By Marley Morris, Research Fellow, the Institute for Public Policy Research
Rumours abound over the Prime Minister’s renegotiation over the UK’s EU membership with his European counterparts. With the aim clearly to wrap things up by the European Council summit next month, the pressure is on to find a solution to Cameron’s most troublesome renegotiation demand: restricting tax credits and child benefit for EU migrants for their first four years in the UK. Other EU countries say it’s discriminatory; the Prime Minister says it’s essential for Britain to remain in the EU. (Indeed more than four fifths of the public support the change.)
While much has been written on a potential deal in the press, the daily injection of contradictory and ambiguous briefings paint an increasingly confused picture. So what are the real options available to the government and what are their prospects of success? There appear to be (at least) five main ways out of the current impasse currently being discussed.
· The residency test
Some have suggested that, in order to avoid directly discriminating against EU migrants, the UK could introduce a four-year residency test for accessing benefits for all newcomers, UK and EU nationals alike. The problem here is that, while it may not be directly discriminatory, it is still likely to be considered indirectly discriminatory by the European Court of Justice, as EU migrants are far more likely to be affected than UK nationals.
It has been proposed that the UK could extend the ban on in-work benefits to all 18-22 year olds too, in order to avoid the discrimination charge. Judging by the headlines so far on such an arrangement, it is likely this would be politically toxic. Reports have suggested that an alternative means could be found to compensate 18-22 year olds that wouldn’t apply to EU migrants, perhaps through a voucher for college fees or some other form of “social payment” before they enter the workforce (presumably described in such a way as to justify categorisation as a “social assistance” benefit, which under EU law would be more easy to deny to EU migrants). Yet this too has its problems. Apart from the somewhat absurdly bureaucratic consequences of such a move, it would likely still be considered discriminatory if young EU workers were openly barred from the new system – or even if they were indirectly disadvantaged.
· Redefining ‘workers’
On the other hand, this week there has been talk of a German proposal to restrict benefits for EU migrants by redefining what counts as a worker under EU law. Currently according to the European Court of Justice’s case law, EU nationals who undertake “genuine and effective” and not “marginal and ancillary” work have a right to reside as a worker and so full access to in-work benefits on a par with UK nationals. It seems that this proposal would remove worker status from anyone who earns under £7000 a year (or 20 hours a week on the minimum wage) On the face of it this might seem an ingenious solution to the standoff: the UK’s EU partners won’t tolerate any discrimination against workers in particular, so a change to how workers are defined removes their primary concern.
But there are two problems here. First, as the German proposal is only to remove worker status (and therefore in-work benefits) to anyone earning less than £7000 a year, everyone else will still be classified as a worker. So most EU migrants will not be affected by the change. Second, it is quite possible that such a reform would require treaty change, given that the European Court of Justice could argue that it takes its interpretation of who counts as a worker and who doesn’t from the treaties themselves. Treaty change is harder to secure than an amendment to secondary legislation, as it requires ratification by all 28 member states.
· The labour mobility package
At the same time, there has been much talk in the press about European Commissioner Marianne Thyssen’s labour mobility package, which was meant to be published last year but has been delayed due to the UK’s renegotiation efforts. While the full details of the proposals are not yet published, some papers have argued that they will at least deliver part of the Prime Minister’s four year demand.
But this seems farfetched: from Thyssen’s recent public speeches, most of the proposals appear to be minor changes to the 2004 social security coordination regulation. For instance, Thyssen has raised the possibility of setting a time limit on how long an EU national must work in a member state before accessing contributory unemployment benefits there. This is meant to address a particular issue in the current system of coordination: EU nationals who have worked in one member state for many years, who find work in another member state, and who subsequently lose their job can then claim contributory unemployment benefits in their current member state on the basis of their previous contributions elsewhere, even if they have only paid into the current member state’s system for a matter of weeks. Thyssen has therefore hinted that someone should work in an EU member state for a certain time period (potentially one month or three months) before they can claim contributory unemployment benefits in that member state if they lose their job. For countries with highly contributory systems like Germany and the Nordic countries – who pay out a certain percentage of your former salary – such a change would be quite significant, but for the UK – where contribution-based JSA is paid at the same rate as income-based JSA – it is not. Thyssen has also suggested changes to the rules on exportability of contributory unemployment benefits, but this will for the most part not have a large impact on the UK.
Thyssen’s package of reforms is therefore unlikely to be anything close to the kind of change the Prime Minister needs (and in any case, even if Thyssen does propose something suitable it would still need to be passed by the Council of Ministers and the European Parliament). The one exception is on the Prime Minister’s arguments on access to child benefit in cases where a child lives in a different member state to the parent – here Thyssen has hinted that reform is coming.
· The emergency brake
Another suggestion has pointed in a very different direction: rather than reforming the benefit rules for EU migrants, the EU could agree a deal to allow an emergency brake for free movement of people. Actual controls on people entering the country would be impractical; instead the brake would presumably consist of limits on access to the UK’s labour market. When it was originally discussed in 2014 it was widely deemed unfeasible. But now it is back on the table it might be a suitable political alternative to the four year rule and may be easier to negotiate than the Prime Minister’s current plans (though still will likely require treaty change). But the devil is in the detail: how in practice would an emergency brake work?
As the EU legal professor Steve Peers notes, there is an ‘emergency brake’ option in the arrangements for the seven year period of transitional controls after accession of new member states that perhaps serves as a model for a broader emergency brake. Here the brake can only be pulled when a country ‘undergoes or foresees disturbances on its labour market which could seriously threaten the standard of living or level of employment in a given region or occupation’. But such a decision has to be approved by the European Commission and can be overturned by the European Council, so the UK would not be able to pull such a brake at will.
Moreover, it is hard to know what an objective measure of determining a situation serious enough to justify an emergency break would look like. Could an emergency brake be pulled because levels of migration are simply too high? If that’s the case then this would amount to a quota system, which would presumably be unacceptable to the rest of the EU. Could it be pulled if there is evidence of high unemployment, of a burden on the welfare system, or of pressures on public services? The problem is that the evidence for such challenges is either limited or hard to compare across member states.
So a deal here might be possible – but the challenge for the Prime Minister will be to get a balance between an emergency brake that does not unduly restrict free movement – which would clearly not be countenanced by other member states – yet which is meaningful enough to convince the British public.
· Benefits for unemployed EU migrants
Finally, as IPPR has suggested, there is political and legal scope for action on benefits for unemployed EU nationals, rather than those who are in work. Here the rules are very different and there are signs from recent European Court of Justice judgements that there is scope for tightening them further. Certainly other EU member states seem more comfortable with a deal of this sort, and a few proposals have been touted, particularly with respect to the rules that allow EU migrants to retain their worker status after losing their job and so continue to get access to the benefit system on a par with UK nationals. IPPR has suggested removing the retention of worker status until EU migrants have worked in the UK for three years; more modestly, in Germany there have been recent suggestions of a similar restriction for six months.
None of these proposals are perfect – all face their own legal and political difficulties. Perhaps the most convincing and achievable are the emergency brake (depending of course on the details) and the benefit limits for unemployed EU migrants – because they both are capable of gaining support in the UK and avoid the toxic accusation of discrimination between EU workers. Yet here the Prime Minister may be accused of backing down on a manifesto promise to restrict in-work benefits. Surely some kind of compromise will be found – but it’s still far from clear whether it will be enough for the Prime Minister to declare his renegotiation a success.
Marley Morris is a Research Fellow at the Institute for Public Policy Research
Respond
