measures would be recognised in secondary EU legislation. That would be the only potential change to the current state of EU legislation.

 

The proposed time-limited derogation would allow the UK to restrict certain in-work benefits to newly arriving EU migrant workers, but any such restriction would not apply to workers already resident in Britain. Moreover, the restriction in respect of newly arriving workers would only apply for a maximum of four years from the date on which it came into force. At the time of writing (8 February 2016) the Tusk proposal and the draft decision attached to it do not state if the proposed national ‘emergency brake’, once invoked, is time-limited (eg to four years) or intended to operate on a permanent basis. As the ‘emergency brake’ can only be invoked in circumstances that, by their nature, cannot with certainty be described as permanent, it is unlikely that any national restrictions on benefits to EU migrant workers will be applied permanently.

 

It is to be expected that the final draft legislation will confirm that such restrictions will be subject to a time limitation. Even during this four-year period, the right to equal treatment would have to be phased in gradually, so that a total exclusion from all or most benefits would, at best, only apply in the first and perhaps second year.

 

Finally, it is worth noting that even if under the Tusk proposal a Member State availed itself of the derogation to the general equal treatment principle, the national measures adopted may still be challenged in the national courts or, ultimately, the CJEU. To date very few ‘public policy’ derogation defence pleas by member states in ‘equal treatment’ actions brought by individual applicants have succeeded before the CJEU or the national courts. If the ‘emergency brake’ on benefits payments were adopted as envisaged under the Tusk proposal, this is likely to increase member states’ chances of successfully defending such actions. However, the CJEU will continue to scrutinise national restrictions on the operation of the equal treatment principle extremely carefully.

 

To what extent would these changes achieve David Cameron's objectives in this area? Are they more/less than he was seeking?

 

In its 2015 general election manifesto David Cameron promised to ‘control immigration from the EU by reforming welfare rules’ and to limit ‘net migration’ into the UK to ‘tens or thousands, and not hundreds of thousands’.

 

The evidence suggests that EU citizens overwhelmingly come to the UK to find work and not primarily to claim benefits. Moreover, most EU citizens who come to work in the UK are single. Most EU citizens currently working in Britain will therefore not be affected by any change to existing child benefits rules, nor are they likely to be deterred by the temporary non-payment of other payments as any ‘emergency brake’ does not affect non-state benefits. The range of state benefits which are payable to single workers is limited and, in any event, remains unclear from the Tusk proposal. Besides child benefit, access to housing benefit and/or social housing is likely to be the biggest item of expenditure for which EU migrants may qualify.

 

The Tusk proposal does not state whether access to housing benefit may be restricted under the ‘emergency brake’ and, if so, under what conditions.

For these reasons, it is extremely unlikely that the proposed ‘emergency brake’ measures under the Tusk proposal would have an appreciable effect on EU immigration into the UK, let alone allow the UK to ‘control’ EU immigration.

 

They fall far short of the pledges set out in the Conservative election manifesto.

 

What effect would these changes have on a practical level?

 

The ‘emergency brake’ on in-work benefits payments proposed under the Tusk proposal, would, if implemented in their current or anything resembling their current form, significantly complicate the legal regime governing welfare payments to migrant workers in the UK. The regime would, in addition, be difficult to administer as it will often be impossible to establish when, precisely, a migrant worker arrived in the UK and if previous visits and periods of residence should be disregarded or not. Crucially, any limitation of benefits payments under the proposed concessions would remain subject to the principle of proportionality and the requirement that the limitation be progressively ‘normalised’ over the four-year period to take account of the migrant worker’s progressive integration into the labour market of the host country.

 

The CJEU and, in the first instance, the national UK courts would scrutinise any legislative changes and their administrative application for compliance both with the ‘progressive normalisation’ rule under the Tusk proposal as well as the well- established proportionality principle in EU law.

 

What will all this mean for lawyers and their clients? What should they do next?

 

It is foreseeable that any changes to be implemented under or in the wake of the Tusk proposal will complicate, and not simplify, the existing rules for payments of in-work benefits to EU migrant workers. As such measures would remain subject to the general principles of EU law, it is likely that there will be an increase in litigation involving the proportionality of any restrictions imposed.

 

Lawyers should familiarise themselves with the main outlines of the general pro-integrationist tenor of the CJEU’s case law in this area and the court’s principal cases on proportionality in the field of member state derogations from general rules of EU law. Knowledge of the court’s approach will be essential to advising potential clients on their prospects of success in any litigation against national restrictive measures.

 

How does all this fit in with the referendum? What effect could these changes have? Do you have any predictions for future developments?

 

After some initial uncertainty the general reaction to the Tusk proposal has been sceptical. The proposal falls far short of David Cameron’s manifesto pledges, and the concessions suggested are not perceived to represent a basis for a meaningful reform of the UK’s relationship with the EU. At present, it seems unlikely that at the EU summit later this month Mr Cameron will be able to obtain further significant concession. Unless he does so, his so-called ‘EU reform deal’ is unlikely to give a major boost to the ‘Remain’ campaign. However, as the referendum campaign unfolds, the general debate will gradually shift to a straight in/out contest—Mr Cameron’s reform pledges are likely to recede into the

background, and the ‘Remain’ campaign will unleash ‘project fear’ focussed on frightening the majority of the British public to vote for the alleged status quo (ie continued membership of EU). The ‘Leave’ campaign’ will only be able to neutralise the adverse effects of the ‘fear’ factor if they succeed in making the case that there is no status quo in Britain’s relations with EU, that the rest of the EU is set on further integration and that, if Britain remains a full member, it will not be able to escape the consequences of the euro and the EU’s refugee crises.

 

Dr Gunnar Beck at 1 Essex Court is a leading EU lawyer who combines practice with academic research. He is the author of the leading study of the legal reasoning of the Court of Justice of the EU: G. Beck, The Legal Reasoning of the Court of Justice of the EU. Gunnar Beck practises in most areas of EU law and has represented private clients in some of the milestone EU law cases in EU sanctions law, litigation arising from the euro crisis and financial services regulation, as well in EU citizenship, internal market and infringement cases.

 

Interviewed by Barbara Bergin.

 

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor

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