Documents considered by the Committee on 23 May 2018 Contents

6Coordination of social security systems

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; scrutiny waiver granted for the Employment, Social Affairs Council on 22 June 2018; further information requested; drawn to the attention of the Work and Pensions Committee

Document details

Proposal for a Regulation 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 base

Article 48 TFEU; QMV, ordinary legislative procedure

Department

Work and Pensions

Document Number

(38400), 15642/16 + ADDs 1–8, COM(16) 815

Summary and Committee’s conclusions

6.1As part of the free movement of people, the EU has created a system for the coordination of social security benefits for EU residents who move between different Member States.38 This system determines, for example, which national government is responsible for the payment of unemployment benefits or child benefit for mobile EU citizens.39 It is also the legal framework that allows, for example, UK pensioners in Spain and France to access healthcare free of charge locally and have the costs reimbursed by the Department for Work & Pensions.

6.2In December 2016, the European Commission tabled a legislative proposal to amend the relevant legislation (Regulation 883/2004 and its Implementing Regulation).40 The purpose of its proposal was to bring the Regulations in line with the case law of the European Court of Justice on access to benefits for unemployed EU citizens; to clarify the rules for determining which EU country is responsible for payment of benefits; and to amend the provisions of the Regulation on access to unemployment benefit, salary-related family benefits and long-term care benefits.

6.3The Committee has set out the details of this proposal in some detail in previous Reports in February and November 2017.41 It has retained it under scrutiny because of its political importance: the provisional Withdrawal Agreement on the UK’s EU exit foresees the continued application of social security rights derived from the Regulation (including the proposed amendments) for UK citizens already resident in the EU and vice versa on the date the UK actually leaves the Single Market.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 ceases to apply to the UK. In the draft Withdrawal Agreement published on 19 March 2018, the provisions relating to social security coordination are shaded in green: this indicates the Government has accepted them, subject to minor technical redrafting.43

6.4The European Parliament and the Member States in the Council are yet to formally agree on the legal changes to Regulation 883/2004. The Member States have already established their ‘general approach’44 on most elements of the draft legislation, namely non-discrimination between EU nationals, the determination of the appropriate national social legislation, long-term care and child-rearing benefits. We discussed these developments in our Reports of 13 November and 6 December 2017.

6.5The UK Government has been broadly supportive of the proposed amendments, confirmed by the then Minister for Employment (Mr Damian Hinds) in December 2017,45 and supported the substance of the Council’s earlier partial general approaches.46 However, the Minister has consistently felt unable to provide any detailed information on the Government’s contingency planning for if the agreement on grandfathering the social security rights of UK nationals already living in the EU is, for whatever reason, not ratified through the Withdrawal Agreement by March 2019.47

6.6In June 2018, EU Employment Ministers are due to agree their common position on the final provisions of the Commission proposal not covered by their previous general approaches (namely those dealing with unemployment benefit). According to the Minister for Employment,48 negotiations between national officials have led to a compromise where a worker would normally have to have been employed for at least a month in a Member State before they could count social security contributions paid in another EU country towards the local unemployment benefit entitlement.49 Member States have also agreed to abolish a reimbursement mechanism between themselves for unemployed workers who live in one EU country while working in another.50

6.7The Government is confident that Employment Ministers will endorse the compromise brokered at official level at their meeting on 21 June 2018. The Minister has said that the UK “has thus far secured many of its objectives for the package of reforms”, and has asked the Committee to clear the proposal from scrutiny so that the Government can give its political support at the Council meeting. Negotiations with the European Parliament on the final legal text of the amendments to Regulation 883/2004 are due to follow later this year. If the Withdrawal Agreement is ratified by both the UK and the EU before the end of the Article 50 period on 29 March 2019, the changes to Regulation 883/2004 are likely to apply in full to the UK between their date of application and the end of the transition, and thereafter only to citizens in the scope of the Withdrawal Agreement.51

6.8The proposal to amend Regulation 883/2004 remains politically important, given the impact it could have on individual citizens’ lives, and its specific significance within the “citizens’ rights” chapter of the draft Withdrawal Agreement on the UK’s exit from the EU.

6.9We thank the Minister for his latest update on the proposed changes to the ‘unemployment benefit’ chapter of Regulation 883/2004, and note that the Government is likely to support a compromise text at the June 2018 EPSCO Council based on the current direction of travel in the negotiation between the Member States. He has specifically cited the loss of the UK’s institutional representation in March 2019 as one of the drivers for the Government’s willingness to compromise on amendments to the social security rules that it considers less than ideal, notably those allowing frontier workers to choose which Member State—that of employment or of residence—should pay their unemployment benefit. We accept that no Member State is likely to achieve all of their objectives in this legislative process, given their competing interests, and that a compromise is therefore the only way to modernise the Social Security Regulation.

6.10More generally however, we remain concerned about the lack of information about the Government’s planning for the eventuality that the Withdrawal Agreement (and its Citizens’ Rights chapter) is not ratified in time for the UK’s exit from the EU on 29 March 2019. As we have noted repeatedly, failure to ‘grandfather’ existing EU social security rights, for those who have already exercised their freedom of movement before Brexit, would have serious consequences for many thousands of people. In the absence of a legally-binding Agreement, the rights UK nationals in the EU derive from Regulation 883/2004 to access, aggregate and export social security entitlements (including access to non-emergency healthcare) would disappear, and it is not clear whether there would be a unified EU-wide response to address the resulting legal uncertainty for UK nationals.

6.11Similarly, although there have been press reports about the UK’s offer for a “labour mobility partnership” with the EU after it leaves the Single Market, the Government has not published any detailed prospectus for the future of the UK’s approach to immigration from and emigration to the EU-27 when current free movement rights are due to come to an end in December 2020. With respect to social security rights in particular, the Government has been unable to explain if it intends to seek a new social security arrangement with the EU after Brexit, for citizens of both sides who want to move between the two after the UK’s withdrawal from the EU and are therefore outside the scope of the Withdrawal Agreement.

6.12Given the proposal remains under discussion, and in view of the uncertainties triggered by Brexit, we retain the proposal under scrutiny. However, we are content to grant the Minister a scrutiny waiver to support a general approach on the remaining elements of the proposed Regulation at the June EPSCO Council meeting. We emphasise, however, that the scrutiny reserve will continue to apply thereafter and ask for further information on developments in any future trilogue negotiations between the incoming Austrian Presidency of the Council and the European Parliament.

6.13We also draw these developments to the attention of the Work and Pensions Committee.

Full details of the documents

Proposal for a Regulation 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: (38400), 15642/16 + ADDs 1–8, COM(16) 815.

Background

6.14Regulation 883/2004 determines which EU Member State is responsible for the calculation and payment of social security benefits for mobile EU citizens who move within the Union. Such citizens are, in principle, entitled to use the local benefits system on the same basis as nationals of their host Member State, including unemployment benefit.

6.15In December 2016, the European Commission tabled a legislative proposal to amend Regulation 883/2004. Among other things, this proposal would bring the legislation in line with the case law of the European Court of Justice on access to benefits for unemployed EU citizens and amend the rules determining which Member State was responsible for paying them. Although the amendments to the Regulation are unlikely to apply before the UK is due to withdraw from the EU in March 2019, the Government has agreed to maintain the effects of the Regulation (as amended) for resident EU nationals who had accrued social security entitlements in the UK and vice versa before the UK leaves the Single Market as part of any Withdrawal Agreement.52

6.16The EU Member States in the Council have already established their position on most elements of the proposed Regulation, which relate to general access to benefits, long-term care and family-related benefits. We have discussed these aspects of the proposal in a series of previous Reports.53 The final aspect on which Member States must agree relates to access by EU nationals to unemployment benefit in another Member State, after which the Presidency of the Council can initiate negotiations with the European Parliament on the final legal text of the amendments.

6.17The coordination rules for unemployment benefits under Regulation 883/2004 deal with three different areas, namely:

6.18The Commission proposal sought to amend the Regulation 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:

The Member States’ position on access to, and export of, unemployment benefits

6.19On 24 April 2018, the Minister provided an update on the Council’s deliberations on changing the provisions of Regulation 883/2004 relating to unemployment benefits, which govern EU nationals’ access to contributory Jobseeker’s Allowance in the UK.57 The Minister states the Government’s efforts have focussed on ways to “limit the Commission’s proposals on extending the period during which [unemployment benefit] may be exported to another Member State, and reduce the administrative burden surrounding the proposals”. In particular, with respect to aggregation of contributions, the Government has “supported a longer waiting period than the current one day” before a claimant can use contributions paid in another Member State to qualify for Jobseeker’s Allowance in the UK.

6.20As a result of discussions between Member States, the Minister explains, the Commission proposals on unemployment benefit have been substantially amended:

The Government’s view

6.21The Minister concludes his letter by saying that, although the unemployment benefit provisions are “not finalised”, the Council’s position “is not expected to change substantially before the June [2018] EPSCO” Council meeting. He notes that the UK “has thus far secured many of its objectives for the package of reforms”.

6.22Although the Government “would have preferred not to see the introduction of new circumstances in which individuals may opt to receive benefit paid by one [EU country] in another” (as is the case for frontier workers, see paragraph 6.20 above), the Minister adds “the instances of this will be limited in circumstance and duration and be subject to the individual meeting the national entitlement conditions”.60 Moreover, he notes that any attempt by the UK to unpick the current compromise would most likely lead to the limitations on the export of unemployment benefit, which are one of the Government’s objectives, “to be lost” because “most [Member States] see the UB provisions as a package”.

6.23Accordingly, the Minister says the Government would be able to support the Council’s position if it is “similar to that which is currently on the table”, especially given it is in the UK’s interest that the changes to these regulations “are agreed sooner rather than later while we continue to have a seat at the Council negotiating table” in view of the continued application of Regulation 883/2004 to large numbers of UK and EU citizens even after Brexit under the terms of the draft Withdrawal Agreement. The letter therefore requests the Committee clear the proposal from scrutiny to enable the Minister to vote in favour of the compromise legal text in June 2018.

6.24The European Parliament’s Employment & Social Affairs Committee, meanwhile, is also due to propose amendments to the draft Regulation at its meeting on 19 June. It is therefore likely the Member States and MEPs will negotiate the final legal text of Regulation 883/2004 after the summer recess, with adoption to follow by the end of 2018. The changes would then take effect in 2020, during the post-Brexit transitional period.61 If the Withdrawal Agreement is ratified by both the UK and the EU before the end of the Article 50 period on 29 March 2019, the changes to Regulation 883/2004 would apply in full to the UK between their date of application and the end of the transition, and thereafter only to citizens in scope of the Withdrawal Agreement.62

Previous Committee Reports

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); and Fourth Report HC 301–iv (2017–19), chapter 8 (6 December 2017).


38 For example, the Regulation is the legal basis for the system that 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 effects of the Regulation have also been extended to the four EFTA countries (Iceland, Norway, Liechtenstein and Switzerland).

39 The EU’s social security coordination system also applies in the other countries to which freedom of movement has been extended, namely Norway, Iceland, Switzerland and Liechtenstein.

40 Regulation 987/2009.

41 See the Committee’s Reports of 8 February 2017 and 13 November 2017.

42 Under a (provisional) transitional arrangement, the UK would stay in the Single Market until the end of 2020. Even if it formally leaves the EU on 29 March 2019, free movement rights for UK and EU-27 nationals would continue until the end of the transition, and the ‘grandfathering’ provisions of the Social Security Coordination Regulation would take effect afterwards.

44 A ‘general approach’ is the collective position of the EU’s Member States on new legislation proposed by the European Commission. It includes substantive amendments to proposals for negotiation with the European Parliament.

45 Letter from Mr Damian Hinds to Sir William Cash (14 December 2017).

46 The Government abstained from the vote on the partial general approach covering on 7 December 2017, after the Committee refused to grant a scrutiny waiver.

47 When the Committee first asked for details of the relevant contingency plans in February 2017, the Minister replied that “it would not be appropriate to comment further on this before negotiations have begun”.

48 Letter from Alok Sharma (24 April 2018).

49 If they had not been employed in a new Member State for at least a month, unemployment benefit would be the responsibility of the previous Member State where the worker was employed (provided it was for a month or more). If neither the worker was not employed for at least a month in either of the last two Member States of employment, unemployment benefit would remain the responsibility of the last Member State where social security contributions were made (as is the case under the current Regulation).

50 See “Background” for more information on the changes to access to unemployment benefit being considered.

51 The Government has not been able to provide any clarity about its intentions for a long-term agreement on social security coordination with the EU after the end of the transition. Where the EU has reached agreement with other countries previously (for example with Norway and Switzerland), it has required the latter’s wholesale implementation of Regulation 883/2004 and its Implementing Regulation. However, it has always been accompanied by a broader agreement on the free movement of workers.

52 In addition, the Government has negotiated a post-Brexit transitional period, during which Regulation 883/2004 would continue to apply as it did while the UK remained a Member State.

53 See for example our Reports of 10 January 2018 , 6 December 2017, 13 November 2017 and 8 February 2017.

54 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.

55 Under Regulation 883/2004, ‘frontier worker’ means any person pursuing an activity as an employed or self-employed person in a Member State and who resides in another Member State to which he/she returns as a rule daily or at least once a week.

56 This option was preferred to the alternatives considered of either providing a choice for frontier workers as to where to claim unemployment benefits or making the Member State of most recent employment responsible for the payment of unemployment benefits in all cases.

57 Letter from Alok Sharma to Lord Boswell (24 April 2018).

58 Moreover, while the Commission proposal could have required governments to look back through a worker’s employment history in multiple countries to find the most recent period of three months of employment in one country (which would then become responsible for unemployment benefit), the Minister explains that the Council’s amendments would “simplif[y] the process for looking back at work history elsewhere where the claimant has not completed one month in the most recent job” in the new Member State. As a result, officials would only have to examine a worker’s record in the penultimate country of employment.

59 In cases where a claimant is subject to the legislation of the Member State where they previously worked and must make themselves available for work there in order to receive unemployment benefit, they can opt instead to seek work in the country of residence and receive the benefit from where they last worked in the Member State of residence. However, the reimbursement provisions would remain abolished.

60 With respect to access to JSA in the UK, the Minister says: “Given the stringent contribution conditions attached to UK contributory Jobseeker’s Allowance many potential applicants are likely to be ineligible to receive it.”

61 According to the Minister, “the expectation in the draft Council text, based on previous amendments to these regulations, is that the changes will enter into force between six months and one year after they are adopted into EU law”.

62 The Government has not been able to provide any clarity about its intentions for a long-term agreement on social security coordination with the EU after the end of the transition. Where the EU has reached agreement with other countries previously (for example with Norway and Switzerland), it has required the latter’s wholesale implementation of Regulation 883/2004 and its Implementing Regulation. However, it has always been accompanied by a broader agreement on the free movement of workers.




Published: 29 May 2015