Not cleared from scrutiny; further information requested; drawn to the attention of the Work and Pensions Committee and the Health and Social Care Committee
Proposal for a Regulation amending Regulation (EC) No 883/2004 on the coordination of social security systems
Article 48 TFEU; QMV, ordinary legislative procedure
Work and Pensions
(38400), 15642/16 + ADDs 1–8, COM(16) 815
6.1As part of the free movement of people, the EU’s Member States have put in place a system for the coordination of social security benefits. This system determines, for example, which national government is responsible for the payment of benefits for EU residents who move between different Member States. For example, it determines at which point an EU national employed in the UK is entitled to child benefit (and allows the cash to be ‘exported’ to another EU country if that’s where the child lives). It is also the legal framework that currently allows British pensioners in Spain and France to access healthcare free of charge locally, and have the costs reimbursed by the UK Department for Work & Pensions.
6.2In December 2016, the European Commission tabled a to amend the relevant EU legislation (Regulation 883/2004 and its Implementing Regulation). The purpose of its proposal was to modify when a Member State has to pay unemployment benefit to a mobile EU worker, and how long a person can claim the benefit in one EU country after having moved to another to look for work; to clarify the rules for determining which EU country is responsible for payment of benefits and under what conditions non-contributory benefits can be claimed; and to make smaller changes to the provisions of the Regulation on access to salary-related family benefits and long-term care benefits.
6.3The Member States in the Council of Ministers established their ‘general approach’ on the draft legislation following a series of meetings by EU Employment Ministers throughout 2017 and 2018. The UK Government has been broadly supportive of the proposed amendments sought by the Member States to the Commission proposal, which would include the following substantial changes to the current system:
6.4The Council’s position and the Government’s views on the negotiations are discussed in more detail in our previous Reports. However, the Member States’ position on the proposed changes to the EU’s system of social security coordination is not yet final. Under the ordinary legislative procedure, the European Parliament and the Member States in the Council have to jointly agree on the legal changes to Regulation 883/2004 and can make further amendments before the new legislation is finalised.
6.5When we the proposal in October 2018, the European Parliament had yet to establish its position on the proposed Regulation. At that stage, we retained our parliamentary scrutiny reserve because of the proposal’s political importance in the context of the Brexit process: as set out in more detail in paragraphs 0.9 to 0.13 below, the provisional Withdrawal Agreement on the UK’s EU exit foresees the continued application of social security rights derived from the Regulation for British nationals who have exercised their free movement rights to live or work in the EU (and vice versa) on the date the UK actually leaves the Single Market. Crucially, the Government accepted that any future changes to the Regulation—which will be decided without formal UK participation in the EU’s legislative process—would also have to be implemented by the Government for those citizens who are within the scope of the Withdrawal Agreement.
6.6On 11 January 2019, the Minister for Employment (Alok Sharma MP) provided the Committee with a on the state of play in the legislative deliberations in Brussels to amend the Social Security Regulation. The Minister explained that the European Parliament’s Employment & Social Affairs Committee, which acts as the Parliament’s negotiator on matters relating to EU social security legislation, adopted its in November 2018.
6.7The “main points of difference” between the European Parliament and the Member States are on the chapters concerning applicable legislation (that is to say, which Member State is responsible for the payment of social security entitlements to a specific worker) and access to unemployment benefits, with a “number of mainly minor and cosmetic” differences on the remaining chapters (long-term care allowances, family benefits, and equal treatment on access to benefits for nationals of a Member State and those of another EU country).
6.8As can be seen, very clear and significant differences persist between the positions of the Council and the European Parliament. The first round of negotiations between the Romanian Presidency of the Council and MEPs on the final substance of the amendments to Regulation 883/2004 took place on 15 January 2019. It is not yet clear when the agreement is likely to be reached, although both institutions are aiming for formal adoption of the legislation before the European elections in May. The Minister notes, however, that “given the complexity and controversial nature of some elements of the file”, the negotiations “may not conclude before the end of the current European Commission and Parliamentary terms” (although he adds that the UK “will do all it can to ensure that the negotiations progress satisfactorily while it still has a seat at the table”).
6.9The proposed changes to Regulation 883/2004 are relevant to the UK despite its planned exit from the EU in March 2019: under the Withdrawal Agreement, the Regulation would continue to have legal force in the UK for some considerable time afterwards, subject to certain qualifications with respect to its personal scope.
6.10In summary, the Regulation—including the proposed amendments—would continue to apply to EU nationals for whom the UK is the responsible Member State in terms of social security, meaning the UK is the current or last country of employment, and vice versa for UK nationals in the EU. Family members of workers and certain other categories of people who have the necessary links to the UK under the Agreement would also continue to be covered by the Regulation for their lifetime. The aim of this is to ensure that social security entitlements that are available to those UK and EU nationals, who exercise their freedom of movement rights prior to the end of the post-Brexit transitional period, are retained for them under Regulation 883/2004 after it would otherwise cease to apply to the UK. It means, for example, that UK pensioners already resident Spain and France would remain able to access healthcare locally without needing to purchase private health insurance, and have their costs reimbursed by the British Government.
6.11The social security provisions of the Withdrawal Agreement are ‘dynamic’, meaning they are drafted to ensure the UK continues to apply the Social Security Coordination Regulation to citizens within the scope as amended and updated by the remaining Member States, even after the UK has ceased to be a Member State. That includes the amendments to the Regulation currently being negotiated between the Council and the European Parliament. The Committee, by letter dated 5 September 2018 asked the Government to clarify what legal effect the parts of the amended Regulation that take effect after the end of the transitional period would have. By letter dated 27 September 2018, the Minister explained, with reference to the 19 March version of the proposed Withdrawal Agreement:
6.12As such, if the Withdrawal Agreement is ratified—or a similar arrangement is made after 29 March 2019 as part of a new effort to secure the rights of UK and EU nationals who exercised their free movement rights prior to ‘exit day’—the proposed changes to Regulation 883/2004 would continue to be directly-applicable in the UK, with an impact on both citizens within scope of the Agreement and for the administration of the British system of social security. Although the exact implications of this depend on the final text of the Regulation once the negotiations between the Parliament and the Council have concluded, in practice this could mean that the UK would be able to delay having to pay unemployment benefit to EU nationals who move to the UK during the post-Brexit transitional period. It would also change the system of access to unemployment benefits for frontier and cross-border workers, which is particularly relevant for many in Northern Ireland and Ireland.
6.13Under the Withdrawal Agreement, the Regulation would not apply to UK residents who move to the EU or vice versa after ‘exit day’, unless such an arrangement was agreed between the UK and the EU or individual Member States as part of the future partnership. The purpose of the and the is to give the Government the power to fund social security and healthcare arrangements with other countries after Brexit. Given the reciprocity inherent in such mechanisms, it would require agreement with the EU or with specific EU Member States for the current arrangements enjoyed by UK nationals in countries like France and Spain to be continued. The need for reciprocity creates immediate problems in the event of a ‘no deal’ scenario, as described below.
6.14As discussed, if the Withdrawal Agreement is ratified, Regulation 883/2004 would continue to apply to many UK and EU nationals indefinitely (provided they exercised their free movement rights before the end of the post-Brexit transitional period). However, in a ‘no deal’ scenario, the Regulation would immediately cease to apply to UK nationals in the EU and vice versa on 29 March 2019.
6.15Given that this is an inherently cross-border problem that the UK cannot solve unilaterally, the Committee has repeatedly pressed the Government on the consequences of ‘no deal’ for both UK nationals in the EU and EU nationals in the UK. The treatment of UK nationals by the 27 remaining Member States for the purposes of accessing social security or healthcare on the same terms as EU nationals would undoubtedly be affected. The precise rights and entitlements they would continue to enjoy (or not, as the case may be) would likely vary by Member State in a ‘no deal’ scenario. There is no harmonised EU approach to social security coordination between an EU Member State and a ‘third country’ (with the exception of the four EFTA countries, which have all implemented Regulation 883/2004 because they have accepted freedom of movement).
6.16Moreover, in terms of competence of resolving legacy issues on social security issues created by the UK’s departure, the European Commission has argued that the EU—rather than individual Member States—has “exclusive competence on social security coordination for the periods completed and for facts and events that occurred before the withdrawal date”. Concretely, if correct, this means that EU countries cannot negotiate separately with the UK about new bilateral social security agreements that take into account periods of work undertaken, or social security contributions paid, before 29 March. (By extension, they have competence to conclude such agreements for periods of work from 30 March onwards.)
6.17The Government has this “particularly unwelcome”, and in a parliamentary answer on 21 January 2019 that it has “informally approached other Member States and are prioritising those that are the major pensioner, worker and tourist destinations” for UIK nationals. A formal letter with the UK’s “generous offer on reciprocal healthcare” is due to be sent to all EU countries, and the European Commission, shortly. In December 2018, the Government’s however said that the Withdrawal Agreement “is the only way the UK Government [can] guarantee the rights” of British people living in the EU. This is an acknowledgement that in a ‘no deal’ scenario, the social security and healthcare rights of UK nationals elsewhere in the European Union are likely to be disrupted, with entitlements varying depending on the domestic legislation of the Member State of residence.
6.18With respect to the social security rights of EU nationals in the UK, the Government’s own on the rights of citizens in a ‘no deal’ scenario noted that EU nationals lawfully resident in the UK on ‘exit day’ “will be able to continue to access in country benefits and services on broadly the same terms as now”. It added, however, that these entitlements “will be subject to any future domestic policy changes which apply to UK nationals”. However, under laid by the Department for Work & Pensions before Parliament in December 2018 to address the implications of a ‘no deal’ Brexit on the system of social security coordination with other EU countries, the legal principle of “equal treatment” (between UK and EU nationals) would be removed from Regulation 883/2004 as it applies domestically from April 2019. The Department’s Explanatory Memorandum on these draft regulations does not refer to the intended consequences or practical effect of the repeal of the equal treatment principle.
6.19We thank the Minister for Employment for his latest update on the negotiations to amend the EU’s Social Security Regulation. If the Withdrawal Agreement is ratified, or a similar deal on citizens’ rights is struck separately, the UK would be legally required to continue applying the Regulation to many millions of UK and EU nationals who exercised their free movement rights before the end of the post-Brexit transitional period.
6.20Crucially, the requirement to continue applying the Social Security Regulation under the Withdrawal Agreement also applies to any future changes adopted by the EU without UK involvement. The Government has accepted the EU’s proposal that it should have no unilateral discretion to refuse to apply future changes to the Regulation decided by the remaining Member States. The proposals to amend Regulation 883/2004, especially those on access to the UK’s social security system by citizens in scope of the Withdrawal Agreement, therefore remain highly politically relevant.
6.21We note in this respect that there is no certainty yet at this stage about the final substance of the amendments to the Regulation, and it appears unlikely they will be adopted before the Government is due to lose its representation and voting rights in the Council of Ministers on 29 March 2019. There remain substantial differences between the European Parliament and the Member States on the necessary changes to Regulation 883/2004, not least with respect to access to unemployment benefits by EU nationals who move to another Member State to work. The proposed Regulation would also make important changes to the treatment of frontier and cross-border workers and their entitlements if they become unemployed, which is particularly important in Northern Ireland and Gibraltar. The Committee will keep this file under review until those differences have been resolved.
6.22In a ‘no deal’ scenario, UK nationals in the EU would no longer be covered by the harmonised system of Regulation 883/2004. We have warned on a number of occasions that this would disrupt their entitlement to key social security benefits and local healthcare provision, as they went from ‘EU citizen’ to ‘third country national’ overnight. The exact implications are likely to vary Member State by Member State, depending on local legislation and any contingency measured adopted unilaterally by the EU or individual countries. As we have noted before, for British people in countries like Ireland, France and Spain this could result in being unable to access, or afford, healthcare in their EU Member State of residence (for example if they become reliant on private health insurance). The implications for their personal lives, as well as for public services in the UK if they see no option but to move back, are likely to be profound.
6.23The Government only acknowledged the scale of the disruption in access to healthcare for UK nationals in the EU on 28 January 2019. That is nearly two years after we first asked the Department for Work & Pensions to confirm the potential implications of Brexit for UK nationals who access healthcare arrangements as long-term residents elsewhere in the EU.
6.24We note in this context that the Government’s Social Security and Healthcare Bills are not solutions that would prevent disruption from the UK’s abrupt exit from the system created by Regulation 883/2004. They would only provide the statutory basis for the Government to fund new arrangements with the EU and other countries in this area. A continuation of the status quo for UK nationals living in the European Union would require an agreement, which by definition in a ‘no deal’ scenario would not exist. Moreover, neither of the Bills to facilitate the UK’s domestic implementation of any such new arrangement has yet received Royal Assent.
6.25We also note that the Government has said that EU nationals lawfully resident in the UK on 30 March 2019 would retain their current access to UK social security and healthcare system, but “subject to any future domestic policy changes which [also] apply to UK nationals”. It is unclear to us how this commitment to the ‘equal treatment’ principle would be affected by the draft Statutory Instrument to prepare Regulation 883/2004 for the UK Statute Book in a ‘no deal’ scenario, which would explicitly remove Article 4 (which currently protects the ‘equal treatment’ principle when the EU nationals seek to access the UK’s system for social security as a matter of European law).
6.26In light of this, we ask the Minister to write to us as soon as possible with further information about:
6.27In anticipation of the Minister’s response, and in view of the continued possibility that Regulation 883/2004 may have to be applied in the UK to EU citizens in scope of the Withdrawal Agreement indefinitely, we retain the proposal to amend Regulation 883/2004 under scrutiny. We also draw these developments to the attention of the Work and Pensions Committee and the Health and Social Care Committee.
Proposal for a Regulation amending Regulation (EC) No 883/2004 on the coordination of social security systems: (38400), 15642/16 + ADDs 1–8, COM(16) 815.
Thirty-first Report HC 71–xxix (2016–17), chapter 8 (8 February 2017); First Report HC 301–i (2017–19), chapter 15 (13 November 2017); Fourth Report HC 301–iv (2017–19), chapter 8 (6 December 2017); and Twenty-ninth Report HC 301–xxviii (2017–19),(23 May 2018).
29 The effects of the legislation have also been extended to the four EFTA countries (Iceland, Norway, Liechtenstein and Switzerland), which accept the legislation in its entirety.
30 More concretely, Regulation 883/2004 allows many of the 190,000 British pensioners living in other EU countries to access healthcare locally on the same basis as citizens of that country, and to have the costs of their care reimbursed by the Government using a so-called S1 form issued by the UK. The underlying logic is that the Member State of last employment pays for social security, including access to healthcare, even when they move to another Member State without taking up employment (i.e. pensioners).
31 The implementing legislation is Regulation 987/2009.
32 More concretely, the current coordination rules require that the Member State where a worker was last employed (and thus made national insurance contributions) is responsible for the payment of unemployment benefit (UB), starting on the very first day of their employment in a particular country. Moreover, social security contributions made in other EU countries have to be taken into account when determining if someone meets the national criteria for entitlement to UB. This means, for example, that social security contributions made in another EU country count towards the contributory Jobseeker’s Allowance (JSA) entitlement in the UK, as long as someone had been employed in the UK for at least a day.
33 Member States also want to abolish a reimbursement mechanism between themselves for unemployed workers who live in one EU country while working in another.
34 The Government accepted the one-month qualifying period rather than the longer three-month period, because of the increased administrative burden of the latter since it would involve more onerous checks of a person’s employment history to ascertain the Member State required to provide the unemployment benefit.
35 Regulation 883/2004 currently means that in certain cases the country of residence provides the unemployment benefit even though any social security contributions would have been made in the country of employment. To compensate the Member State of residence, the rules provide for a reimbursement of benefits paid for the first three months or five months.
36 The European Commission had proposed to make the Member State of residence responsible for unemployment benefit until a frontier worker had worked in another Member State for at least 12 months.
37 The Government has welcomed the proposed abolition of the reimbursement provisions (which the Government said “were cumbersome to administer and a source of disagreement between the UK and other Member States”).
38 The “right of residence” test means that to qualify for certain benefits, an unemployed EU national must be actively looking for employment, or be able to financially support themselves and have comprehensive sickness insurance. 80% of non-economically active mobile EU citizens derive either residence rights or entitlements to social security through working family members with whom they reside and so automatically qualify.
39 As confirmed in the letter from Damian Hinds MP to Sir William Cash MP (14 December 2017). The proposed codification was dropped because Member States could not agree on the scope of the codification (and in particular access to which types of benefits could be restricted under the judgement delivered in ). that the right to equal access to non-contributory benefits for mobile EU nationals can be made subject to a “right of residence” test (see previous footnote). As a result, Member States can refuse to grant non-contributory cash benefits to mobile citizens who are economically inactive, and who do not have a legal right of residence under the Free Movement Directive (although which specific non-contributory benefits are caught by this exemption is still a matter of contention).
40 See ‘Previous Reports’ hereafter.
41 Letter from Sir William Cash MP to Alok Sharma MP, Minister for Employment at the Department for Work & Pensions (17 October 2018).
42 The aim is to ensure that social security entitlements that are available to those UK and EU nationals who exercise their freedom of movement rights prior to that date are retained for them under Regulation 883/2004 after it otherwise ceases to apply to and in the UK.
43 European Parliament document .
44 The Minister’s letter also notes the proposal would increase the administrative burden of implementing the system, and entail the reintroduction of reimbursement provisions to ensure fair burden-sharing between those Member States who have had the national insurance and taxes of workers and those paying the benefits. One of the objectives of the proposal to amend Regulation 883/2004 was to abolish that reimbursement procedure.
45 Currently, portable documents certifying where a worker is insured can be issued after a worker is sent to another Member State, allowing for flexibility. The Parliament has also proposed the imposition of a fine on the sending Member State in instances of non-notification of a worker being sent to another EU country, and reduces the maximum duration of a posting (a worker being sent to another Member State to carry out work there without its country of national insurance changing) from 24 to 18 months.
46 Our addition. This is now Article 36 (1) of the current 14 November text of the proposed Withdrawal Agreement
47 The Withdrawal Agreement in Article requires the Joint UK-EU Committee to revise the list of social security legislation in the Agreement “as soon as such an act is adopted by the Union”.
48 Our addition. This is now Article 36 (2) of the current 14 November text of the proposed Withdrawal Agreement
49 ‘Export’ of a cash benefit, such as unemployment benefit, means a person can continue to receive it from EU country A even if they move to EU country B.
50 As the pending amending Regulation is yet to be finalised following negotiations between the Council and the European Parliament, the Minister told the Committee that “it is too early to say how amendments that are applied after the end of the Transition Period […] would fall within the scope of Article 31(2) of the draft Withdrawal Agreement”.
51 Exit day would be the day the UK fully leaves the Single Market, i.e. on 29 March 2019 in a ‘no deal’ scenario or by the end of the post-Brexit transition period if the Withdrawal Agreement is ratified.
52 There are EU rules for social security coordination of ‘third country’ nationals who move between two or more EU Member States.
53 (answered on 21 January 2019).
54 Department of Health and Social Care ““ (28 January 2019).
55 The European Scrutiny Committee first asked the Government to clarify how it would seek to protect the social security and healthcare entitlements of UK nationals in the EU following Brexit in its (i.e. before Article 50 had even been triggered).
56 The . Schedule 1 would replace Title 1 of Regulation 883/2004 as it applies in the UK in a ‘no deal’ scenario, and includes the removal of Article 4 on equal treatment.
Published: 5 February 2019