Documents considered by the Committee on 2 February 2011 - European Scrutiny Committee Contents


5   Social security coordination

(32402)

5063/11

COM(10) 794

Draft Regulation of the European Parliament and Council amending Regulation (EC) No 883/2004 on the coordination of social security systems and Regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004

Legal baseArticle 48 TFEU; co-decision; QMV
Document originated20 December 2010
Deposited in Parliament6 January 2011
DepartmentWork and Pensions
Basis of considerationEM of 19 January 2011
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentLegally important
Committee's decisionNot cleared; further information requested

Background

5.1  For many years, the EU has had a framework for the coordination of Member States' social security systems in order to encourage labour mobility. The current framework is contained in Regulations 883/2004 and 987/2009 which took effect on 1 May 2010. Both Regulations are based on Article 42 of the EC Treaty (now Article 48 in the Treaty on the Functioning of the European Union, the 'TFEU') which provides for the adoption of "such measures in the field of social security as are necessary to provide freedom of movement for … migrant workers and their dependants." They also cite Article 308 of the EC Treaty (now Article 352 TFEU) because the personal scope of the Regulations now extends to all EU citizens who are, or have been, covered by social security legislation in a Member State and who exercise free movement rights. So, for example, the Regulations apply to self-employed people as well as to those who are not economically active, perhaps because of disability, illness or caring responsibilities, and who would not otherwise be covered by Article 42.[13]

The draft Regulation

5.2  The purpose of the draft Regulation, according to the Commission, is to amend Regulations 883/2004 and 987/2009 so that they incorporate recent changes to some Member States' national social security legislation as well as recent developments in cross-border mobility that affect the coordination of social security systems. The changes proposed are intended to increase legal certainty for stakeholders and improve protection for individuals moving within the EU by ensuring that the coordination of social security systems operates effectively in all Member States. The Commission emphasises that the draft Regulation is purely a coordinating measure and that Member States remain responsible for organising and financing their own social security systems.

5.3  The Commission says that most of the changes have been proposed by Member States and the Administrative Commission — a body comprising representatives of the Member States which is responsible for interpreting and administering EU rules on the coordination of social security — and "will make no substantive difference to the present situation of social security coordination for institutions and administrations, workers or employers or non-active citizens."[14]

5.4  Many of the changes proposed are of a minor and technical nature but some are more substantive and are helpfully summarised in the Explanatory Memorandum provided by the Minister for Employment (Chris Grayling). The more significant amendments proposed are described below.

Amendments to Regulation 883/04

5.5  The draft Regulation seeks to clarify which social security legislation is applicable, and where contributions are payable, if an individual is employed in more than one Member State. The Minister says:

"The existing text does not fully reflect the original intention of the Member States with regard to the definition of a 'substantial part' of an employment. The amendment makes clear that the condition of pursuing a 'substantial part' of an employment, if the employee is to be insured in his Member State of residence, also applies to a person who pursues employment for various employers in two or more Member States."[15]

5.6  The draft Regulation would make a substantive change to the rules for receiving unemployment benefit. It seeks to address a potential gap in social protection as a result of differing rules in Member States on the payment of unemployment benefit to individuals who were previously self-employed. So, for example, a self-employed person who has worked and paid insurance against unemployment in another Member State and who, on becoming unemployed, returns to his or her Member State of residence to seek work there, may be unable to obtain unemployment benefit. The amendment seeks to ensure that benefit would be payable by the Member State in which the individual last worked and paid insurance. The Minister explains:

"This amendment reflects a change in policy agreed by the Member States. The amendment is to improve the situation of some unemployed people who were previously self-employed. For example, a self-employed person who has been paying insurance for unemployment in their state of work may not be able to claim unemployment benefit in their state of residence. This is because not all Member States insure self-employed workers against the risk of unemployment. The UK does not pay Jobseekers Allowance contributory on the basis of self-employed national insurance contributions; however, we do recognise that if a person has paid unemployment insurance it is unreasonable that they do not receive any benefits arising out of that insurance.

"The [amended] article sets out the conditions under which a person who is unemployed in these circumstances can claim their unemployment benefit. Unemployment benefits are not generally exportable and cannot normally be claimed from one Member State by a person who is resident in another Member State. Normally a person lives in the Member State they work in and claims benefit there. However, if a person lives in a different state, they cannot claim unemployment benefit from the state of work. They claim it in the state of residence.

"This amendment makes special provision for people who were previously self-employed to be able to claim from the state of work if they had paid insurance there that covered the risk of unemployment."[16]

5.7  In such cases, where unemployment benefit is exported to the claimants' Member State of residence, the draft Regulation also makes clear that any obligations associated with the payment of that benefit (for example, a requirement actively to seek work) must take priority over any job seeker obligations imposed in the Member State of residence.

5.8  The draft Regulation would include a change to the voting procedures in the Administrative Commission which is intended to reflect the move from unanimity to qualified majority voting (but subject to an 'emergency brake') under Article 48 TFEU (previously Article 42 of the EC Treaty) as a result of changes introduced by the Lisbon Treaty.

5.9  The draft Regulation would also amend the list of special non-contributory cash benefits which may not be exported to another Member State in Annex X of Regulation 883/2004 by removing, in the case of the UK, the reference to Income Support, and adding Employment and Support Allowance (income-related).

Amendments to Regulation 987/2009

5.10  The draft Regulation would clarify the meaning of the term "registered office or place of business" by specifying that it refers to the place where "the essential decisions of the undertaking are adopted and where the functions of its central administration are carried out." In the case of international air transport workers, the draft Regulation would introduce a specific provision deeming their "home base" (defined in EU air transport legislation as the place where they start and finish their duties) to be their employer's registered office or place of business.

5.11  The legal base proposed for the draft Regulation is Article 48 TFEU. It differs from its predecessor, Article 42 of the EC Treaty, in the following respects:

  • its scope is broader, encompassing self-employed migrant workers; and
  • the voting procedure has changed from unanimity to a qualified majority, but is subject to an emergency brake which may be invoked by any Member State to prevent the adoption of a draft legislative act which it considers "would affect important aspects of its social security system including its scope, cost or financial structure, or would affect the financial balance of that system".

The Government's view

5.12  The Minister notes that the legal base for the draft Regulation differs from that cited for Regulations 883/04 and 987/2009 because it omits Article 352 TFEU (the successor to Article 308 of the EC Treaty) and that the Commission has offered no explanation for the omission. He says that the Government intends to raise the issue of the legal base in negotiations and will consider whether to propose an amendment. The Minister does not question the use of Article 48 TFEU, but adds:

"Our initial view is that Article 21(3) of the TFEU should also be cited, as it specifically covers measures concerning social security in relation to free movement (unlike its predecessor, Article 18 TEC). This provision is therefore more appropriate than Article 352. I will update the Committee on developments in this area."[17]

5.13  The Minister also has reservations about the proposed change to the voting procedure within the Administrative Commission because this would be based on the procedure set out in Article 48 TFEU. He says that the scope of the Regulations which the draft Regulation would amend is broader than Article 48 TFEU as the latter does not cover EU citizens who are not economically active. The Government will seek to ensure that its wider concern about the choice of legal base for the draft Regulation, and the need to include Article 21(3) or 352 TFEU, is also reflected in the voting procedure in the Administrative Committee.

5.14  The Minister indicates that the Government supports nearly all of the amendments proposed, but highlights two which are of particular interest:

  • a change to the list of benefits that may not be exported from the UK to other EU Member States; and
  • a change on where international air transport workers should pay their social security contributions.

5.15  On the first, the Minister explains that the UK supported the removal of Income Support from the list of benefits that are outside the scope of EU coordination rules and cannot be exported, adding:

"Income Support is no longer a social security benefit but a social assistance benefit, as the extent of coverage and purpose of the benefit has changed over time, and social assistance benefits are not covered by the coordination rules. Additionally the list is amended to reflect the introduction of Employment and Support Allowance (income related) which replaces Income Support for those who are sick. The UK asked for both of these changes."[18]

5.16  On the second, the Minister explains that a number of Member States asked the Commission to make special provision for international air transport workers by specifying that their "home base" (where they start and finish their duties) should be regarded as their employers' registered office or place of business for the purpose of identifying the Member State in which they should pay social security contributions. He says that Her Majesty's Revenue and Customs are consulting interested parties on the introduction of a home base provision and will inform us of the outcome of its consultation.

5.17  The Minister says that the Government supports the amendment outlined above in paragraph 5.6 which would change existing rules for receiving payment of unemployment benefit. He continues:

"This will not involve any benefit expenditure (in the form of Jobseekers Allowance (contributory) JSA(C)) for the UK as we do not insure the self-employed for unemployment. The unemployed person would not currently receive JSA(C) from the UK if they claimed here as we would not use self-employed insurance to help meet UK contribution conditions. After the change they would instead claim from their previous state of work and be paid by them, at the same time as registering as unemployed in the UK. There is also a potential reduction in costs, as formerly self-employed people would be able to get unemployment benefit from the state where they last work, rather than receiving income-based Jobseekers Allowance."[19]

5.18  Finally, the Minister says that the Government does not expect the draft Regulation to generate any new costs for the UK, although this is subject to a more detailed consideration of the implications of the "home base" proposal for air crew. He anticipates that the Hungarian Presidency will seek to achieve a First Reading agreement on the draft Regulation in June.

Conclusion

5.19  We thank the Minister for providing a helpful and informative Explanatory Memorandum. We note that the Government supports nearly all of the amendments proposed in the draft Regulation. We agree with the Government's concerns regarding the Commission's choice of legal base and also consider, in light of the changes introduced by the Lisbon Treaty, that Article 21(3) TFEU may be a more suitable additional legal base than Article 352 TFEU. We welcome the Government's commitment to keep us informed of developments on this issue and to tell us the outcome of its consultation on the "home base" proposal for air crew working in two or more Member States. Pending further information from the Minister, the draft Regulation remains under scrutiny.



13   Article 48 TFEU includes self-employed migrant workers but does not include those who are not economically active and have not worked.  Back

14   See page 4 of the Commission's explanatory memorandum.  Back

15   See paragraph 13 of the Minister's Explanatory Memorandum.  Back

16   See paragraphs 15-17 of the Minister's Explanatory Memorandum. Back

17   See paragraph 3(i) of the Minister's Explanatory Memorandum.  Back

18   See paragraph 23 of the Minister's Explanatory Memorandum.  Back

19   See paragraph 18 of the Minister's Explanatory Memorandum.  Back


 
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