EU migrants and benefits: what's the price of "caving in"?

31 May 2013


"Iain Duncan Smith promised to "fight every step of the way" after Brussels said it will sue Britain for requiring EU immigrants to pass an extra test before claiming benefits. As Conservative MPs reacted with fury, Mr Duncan Smith said he would never "cave in" to the demands, which could cost taxpayers £155 million a year."

The Telegraph, 31 May 2013

In a statement released yesterday, the European Commission employed a scenario to explain why they had decided to refer the UK to the European Courts of Justice:

A non-UK citizen who has worked in Italy for over 20 years transfers to the UK to work for an Italian company. They create a life in their new country of residence and progress in their career, but after less than two years they are made redundant. When they were employed they paid taxes and national insurance contributions, but their claim for the jobseekers' allowance is rejected on the grounds that they do not have a right to reside in the UK.

The Commission claims this system is illegal and "discriminatory" given that UK citizens aren't put through the same 'strict' procedures as EU immigrants.

A 'Habitual Residence Test' has existed in some form since 1994, but since 2004 access to some social security benefits has also been restricted by a 'right to reside test'. According to the EU Commission, this means "EU citizens cannot receive specific social security benefits to which they are entitled under EU law such as child benefit."

Work and Pensions Secretary Iain Duncan Smith said he wouldn't cave in to the EU's demands which, as the Telegraph reports, "could cost taxpayers £155 million a year."

To find out where this figure is from, it might help to look at its history. Negotiations with the EU have been ongoing for over two years.

£155 million or £2 billion?

£155 million is actually a revision of a previous estimate. Back in September 2011, in an article for the Telegraph, Mr Duncan Smith wrote that the EU's proposals "could mean the British taxpayer" will have to pay 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."

At a parliamentary session in September 2012, the Secretary of State announced the revised estimates:

"I want to put it on the record that the costs of the proposal could be enormous. If we did not have the British residency test, it is estimated that right now the cost would be something in the order of £155 million, although that could change."

Iain Duncan Smith reiterated the point at the Conservative Party Conference in October last year:

"I have to deal with the European Commission as they seek to interfere in our welfare arrangements, telling us we will have to pay benefits to anyone from Europe who comes here - from day one. This will destroy our existing tests which require claimants to live and work in the UK for some time, be job seeking, or self-sufficient... Ending these tests could cost of a minimum of £155 million or even more."

A spokesperson for the European Commission informed us the UK had told them that 64% of 42,810 EU nationals applying for benefits in Britain 2009 to 2011 were refused. The benefits they applied for included: child benefit; child tax credit; jobseeker's allowance (income-based); state pension credit; and employment and support allowance (income-related).

While the European Commission has its examples of people who have "created a life" in the UK, the UK government is concerned about people who haven't — but nevertheless might want to claim benefits here.

Last year we factchecked the shift in the estimate of that potential cost from £2 billion to £150 million, and sent out a Freedom of Information request to the Department for Work and Pensions (DWP) requesting details of the shift in cost estimated from £2 billion to £155 million. This is the response we received

We were told that the original estimate was simply based on the number of European Economic Area (EEA) nationals in the UK. The DWP then "made assumptions about what proportion of these might be inactive (5% 10% 20%)". This number was then scaled up by the benefits "they were likely to be able to claim to get an annual cost picture for each scenario."

This figure was then revised when "more detailed analysis of the Labour Force Survey data" produced a more accurate figure by allowing the Government "to eliminate households who have already qualified for benefits."

The new estimates "assume 100% take-up for the entitled population" and the Department makes clear that "this is unlikely to be the case for any of the benefits."

On the other hand, they don't include "any pull-factor" resulting from removing the habitual residence test, despite the volume of debate about the risk of an inlux of 'benefit tourists'.

A spokesperson for the European Commission told us they had received scant evidence of benefit tourism. The responsible Commissioner said: "so far no Member State has provided the Commission with facts to back up this perception [of benefit tourism]".

Without more information (of which the DWP's FOI response sadly provided little), it's impossible for us or any member of the public to assess the numbers coming out of the Department. We have asked to see a copy of the Government's evidence submission to the EU Commission. 


Flickr image courtesy of Gwenaël Piaser

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