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Benefits (EU Nationals)

Volume 531: debated on Tuesday 12 July 2011

It is delightful to serve under your chairmanship this afternoon, Mrs Riordan. This is an important debate. I have a brief time in which to speak—I wish that it were longer—but I will allow my colleagues to make brief interventions, if they need to make a particular point.

Can British taxpayers, with a massive budget deficit of £143.2 billion, afford to be so generous with their benefits payment system to everyone who tries to claim? Are we the benefit pot for the EU or the UK? Do we, through our lax approach, encourage benefit tourism?

Under EU rules governing non-discrimination against other EU member citizens, many of our benefits are ultimately available to many of the citizens who have decided to join us from other EU member states with only a few exceptions for some accession countries. The amount of benefits being paid has risen enormously, and our own Chancellor, in his spending review, is looking at ways in which to bring down the welfare bill. I suggest that we start with EU benefit tourists and by closing some of the loopholes that have been exploited by the canny.

My colleagues will not be surprised to hear that I am no fan of the bloated, greedy, meddling Euro-state. I did not vote for it, and the power-creep that has gone on over the years is abhorrent to many older citizens who voted for a common market based on trade. In 2004, 10 countries joined the EU, and their citizens are afforded the same rights as those of other EU member states. Transitional measures for up to seven years restricted the right of freedom of movement for labour for eight of the 10 new accession states. Often called the A8 countries, they are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Ireland, Sweden and the UK were the only EU member states to grant full labour market access to the A8 nationals. Other member states maintained their existing work permit arrangements or implemented a modified work permit regime.

At that time, we foolishly implemented a transitional set of arrangements covering a workers’ registration scheme. These arrangements have lapsed for the A8 group as of this year. That category of EU migrant worker will be able to claim jobseekers’ allowance, council tax benefit and housing benefit on top of other benefits such as child benefit. If the Migration Advisory Committee’s report of 2009 is anything to go by, we can expect an even greater call on our benefits now that the transitional arrangements have lapsed. The MAC report looked into extending the transitional arrangements for EU migrant workers until April 2011.

In 2008, the MAC reviewed the evidence on drivers for migration. Relative income levels—GDP per capita expressed in purchasing power standard—in A8 countries demonstrated the strongest relationship to immigration rates. We must learn from history. If there is a direct link, as outlined by the MAC in 2009, that people from poorer countries are more likely to come to work and claim benefits in Britain, then we must expect that when the current transitional arrangements for Bulgaria and Romania lapse this year, or in 2013 if we achieve an extension, many thousands of them will come over, too. We cannot walk into a potentially burgeoning welfare commitment with our eyes closed, and we must act to protect our public finances. We cannot castigate the previous Labour Government for massively underestimating the number of Polish migrant workers who would come to the UK and then put the blinkers on our own eyes when it comes to the A2 countries.

The MAC report showed that, relative to other A8 countries, Poland had a much lower GDP per capita than Britain, and so many Poles came to the UK to seek work. As the right hon. Member for Birkenhead (Mr Field), in his capacity as poverty tsar, has been advising the Government, it is no secret that nearly 90% of the newly created jobs have been filled by migrant workers, many of whom have dependent families back home. With an even worse GDP per capita for both Bulgaria and Romania, we must expect them to react to their circumstances in the same way and to seek a more affluent lifestyle on our doorstep.

We should have learned a lot from the failure of the previous Government to protect the coffers of the UK from EU migrants seeking, very understandably, to better their economic lot and that of their families, many of whom will have stayed behind in their mother country. I do not blame them; they are simply working within a set of rules that we have stupidly put in place.

This is an important subject, and I congratulate the hon. Lady on securing the debate. Does she not accept that in judging this in the round, we also have to take into account the benefits to our economy and to other economies of freedom of movement? Should we also not take account of the benefits that accrue to British citizens through having rights of movement to other EU countries?

There are undoubtedly benefits, but we are talking about countries with different levels of affluence. Although we benefit from some hardworking migrants, we also have to open up our benefit pot. It is no good expecting our country to withstand massive cuts in benefits and services to try to tackle a budget deficit while, at the same time, handing out largesse elsewhere. I want to examine those failures and learn from them, especially as Romania and Bulgaria will soon enjoy full accession rights.

There is no point in any of us wringing our hands, berating the shortcomings of the previous Government and moaning that our hard-earned taxes are being sent abroad if we are not prepared to tackle this. I urge the Minister to take note and, hopefully, take action.

Child benefit is a notable example that has caught the eye of hon. Members in all parts of the House. I pay particular tribute to my hon. Friend the Member for Witham (Priti Patel) for her sterling work in uncovering recent data that show how our child benefit is being transferred by EU migrants and their families.

In 2007, the Secretary of State for Transport, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond), who was then shadow Treasury spokesperson, said:

“There are 200,000 more British children living in poverty than a year ago. Child benefit is a vital weapon in the fight against child poverty. So why is Gordon Brown sending thousands of pounds of benefits every week to children who do not live here and who may never have even visited the UK.”

I totally agree, so why are we still doing it and why will we keep on doing it in ever greater amounts when the new A2 countries will equally want a slice of our benefit pie? We cannot just hope that other countries may not know about the apparent advantages of seeking benefits in our country.

At the time my right hon. Friend made his comments, the biggest Polish newspaper in Britain, The Polish Express, ran a story headlined “Benefit Hunters”, which claimed:

“The longer we are in Britain, the more rights to social security we are given and the better we are taking advantage of them.”

It gave advice on how to claim and described the case of one Polish migrant who was given a two-bedroom house shortly after applying to a housing association without any need to join a waiting list. The paper said:

“The formalities concerning an application for social security are extremely simple. Do not delay in submitting an application.”

Does my hon. Friend agree that the NHS should also do more to reclaim the costs of treating EU nationals? Those costs can be a very great burden on hospitals such as mine in Treliske.

My hon. Friend makes a valid point. I will touch only on some of the benefits, but the actual list is almost endless. We cannot delude ourselves and think that people will not know about the loopholes or the benefit pots. According to Martin Beckford and Matthew Day, writing in The Daily Telegraph in November 2008, jobcentre staff in Poland encouraged returning migrants in Poland to continue to claim jobseeker's allowance from Britain, rather than sign on for Polish unemployment benefit, which pays much lower amounts. A quick trawl on the internet shows how EU migrants can get a myriad of advice on how to claim a range of our benefits. We must be under no illusions. We are seen as a soft touch, and we will be exploited by those who have the full might of EU law behind them.

Perversely, we are expecting our own citizens to bite the bullet on cuts in order to help slash the massive budget deficit, yet at the same time we are widening the pool of foreign EU families who are eligible to make a claim from the UK benefit pot. What we save in one corner we pay out in another. Benefit payments to newcomers from eastern Europe and other parts of the EU are not specifically recorded by the Department for Work and Pensions, but unofficial estimates put the bill at a very conservative £200 million a year—that probably does not include the NHS—and growing. Teasing out firm data on this has been difficult. In a series of questions, I have been told by the DWP that the data are not recorded or are not available due to cost. However, I was pleased to be assured by the Secretary of State for Work and Pensions on 20 June that he has commissioned his officials to look at alternative ways of making the information available.

The child benefit bombshell has been widely covered in the media from The Daily Telegraph to the tabloids. I find it hard to look ordinary middle-class families in the eye, particularly families with a mum who stays at home, and say, “Apparently, you are so wealthy with one of you earning just more than £44,000, you must give up your child benefit so that a family in Poland, and ultimately Bulgaria, Romania or wherever within the EU, can claim it for children who do not even live here.” They are furious and so am I. It is estimated that 1.2 million British families will lose out under the new benefit rules. I am not happy that we are looking at this issue in this way.

Although in theory there is reciprocation, other EU countries have far lower benefit rates, and many EU countries also have tougher qualification rules. All those EU countries have some form of family allowance. If children qualify for benefits in their own country, why should our taxpayers be expected to support them? If we could afford it, I would rather that every family in Britain had child benefit as a right that was not means-tested—as used to be the case—instead of rationing it, especially since it now appears that any money that is saved is then swallowed up in our burgeoning welfare bill, which must include payments for EU children and families who do not even live here. If we are expected to make cuts, I want to cut back on this scam, which takes the UK taxpayer for a fool.

I congratulate my hon. Friend on her excellent speech. I do not believe in the free movement of labour across the EU. However, if we are to have this system and if we are to have reciprocity between nations, would it not make sense that, when someone moves from Poland to this country, they should be entitled to receive the same child benefit that they would get in Poland? In other words, they should receive the rate of benefit that they would receive in their home country. That way, we would have reciprocity across the EU, but we would not have to shell out billions to other EU nationals.

My hon. Friend has anticipated my next point, but I think that he will be shocked at what he will hear. The figures speak for themselves. I have taken the case of one three-year-old child, because I know that there are various rules and regulations, depending on whether a child has a disability and so on. In the UK, child benefit for one three-year-old child is £87.97; in Poland, it is £14.99; in Bulgaria, it is £15.87; and in Romania, it is £8.67. Those are the equivalent figures for euros at today’s rate. We should ask ourselves, “If you could claim at a higher UK level, why wouldn’t you?”

Hon. Members might be surprised to learn that we are not only paying child benefit here, at our rate, if an EU worker is eligible to claim it, but apparently we are also topping up dependants in countries whose largesse does not meet the standards of our own largesse. We should be asking ourselves, “Why are we paying top-ups to less generous countries where the level of child benefit has obviously been set at one that the country deems acceptable?” When conducting research for this debate, I was staggered to be told only yesterday by the international child benefit team, which is part of Her Majesty’s Revenue and Customs, that the rules allow for top-ups to be claimed to top up lower rates elsewhere. So, when one EU migrant worker is in the UK with a spouse working in their country of origin, such as Poland, and with their children receiving that country’s child benefit, we will top it up to the level of UK child benefit. That is madness.

Loopholes exist in the current benefits system to such an extent that EU migrants can always find a way around the system, if they are resourceful. As has been reported widely in the Daily Express and other newspapers, by declaring themselves self-employed Bulgarians and Romanians get around our weak transitional arrangements on restricting access to the labour market simply by selling The Big Issue and paying a nominal contribution of £2.50 in national insurance per week, which then opens up a lucrative stream of other benefits. The TaxPayers Alliance has described that system as a scam, and it is right to do so. We are the politicians; what are we going to do about this situation? It is a ridiculous state of affairs that I believe will foster social unrest, discrimination and most importantly resentment.

I know that fairness works both ways. The fact that so many newspaper editorials are addressing this thorny issue shows the depth of public concern, and I pay tribute to those newspapers and urge them to keep up the pressure. With their help, we can hopefully give Britain a strong voice when we stand up to this nonsense.

Let us not forget that we have the poor, the young and the elderly living in increasing poverty in our own country. According to the Poverty Site, some 13.5 million people in the UK—around a fifth of the population—exist on or below the poverty line, and yet we are rationing money to send it to even poorer citizens elsewhere in the EU. Sadly, poverty is always relative, and so our citizens will lose out.

A staggering case of opportunistic lifestyle enhancement was recently reported in The Economist under the headline, “Keeping the coffers shut”. The Economist reported how Galina Patmalniece came to Britain after 40 years working in Latvia’s factories and kitchens with only her Latvian state pension to support her, which was as little as £50 a month. She applied in the UK for a means-tested pension top-up of £133 for a single person. She was denied that top-up, but meanwhile she got council housing. To cut a long story short, she appealed to the Court of Appeal, which said that the Government were entitled to withhold benefit. The basic issue at stake was whether the conditions that Britain imposes for giving out pensions were compatible with the rule of EU law, which prevents discrimination on grounds of nationality. Broadly speaking, an EU national must be able to support themselves, so with no family or work and only her Latvian pension to support her, Ms Patmalniece had no right to reside here, although we made no effort to deport her. It is a common theme that Britain does not remove EU migrants who cannot support themselves, even though we are allowed to do so.

On 8 March this year, the Supreme Court found in the case of Ms Patmalniece that the British requirements amounted only to indirect discrimination. A majority of the Supreme Court judges agreed that our approach was reasonable. However, the European Commission might decide that it wishes to challenge that ruling and bring an infringement action against Britain in the European Court of Justice. The Commission has already written to our Government expressing unhappiness about our approach in this case as well as about other restrictions on the access of EU nationals to benefits. I believe that that letter has been described as being of quite a threatening nature. Will the Minister update us on that case? I believe that Britain will be firmly behind him in resisting dishing out benefit payments to EU migrants such as Ms Patmalniece.

I am sure that my constituents and hon. Members here in Westminster Hall today have read with interest articles in the Daily Mail and other newspapers covering the Dutch approach to pulling up the drawbridge on workless and benefit migrants amid angry allegations that labour migrants in the Netherlands are abusing the benefits system. In many countries, there is a rising tide of disquiet over EU migrant tourism. I hope that the Minister takes note and joins Holland in saying no to this sloppy and misplaced altruism. If that sentiment catches on across Europe, perhaps a bit of collective common sense will prevail.

Our national autonomy is being eroded by the EU, which must stop. There is an old adage that good fences make for good neighbours. How much more important is it for us to reclaim our boundaries and our borders? Tackling this benefits time bomb must now be a priority for the Government. There is no Government money, only taxpayers’ money, so give us back our say over how we spend taxpayers’ money, whom we can help and how we can do it. I am sick of having to find wriggle room within regulations that we find incomprehensible and that disadvantage ordinary hard-working families in the UK, who pay their taxes to fund services in this country and not to dish out benefits to some cash-strapped EU member country that has its hand out.

I know that I have given the Minister a lot to think about today and I am happy for him to write to me about any of the issues that I have raised. However, I want to hear that the Government are stiffening their resolve to tackle this problem, which I believe will only get worse and worse.

I congratulate the hon. Member for St Albans (Mrs Main) on securing this debate on what she rightly says is an important issue, which I know is of concern to the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling). He has responsibility for employment issues and ordinarily, he would have responded to this debate, but unfortunately he is unable to do so. As I shall explain, he is already taking steps to address some of the issues the hon. Lady raised today. As she knows, as things stand the Department for Work and Pensions’ benefit payment systems do not record the nationality of people receiving benefits. The reason for that is that nationality per se is not a condition of entitlement, and the system records conditions of entitlement such as being available for and actively seeking work, in the case of jobseeker’s allowance, or meeting contribution conditions for contributory benefits such as the state pension. So a person’s nationality is not, of itself, an entitlement condition.

The hon. Lady gave a figure—I think it was £200 million —but the truth is that we do not know what the figure is, which is a matter of concern. I assure her that Ministers are concerned about the lack of data, and we know that other Members share that concern. We consider it right that we should know the extent to which people from other countries are claiming benefits in the UK. I am therefore sure she will be pleased that the Minister with responsibility for employment announced at oral questions last month that he has commissioned work to find means of making information available about the nationality of benefit claimants. That information would help to inform debate on this subject.

To provide some context, I will discuss immigration more generally. The right hon. Member for Oxford East (Mr Smith), who is himself a former Secretary of State for Work and Pensions, talked about the positive impact that inward migrants can have. We fully recognise that positive impact, and we will continue to encourage the brightest and the best to come to the UK to promote growth and enterprise here. However, we will reduce the degree to which we currently rely on migrant workers through a radical shake-up of the welfare system and by improving the skills of the British work force. Our goal as a Department is to ensure that people are better prepared, have more incentive and face more requirements to take up work in the UK, which will mean that demand for migrant workers can be reduced. Clearly, although immigration has enriched our culture and strengthened our economy, it must be properly managed.

The Minister is making a valid point. However, when I looked at the statistics on this issue, I was shocked to realise that some of these migrant workers are hugely overqualified for the jobs they come here to do. I am not disputing that we are attracting well qualified people, but they are not qualified to do the jobs they are doing; if anything, they are overqualified for them. We have a problem, in that we have a dearth of people who want to do those low-skilled jobs, so we have qualified people coming in to do them. That is the problem and I do not see how we will solve it.

No, I do not see how we can solve that, in the sense that, if we have a single labour market we cannot constrain individuals who bring particular skills and prevent them from doing jobs that are, as it were, less demanding than the skills they bring in. That is correct.

The hon. Lady raised the question of benefits claimed by the nationals of other EU member states working in the UK. I shall explain what they are. In preparing for the debate, I had to find out how the system works and was surprised by some of what I learned.

Under the freedom of movement rules, as we have just heard, many UK nationals are living and working in other EU countries and have reciprocal rights. Free movement of persons is fundamental to Community law; indeed, it is an essential element of European citizenship. However, the rights are not unlimited. Those who wish to live in the UK for longer than three months must be exercising a treaty right as a worker, a workseeker, a self-employed person, someone of their own means and self-sufficient, or a student. If EU citizens do not meet one of those requirements, they will not have a right to reside in the UK, and may be liable to removal. The Government are clear that EU citizens who benefit from the right to free movement must adhere to the responsibilities it brings and abide by our laws.

The problem is that that list covers just about everything. As I have said, anybody who cannot do a particular thing can declare themselves self-employed by doing a menial job such as selling The Big Issue or another such publication. That is the problem: the list does not seem to prohibit anybody.

When I looked at the list I wondered whether someone could say, “Oh, I am looking for a job.” That is not sufficient. The definition of a workseeker would be similar to the requirements placed on someone claiming jobseeker’s allowance, for example. I take the hon. Lady’s point that there may be loopholes that need to be looked at. However, if someone says they have come here to look for a job, it not enough merely to assert it; they have to provide evidence that they are actively doing so. Let me now make a bit of progress, as I am keen to respond to the points the hon. Lady has raised.

The failure of past policies has left many people continuously on out-of-work benefits for more than a decade, 90% of them on incapacity benefits. Many of our fellow citizens want to work but have not been provided with the help and support they need. The crucial point is that one reason why employers take on EU migrants is that many of our fellow citizens have not been effective participants in the labour market. The Secretary of State is determined to change that through the Work programme and universal credit, to try to ensure that when employers are looking at a list of potential employees, the UK citizen—the domestic worker—is a credible alternative to the EU migrant. We believe that the success of those policies will reduce the demand for EU migrants in the situation described by the hon. Lady.

On access to benefits, EU nationals have rights under the European treaties to enter and remain in the UK, including the right to seek and take up work. Where EU nationals are here in exercise of a treaty right, the UK, through its obligations under both European and international law, allows them access to income-related benefits. As the hon. Lady says, EU nationals who are working here have access to in-work benefits, such as housing benefit, council tax benefit and child tax credits. If they are unemployed and looking for employment, they may also claim income-based jobseeker’s allowance. There will, however, be some who have no intention of seeking work—benefit tourists, as the hon. Lady says—and they may try to access benefits. We do not believe, on the whole, that that is the main reason why people come here, but we accept it is a danger and it is one of our concerns.

That is why we have rules in place to prevent the abuse of the benefits system and benefit tourism. The principal measure is the habitual residence test, which ensures that income-related benefits are paid to people with reasonably close ties to the UK and who intend to settle here. Its underlying principle is that the taxpayer should not have to subsidise people with very tenuous links to this country.

Will the hon. Lady allow me to make a bit more progress, as she has raised a lot of points and I have got only seven minutes to respond?

To be eligible for an income-related benefit of the sort listed, claimants must satisfy the two-part habitual residence test—I may be coming to the point the hon. Lady was going to raise. That requires the individual first to demonstrate that they have a right to reside here and, secondly, to show that they are habitually resident. Anyone who does not have a right to reside is not habitually resident, and is not entitled to any income-related benefits.

To clarify, the term “habitual residence” is not defined specifically in UK social security legislation. To determine actual habitual residence, decision makers look at a range of things that we think should rightly be taken into account, such as whether the person is returning to resume past habitual residence; attachment to and intentions in the UK; reasons for coming; employment record; and length and continuity of residence in another country. The information is gathered by interviewing the claimant, and decision makers must be satisfied on objective grounds that a person who claims income-related benefits after arriving in the country has genuinely adopted the UK as his or her place of habitual residence.

I have had all that information from a series of questions I have tabled. I was shocked to realise that people need to be resident for only a month or possibly even less, which is open to interpretation by the individual doing the interview. That is a very low bar.

Although the hon. Lady is right to say that a month enables someone to be considered, I have listed the criteria that the decision makers have to apply, and I suspect a lot of those would be hard to satisfy after a month. So, although that is technically true, I suspect that in many cases people have been here for a lot longer.

Child benefit, which has been mentioned, is clearly quite cyclical in terms of foreign nationals coming to the UK. The hon. Lady was right to praise the hon. Member for Witham (Priti Patel), who established through a written question that the number of families getting child benefit for children in Poland was, in October 2009, just under 23,000. However, the answer to that question showed that that figure fell to 17,000 in July 2010. I can provide an update today—the figure fell again to just over 16,000 in June 2011. There has been a 29% fall in the number of Polish people working here and claiming child benefit for children at home. I am sure the hon. Member for St Albans would say that that is 16,000 too many.

However, it is worth stressing that such situations are not static. They change, and in this case there has been a fall of more than a quarter. The reason for the payment is that it is only made in respect of UK national insurance contributions. That is an important part of the mix. We are paying the benefit to somebody who is putting money into the UK Exchequer through national insurance. We have a legal duty to pay at the higher rate. In his intervention, the hon. Member for Kettering (Mr Hollobone) asked whether we should pay at the Polish, rather than the British rate. The courts have determined that we have to pay at the higher rate. The logic is that the entitlement is based on UK national insurance contributions, which will be based on UK wages and taxes. Therefore, the parallel entitlement is to a UK benefit. I understand the emotional reaction that we probably all have when we hear that.

In the few minutes remaining I should move on to the question of EU citizenship and access to benefits—what is called benefit exportability. Since the UK joined the EEC in 1973, it has been part of the system for co-ordinating social security for people who move between member states. The rules protect UK citizens abroad as well as EU citizens who come to the UK. Every EU member state has exclusive responsibility for organising and financing its national social security schemes, and for setting out the conditions governing entitlement, provided that they comply with the principles of equal treatment and non-discrimination on grounds of nationality. However, there are EU regulations on the co-ordination of social security to ensure that, where someone has earned an entitlement, they do not lose it because they have moved between member states. That is to remove one of the barriers to the free movement of workers, which is one of the basic tenets of the EU’s internal market.

The rules set out under what circumstances a person retains, or can claim, social security benefits when they move between member states. In particular, the rules protect workers who live in one member state and work in another. On the question of adding things together, people coming into the UK may be entitled to benefits on the basis of their social insurance payments in another member state; and people going from the UK can be entitled to benefits in another member state on the basis of their UK national insurance. That is known as aggregation—where a person’s contributions are added together to give them entitlement. The country that pays, however, is still usually the country where the person is working or last worked. Again, that makes the point that the payment that is made is not necessarily something for nothing; it may well be something for something. In the case of a British worker, the contribution may have been made in the UK before they left, or, in the case of a foreign worker, in their home country before they came here. There is a reciprocal arrangement.

I turn to the question of topping up child benefit and child tax credits paid, for example, in Poland. Let us take the example of a family in which dad is in the UK and mum is at home with the children. If dad is paying national insurance and mum is at home, we would pay full UK child benefit to the family, in return for his national insurance. That is what he is paying for. However, if mum was working and therefore earning some Polish benefits, we would top up. Funnily enough, although people say it is strange that we are topping up Polish benefits, when we do so we are paying less money than when we are not topping up but paying the full amount.

These are clearly complex and difficult issues. Once there is a single labour market with free movement, a lot of things follow that are difficult to disentangle. However, I can reassure the hon. Lady that the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell is seized of the importance of the issues and, I hope, will be able to make progress on them in due course.

Question put and agreed to.

Sitting adjourned.