Cameron and reform of EU free movement – to discriminate or not to discriminate

benefit tourism

Prime Minister Cameron has, at long last, written down his list of proposals for EU reform, to be followed by the in/out referendum. Nothing that was not expected, in some form or other. Cameron seems keen to wrap this reform process up at breakneck speed, making the whole thing look like a really short film, with the longest trailer ever.

 

Commentators agree that the 4th demand, reform of free movement, is the hardest to achieve. That is particularly the case with respect to the proposal to introduce a 4-year residence/contribution condition for migrant workers to qualify for in-work benefits or social housing. The pundits also point out that the letter to European Council President Tusk tries to create some room for manoeuvre by recognising that these issues are difficult for other Member States. They are indeed, not least because this proposal seems to require some kind of exception to what is the constitutional cornerstone of free movement of persons (and much else) in the EU: non-discrimination on grounds of nationality. But there isn’t much commentary which digs deeper, and that is what this post aims to do. What is discriminatory, and what not?

 

Before doing so, the proposal calls for a couple of other comments. First, it has been cobbled together quickly, at the time when Chancellor Merkel made clear that more drastic restrictions, such as an emergency break on immigration from other EU Member States, were unacceptable. It drew inspiration from an Open Europe briefing co-authored by my LSE colleague Damien Chalmers. That briefing called for a new EU directive on citizenship and immigration, which would contain a comparable 3-year rule. It has to be said that this briefing went into the direction of declaring that discrimination is a virtue, by advocating a new provision establishing the supremacy of national citizenship over EU citizenship. The proposed directive would “set out that welfare benefits, social housing and publicly funded apprenticeships are in principle reserved for national citizens and can only be granted to EU citizens n limited circumstances”. The authors denied that this required Treaty change, but if I was asked to write a legal opinion on this, I would come to the opposite conclusion.

 

Second, it is not clear at all that the proposal, if implemented, would make any difference to the numbers coming to the UK. Research shows that so-called benefit tourism is a marginal phenomenon; that EU citizens come to the UK to work; and that they contribute more in taxes and draw less on benefits, proportionally, than UK nationals. But no need to develop those points, as all this has been extensively commented upon.

 

Third, I note the disconnect between two current UK government policies. The government is concerned that so-called in-work benefits, which as I understand them work mainly through systems of tax credits, are too much of a pull-factor for EU citizens. However, the same UK government is looking at drastically reducing these tax credits, in general, as part of its deficit-cutting programme. If the pull-factor were real, would this issue not be taken care of by the general welfare-reduction policies?

 

But onto the discrimination point. Let me, in succinct blogpost fashion, try to sum up the law on non-discrimination on grounds of nationality. We EU lawyers distinguish between direct and indirect discrimination (also described as overt and covert discrimination). Direct discrimination means that a particular law or rule takes the prohibited criterion – here nationality – as the basis for differential treatment: “UK nationals obtain in-work benefits unconditionally, nationals from other Member States must have legally resided in the UK for 4 years.” Such direct discrimination is a clear breach, and the Treaties would need to be changed to make it lawful. I note in passing that this is the kind of Treaty change which requires an elaborate procedure, as a rule requiring the convening of a “Convention” – so not just consensus among Member State governments.

 

But the prohibition of discrimination on grounds of nationality does not mean that EU Member States cannot have policies distinguishing between residents and non-residents – as opposed to nationals and non-nationals. In the field of taxation, for example, the EU Court of Justice readily accepts such distinctions. Nor does it mean that the award of some kind of benefit on condition of prior residence violates the non-discrimination principle. These are what we call cases of indirect discrimination. Requiring a period of prior residence is not directly discriminatory, but since most UK nationals live in the UK, and most non-UK nationals do not, distinctions based on residence are suspect. Crucially, however, they can in certain cases be justified. Here is an example from the Court’s case law. Mr Bidar, a French national, came to the UK to study (at UCL!). He requested a student loan, to cover his maintenance costs. These loans are government-subsidised, and the UK limited the loans to students who had been resident in the UK for 3 years before starting their course. The UK argued that UK taxpayers funded the student loans, and that it was therefore legitimate to impose the residence condition. The Court accepted this. It stated that it was legitimate for a Member State to grant assistance only to students who have demonstrated a certain degree of integration into the society of that State. And the existence of a certain degree of integration could be regarded as established by a finding that the student in question has resided in that State for a certain length of time. In other words, requiring a certain period of prior residence for the award of a benefit is not a priori unlawful.

 

However, this all depends on the type of benefit, and the context of the case. In this respect, it shows that EU law has developed over a period of more than 40 years, through case law and through legislation on free movement. There are benefits which Member States confer which cannot be conditioned on prior residence, and there are those which can. This post is not the place to demonstrate this, as it would require an extensive study, but it does seem to me that there is a real need for creating greater clarity and consistency in this area of EU law. That would be a kind of EU reform which is worthwhile. What this would require is a process of looking carefully at the EU legislation on free movement, and of starting a debate on which “integration” requirements are acceptable, and which not. That can be done, but it will be time-consuming and difficult, also politically. Of course it cannot be done by the European Council at a summit: there is a legislative procedure in the EU, which involves the Commission, the Parliament and the Council of Ministers. But the European Council could initiate a work programme on this issue.

 

Whether the outcome of such a review process could be that the UK would be allowed to introduce the 4-year Cameron proposal is uncertain, in particular as regard tax credits and in-work benefits. EU legislation on free movement of workers has, from the beginning, provided that workers from other Member States “shall enjoy the same social and tax advantages as national workers”. Coming to work in another Member State involves a much higher level of integration than studying, and subjects the person to income tax and social security contributions in the same way as that State’s own nationals who are employed. The principle of non-discrimination in my view requires that all workers are treated equally in matters of taxation and social security.

 

Curious to see how all this plays out …

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