Social Security Co-Ordination
The Committee consisted of the following Members:
Marek Kubala, Committee Clerk
† attended the Committee
Mr James Clappison (Hertsmere) (Con): Before making that statement, may I say what a great pleasure it is to serve under your chairmanship, Mr Scott, and to see my right hon. Friend the Member for Epsom and Ewell and the right hon. Member for East Ham in the room?
As the Committee may know, it is customary for a member of the European Scrutiny Committee to make a short opening statement on the matter for debate. I emphasise that these views have been put forward on behalf of that Committee. In so far as what I will say about allegations from the European Commission, I do not necessarily agree with them. That is a bit like a disclaimer at the beginning of a feature film stating that it is a work of fiction and that the commentaries do not represent the views of the filmmaker.
Turning to the statement, EU rules on the co-ordination of member states’ social security systems date back to the late 1950s and purport to provide underpinning for labour mobility within the EU’s internal market. EU rules on co-ordination have also been extended to countries forming part of the European economic area—Iceland, Liechtenstein and Norway—and to Switzerland. However, social security co-ordination between EU member states and other non-EU third countries is mainly based on bilateral agreements. The European Commission has now chosen to allege that that has led to a piecemeal and fragmented approach that creates obstacles to labour mobility in the global economy at a time when it is, in the Commission’s words,
The communication before this Committee makes the case for what the European Commission alleges to be a more coherent EU approach to the co-ordination of social security with third countries. The Commission advances two reasons: first, that the EU is generally regarded as a single entity by businesses and migrants in third countries, and that disparities between member states’ social security systems and co-ordination rules create confusion and uncertainty for third-country migrant workers and businesses that want to move to or operate in the EU, and for EU nationals working in third countries; and, secondly, that greater co-operation and co-ordination between member states would help to identify collective solutions to common challenges and to strengthen their hand when negotiating agreements with third countries. I emphasise again that that is the EU’s case.
The Commission goes on to advocate the inclusion of a standard social security co-ordination clause in all future association agreements with third countries that would cover the principle of equal treatment, the
The Government contest most of the reasons advanced by the Commission for strengthening the EU’s role in the co-ordination of social security systems involving third countries. They believe that the Commission has overstated the extent of its competence, and that greater EU involvement would increase rather than reduce complexity and undermine member states’ efforts to combat fraudulent claims. The Government also oppose any expansion of the social security rights of third-country migrants working in the EU as a matter of principle on the grounds that it may lead to increased pressure on national welfare budgets.
Although the communication does not put forward any specific proposals at this stage, the European Scrutiny Committee considered that a debate would provide a useful opportunity to assess the strength of the case made by the Commission and to question the Minister on the legal and practical difficulties that he identified in the explanatory memorandum. The European Scrutiny Committee has already scrutinised a series of draft decisions to implement the social security provisions contained in several association agreements with third countries. Although the Government consider that their title V opt-in should always apply to EU measures that define the rights of third-country nationals, the EU institutions have chosen to contest the application of the opt-in to Council decisions concerning the co-ordination of social security systems with EEA countries and Switzerland.
For my part, if the Minister cannot readily identify any circumstance in which the EU position is made out, and if he asserts strong support for the position that the Government have already set out, I will not be subjecting him to any lengthy questioning.
The Minister of State, Department for Work and Pensions (Chris Grayling): It is a great pleasure to serve under your chairmanship, Mr Scott, and to see colleagues together again. I hope that everyone had a pleasant and restful recess. We are now back to business with an important issue that I confidently forecast—I might not wish it—that the Committee will feel it needs to return to in broad terms in the months ahead, because it is my view that there is an increasing move within the European Commission and the institutions in Brussels to extend their competency into the arena of social security, even
On today’s specific issue, the Commission believes that when third countries are dealing with member states on social security matters, they face a variety of systems that can ultimately affect trade and migration between the EU and the rest of the world. I take issue with the Commission’s assertion that expanded co-ordination at EU level would improve that situation. As I said, I think that this is part of a broader picture in relation to social security.
There are a number of reasons behind the concern about the Commission’s approach. First, social security is a national competence. It was very clearly set out in the Lisbon treaty that it was a national competence and, indeed, for matters of third-country agreements, I am very glad that the previous Government negotiated opt-ins for us under that treaty. Only member states have the exclusive power to make commitments towards third countries about social security rights deriving from their national schemes.
We do have EU internal competence to co-ordinate the social security systems of member states, which is based on the effective functioning of the internal market. The reason for that is clear: if someone leaves the UK, spends part of their career in France and then returns to the UK, we need some mechanism to ensure that the pension contributions that they made during that part of their career can be realised when they reach retirement. Of course, some sensible co-ordination measures are needed, and they have been taken at the European level for many decades and are certainly in place with bilateral agreements between countries.
Third-country agreements are not part of the internal market, however, so we do not consider that the EU is competent to regulate social security co-ordination with third countries outside the context of association agreements. In any case, EU agreements would have to address the fact that there is not one single EU scheme and one third-country scheme. In reality, there are 27 member state schemes—soon to be 28. Although similar, each separate agreement will of necessity reflect the third-country scheme, allowing for the negotiation of carve-outs, which is an option that is not open to member states.
There is no evidence to justify the need for EU-level agreements. Existing bilateral agreements between individual member states and third countries not only are sufficient, but offer better, tailor-made solutions to the persons concerned. Most third-country nationals work in only one member state and do not require a gold-plated co-ordination system to allow them to move around the EU. EU legislation already exists to protect the rights of third-country nationals who work in more than one member state. EU regulations 859/03 and 1231/10 extend the provisions of EU regulations to third-country nationals.
Before I wrap up my opening remarks, I want to make a very important point that, more than anything else, has been driving the approach that I have taken on these issues. It was agreed in a treaty that was signed by the previous Government that the United Kingdom should have an opt-in with regard to whether it should
I sympathise with—and, indeed, strongly agree with—what the Minister has said. However, are the Government being sufficiently robust to ensure that the European Union is aware of our views? Could they be sufficiently robust to kill off the issue at this stage?
Chris Grayling: I would love to say that we could. Had the hon. Gentleman sat in on my conversation with the commissioner a few months ago, he would have no doubts about the way in which our views have been expressed to the European Commission.
The reality is that we have been put in a wholly unacceptable situation. We have informed the Commission of our intention regarding the opt-in. It has reached a number—but not all; this is one of the incongruities—of third-country agreements under article 79, which is the article of the treaty providing for agreements involving third-country nationals. However, it is reaching a small number of agreements—the European economic area and EU-Switzerland agreements—under article 48, which relates to EU citizens and the rights of people who live in the EU. That is also being tried with the Turkish agreement. While I value our friendship with the Turks enormously and we have had close collaboration with them since the 1950s, the last time I looked they were not in the EU. Using legislation that applies to EU citizens to drive through an agreement with a non-EU country is illogical. The Commission has not listened to reason, so we are going to the European Court of Justice over two agreements. We await a hearing date in relation to the EU-Switzerland and EEA agreements, and although we have not yet reached the point of legal action on the Turkish agreement, we are prepared to take it.
I have said clearly to our friends in EEA countries, Switzerland and Turkey that what is happening is nothing to do with them, or with our being unwilling to reach sensible, reciprocal arrangements with them, because it is good practice and good sense to reach such agreements with our friends. The issue is the principle, because if we have an opt-in to a treaty meaning that we can do this for ourselves, it is unacceptable for the EU to use invalid legal mechanisms to take that power away from us. I hope that it will get the message from the writs landing
Kelvin Hopkins: The Lisbon treaty was meant to be the treaty to end all treaties—the ultimate—after which a line would be drawn in the sand and there would be no further change. It seems as if the EU is already trying to extend its tentacles beyond that treaty and to ignore its provisions. Is not that very serious?
Chris Grayling: I regard it as very serious. It has taken up a lot of my time for the past two years. I am clear that I believe that the Commission is doing a land grab in the area of social security. We are fighting battles about social security on a number of fronts, and we are not the only ones—other countries face the same problems.
The fact is—to my mind, this shows a flaw in the workings of the Commission and, indeed, the EU as a whole—that the majority of member states share our view. Eighteen months ago, we joined about 14 other countries in signing a minutes statement that was presented to the Council, or speaking in favour of that statement. That represented a majority of the countries concerned. The statement said that we were concerned about what the Commission and the European institutions were doing in relation to social security, and that we wanted a policy review and a change of the rules at the European level to preserve the integrity of member states’ social security systems. Under the present system, the Commission can just say no, so we have been through a process of cajoling, pushing and pressing to get it on the road to starting a policy review.
There was constructive discussion at a conference that we held in London in June, which was attended by 20 member states and a senior official from the Commission. The Commission is starting to understand that this is a genuine issue for lots of member states—it is not just us. The Austrians have a very complicated case at the moment that sets a dangerous precedent for all of us. We have to be robust. I understand why this is happening, because the assumption is that, in a world of free movement, people should be able to go and live wherever they want in the EU, with financial support flowing with them. That is the view of the European institutions, the European Court of Justice and many in the Commission, but it is not the view of most member states, and this is a battle that we all have to win.
I welcome what the Minister said and agree with the concerns of my hon. Friend the Member for Luton North about what is being proposed. However, it is important that we affirm that there is a proper role for the institutions of the European Union in co-ordinating social security—indeed, that is mentioned in paragraph 12 of the Minister’s explanatory memorandum. Will the Minister set out his view of the appropriate co-ordination at EU level in this sphere?
I have a greater problem when the European institutions start to move into the field of inactive citizens. At the moment, there is effectively a clash between freedom of movement rules and the supposed national ownership of social security systems. The case in Austria concerns a retired couple who moved from Germany to Austria, with no previous connections to Austria, and asked on arriving for the financial support that the Austrian state provides to pensioners on lower incomes. The Austrian Government have said, “No, it doesn’t work like that, because you’ve only just arrived in the country, so you can’t have it.” That case is going to the European Court of Justice. The right hon. Gentleman will understand the precedent that that could create. If the Court formed the view that a European citizen could live wherever they want and claim state support from either where they were or where they are—some decisions coming out of the Court appear to suggest that—it would create a natural movement of economically inactive people from poorer parts of Europe to those parts where there is more state support. None of us, whether in the UK or elsewhere, can countenance that.
Stephen Timms: I agree with the points that the Minister is making. Will he tell us a little bit more about the history? He has explained that it goes back to the Lisbon treaty in 2007 and the safeguards negotiated, I guess, by the then Prime Minister. Will he say a little more about how things have developed in the five years since then and how it has come to the point where, as he says, the Government have decided that they need to take legal action?
Chris Grayling: I first became aware of the situation fairly soon after taking office. Committee members discussed before this debate the issue of whether the initial proposals from the Commission arrived before the Government took office. We made our views clear to the Commission from the outset that it was not appropriate to use article 48 for the measures, because it applied to EU citizens. It was completely incongruent with the agreements with Montenegro, for example, which used article 79, which applies to non-EU citizens. That is fine, but suddenly agreements are coming through using article 48 that apply to EU citizens and remove our power. We have no right to stop an EU-wide co-ordination mechanism applying to EU citizens. It can simply go through the Council on qualified majority voting, and it did.
The first to come along was the EEA agreement, followed closely by the EU-Switzerland agreement. We did not take part in the voting, because we argued that we had an opt-in, which we intended to exercise, but after the Council approved the agreements on QMV, the Commission indicated to us that it would go ahead with implementation. Late last year, first with the EU-Switzerland agreement and subsequently with the
I am afraid that the Commission pulled what I can only describe as a fast one. At the end of March, it used a back-door method—I will not discuss it now, as it is too complicated to explain in a brief debate such as this—to secure consent from the European Court of Justice to implement the agreement. Our case will probably not be heard until later this year or early next year, so we are now in the position that the agreement has been implemented. On the EEA agreement, our case is before the Court. Again, we are challenging the Commission’s right to do what it has done under article 48 rather article 79. That is a quick canter through where we have got to.
Stephen Timms: That is very helpful. Am I right that there is a dispute about whether the agreement applies to us? Will the Court determine that next year, or is it clear that we are not covered by the agreement that has been reached?
Chris Grayling: We dispute the decision that it covers us. We are basically saying, “This should have been done under article 48. What you’ve done is illegal under European law, so it should not have been passed on QMV. We should have been able to exercise our option, and we would have been able to do so had it been done under article 79.”
Stephen Timms: A couple more points: the case that the Minister has made—rightly, in my view—is that matters such as social security and third countries should be covered by bilateral agreements between the UK and other member states and those countries. What is the extent of such agreements? Do we have a large number? Do other countries have the same number, or do we have a more extensive network? Can he give us any background on that?
Chris Grayling: If we look at the scale of what is done at the moment, we have numerous third-country agreements. Some have been constrained over the years by the frozen pensions issue, of which the right hon. Gentleman will be aware, so I will not go into it at length. To give a practical example, we have agreements with Japan and Korea that prevent people from having to make contributions twice, which is a possibility in some countries. In Korea, for example, one must work for 10 years before achieving a pension entitlement. Somebody who went to Korea for seven years and paid contributions would have nothing to bring back with them, so they would have to make contributions there and in the UK. We have reciprocal agreements around the world to deal with such situations if they arise.
Numerous EU third-country agreements have been put in place under article 79. I mentioned Montenegro, and there are some in north Africa. Some have proved controversial with other member states; the Dutch had a big argument with the Commission about the agreement reached in Morocco. What is different is the Commission’s move away from article 79 to article 48. It did so with
Let me give another practical example. The Commission introduced proposals a few months ago for a third-country agreement with Ukraine, which would have involved reciprocal social security rights. There was quite an outcry about that from other member states and the Commission dropped the social security element of the proposals. My concern is that if the Commission can establish the legal precedent unchallenged, in future it can reach third-country agreements with whoever it wants and without much regard to any implications for us. Historical ties between two countries can lead to a wave of people coming in and accessing social security systems in a way that we might wish to prevent, but the Commission will not necessarily have any interest in sorting that out.
“EU Member States generally negotiate bilateral agreements without reference to what their partner EU countries are doing. The process is highly fragmented. In practice, certain EU countries may be pinpointed by the EU’s main trading partners for the conclusion of agreements, whilst other countries are left out.”
Chris Grayling: The trouble is that that is the permanent argument, which goes, “Oh, if we could just co-ordinate this, that and the other.” That is why my view is that the Commission does much too much and that too much has been taken to a European level, and I see no benefit to the single market or to individual member states of doing this at a European level. There are different situations between different countries, different circumstances and different historical relationships. This is not something that can or should be done at a European level; that is my opinion. However, from the UK’s point of view, the previous Government rightly said, “We don’t want this done at a European level”, and negotiated the opt-in. That should be the end of the matter and I find it extraordinary that anybody in Brussels thinks that it is not the end of the matter.
Stephen Timms: I have a final question. The Minister, in his memorandum, has drawn attention to the danger of weakening protections in UK social security legislation against fraud. Members of the Committee asked if he could provide examples and his letter dated 23 August, which has been distributed to Committee members, touches on that issue. Can he give us any specific examples of how this particular point has been a real problem?
Chris Grayling: I will give the right hon. Gentleman a practical example. It is not an example involving the UK, but it was one of the earliest things to arise when I began my role, and it concerned a dispute between the
In the end, the Dutch did not fight that battle, but that was a very clear example. I remember having conversations at the time with my Dutch counterpart, who was not at all happy about the fact that this change was taking place.
Kelvin Hopkins: I have one more question. My worry is that we may make a lot of noise, we may object, we may go to meetings, we may huff and puff and we may blow very hard, but in the end the Commission will get its way, despite concerns being expressed not only by ourselves but by other countries. Are we going to make sure that that does not happen?
Chris Grayling: We are going to do everything we can. There are, let us say, different levels of debate and argument on this issue. I can only do what I can in my job, which has been to work very hard with other member states to take us down the road towards securing reform of the regulations, and that battle is slowly being won. The Commission does not like coming under pressure from member states, and I think that I have annoyed it quite a lot over the past two years by putting it under pressure. However, I sense—step by step—small progress. I hope that that leads to change. In the end, it has to, because this is a time of extreme financial pressure on national budgets. We have differing levels of support in different parts of the European Union, and if the EU and the Commission push all member states into a position where everyone has the right to access the maximum level of support available to them, wherever they are, that will lead to benefit tourism and a political backlash.
I have made clear statements to the Commission about the danger of opening the door to benefit tourism. If the Court finds in favour of the claimants in Austria rather than the Austrian Government, anyone who is hard up in retirement will arguably be able to turn up in Austria and start to claim support from the state. We have offered our full support to the Austrian Government because such a situation is in no one’s interest. It is destabilising, and it leaves a country in the position of having either to find more money to pay for the people coming in or to reduce the support it provides to its own citizens, neither of which is a palatable option in the current climate.
The battle will be won, but it is a labour to cajole the institutions in Brussels into realising the political and financial realities on the ground in member states. Week
Mr Clappison: Will my right hon. Friend reflect on the fact that this afternoon, the Government’s approach has received support from both sides of the House? Does he think that the European institutions and the European Commission can properly take that into account?
Chris Grayling: I very much hope so. It is encouraging not only that there is common concern across the House but that there is no particular political pattern to the concern expressed across the EU member states. It is not a matter for the right or the left; it is a matter of simple practicality. None of us can afford to spend money that we do not have on doing something extra for people who choose to come to our country to use our social security systems. We recognise that we have the choice of either spending more money, which we might not have because of budget pressures, on people coming into the country, or reducing support to people at home, and both options are a gift to political extremists.
I have tried to get across loud and clear in Brussels that it is necessary to understand the political reality and the concerns on the ground. To the Commission’s credit, it is slowly coming to realise that, but the Court has not wised up to it at all. I am genuinely concerned about what is happening in the European Court week after week. We have to change the Court’s view, and the cross-party support in this House means that the UK speaks with a united voice, which is welcome.
That the Committee takes note of European Union Document No. 8552/12, relating to a Commission Communication on the External Dimension of European Union Social Security Co-ordination; supports the Government’s view that the organisation and financing of national social security systems is exclusively the competence of Member States; and shares the Government’s concerns that the extension of European Union competence in the area of social security co-ordination, through developing case law and regulations, will further undermine Member States’ ability to protect their social security systems.—(Chris Gray l ing.)
Stephen Timms: I shall be brief. I welcome what the Minister has said, and I am grateful to the hon. Member for Hertsmere for his opening statement and for the work of his Committee. I welcome the Minister’s efforts to pursue further a position that was, I think, taken by the previous Government. The issue has clearly become a bigger one in the past couple of years, and the Minister is absolutely right to take the position that he has taken.
It is important to recognise that there are valuable benefits to the free movement of labour within the European Union, both for the British economy and for British individuals who want to work elsewhere in Europe. It is absolutely right, as the Minister has explained, that accrued rights to payments such as contributory pensions and incapacity benefits can be transferred across borders to support the free movement of labour. There is therefore an important role for co-ordination.
In those respects, I think we are in agreement with the European Commission. I think all of us would want constituents who are third country nationals, if they were on holiday elsewhere in the European Union and fell ill suddenly, to be able to access local emergency medical care in the same way as our constituents who are British, or indeed European, citizens. However, that is some way from stating, as I think the Commission is stating, that it should have exclusive competence in co-ordinating bilateral agreements with non-EU members. I very much agree with the Minister’s concerns about that claim by the Commission, and the efforts it is making to achieve what he has described as a “land grab”. I understand the language he is using and his reasons for using it.
Like the European Scrutiny Committee, I am interested in the position of our bilateral social security agreements, and I am grateful to the Minister for his answer to my question. I am familiar with the concern about frozen pensions, which he mentioned. I wonder whether the Committee might be able to draw attention to other examples of the value of the bilateral agreements that are in place. The Commission has an important role in the co-ordination of social security systems in the European Union, but it is absolutely essential that Parliament should be fully responsible for organising and financing our own social security system. Again, I endorse the position that the Minister has put to us.
Kelvin Hopkins: I will not speak for too long. I possibly take a more radical view of European Union matters than hon. Members on either side of the Committee or the two Front-Bench spokespersons. Much as I respect both of them, I perhaps have a stronger view than they do on these matters. It is not just about convenience and the single market; it is about a fundamental matter of democracy. Certain democratic decisions have been taken. Sometimes I have not agreed with them, but they are democratic decisions and they seem to have been pushed to one side, including parts of the Lisbon treaty, for example. In principle, countries should have the democratic right to determine their own social security arrangements. If we want to have mutual arrangements with other countries, we can do that by bilateral or multilateral agreement. However, that should be done in a way that is acceptable and voted through democratically by individual member states—or, indeed, by others outside the European Union—and not dictated, controlled or even administered by a supranational organisation such as the European Commission or the European Union.
This is stretching into an economic area that should be determined by member states. That is not to say that our arrangements for social security are admirable. I have made very strong criticisms of them in the House from time to time. For example, I do not think that any other country has at least three different Government Departments and several agencies providing different means-tested benefits—absolutely crazy. I know the Government are trying to organise a kind of one-stop-shop arrangement but, nevertheless, having three Government Departments administering social security arrangements is not sensible.
I am straying wider than perhaps I should and I beg your indulgence, Mr Scott. We ought, however, to be very careful to make sure that the European Union is
Like the hon. Member for Luton North, I think it is important to place on the record the strength of feeling throughout the House. Nothing that has been said today should detract from the view that people are free to move across the European Union and seek opportunities, but that becomes offensive—if I may use that word—whenever people want to take the mickey and effectively put their hand into the coffers of other nation states, and to use and indeed plunder their welfare systems for their own benefit.
I like the fact that the Minister has called the communication an attempt at a land grab. The Government see it for what it is: they are standing up to it and opposing it. I hope that the Minister continues to go to Brussels and make a firm and strong case, knowing that he has a fair wind from this Parliament and that he is supported by Members throughout the House. If the European Commission and member states believe that they are competent to co-ordinate our social security policy, why stop at social security—why not move on to budgets, and come in and manage our Budget, or come in and manage our foreign policy, home affairs or any other matter?
A strong marker has to be put down to Europe, by this Parliament and this Committee, that enough is enough and that some of us oppose the Commission’s rolling encroachment into territory that is not its territory. We have a saying at home, which comes from our own history, of “not an inch”—and there ain’t a centimetre left to give.
As those who work in my private office will know, I stand against no one in having been more annoyed by—wanting to stand up to and to say no to—European institutions on this issue over the past two and a half years. The situation is crazy. We have clear protections in place in the Lisbon treaty over national social security systems. We have the emergency brake, which is supposed to prevent encroachment on those systems, and we have our opt-in. It is absolutely clear that the will of the member states is that such decisions should remain with the member states. It is also the case, however, that parts of the Commission and the Court are, step by step, trying to seize it one piece at a time. We will do everything we possibly can to prevent that. The issue is not only a Conservative one—it is clearly not only a Labour one—and I pay tribute to my Liberal Democrat colleagues, because this is an area in which I have had unwavering support
We will do everything we can to fight the battle. To my mind, it is a structural flaw in the workings of the European Council that member states cannot bring a motion to it that mandates that the Commission must review, reform or whatever it may be in a particular area, so we have to do so by cajoling and encouraging. There is no shortage of member states wanting to work alongside us, and step by step we are driving the realisation home. It is much slower than I would wish, but we are beginning to see the realisation in Brussels that this is a serious issue that has to be addressed—it has all kinds of political ramifications, as well as financial ones.
I give an absolute assurance to the Committee that we will continue to fight those battles. We will take the two cases to the European Court of Justice. We will take the Turkish issue to the European Court in due course, if necessary. I put on the record again that it has nothing to do with our relationships with the EEA member nations—with the Swiss and the Turks. I personally support the principle of Turkey, a great nation, joining the European Union, and this has nothing whatever to do with our relationship with Turkey, which is a good one and should continue to be so. It has everything to do with a legal point of principle: if a treaty says we can do something, we should be able to do it. To have that taken away by legal subterfuge is simply not acceptable. I can assure the House that we will continue to fight that battle.