What are the implications of today's ECJ ruling on EU migrants' access to benefits?

As we've said on many occasions, it is not only the UK that is having problems reconciling EU free movement with maintaining control over national welfare systems; Germany has recently tightened up its own domestic rules recently and the country also faced a legal challenge from a Romanian woman living in the country who claimed the right to receive German unemployment benefits - a case which was referred all the way up to the ECJ.

Essentially, the Dano case concerns the interpretation of existing rules around EU free movement and the extent to which EU migrants have a right to equal treatment with nationals of the host member state with regards to access to benefits,

The Court has finally issued its verdict today, ruling that:

"The [2004 free movement] directive thus seeks to prevent economically inactive Union citizens from using the host Member State’s welfare system to fund their means of subsistence. A Member State must therefore have the possibility of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement solely in order to obtain another Member State’s social assistance although they do not have sufficient resources to claim a right of residence." 

It is also interesting that the Court has confirmed that certain non-contributory benefits are outside the scope of EU rules which guarantee equal treatment and non-discrimination. The UK and other national governments can therefore use this precedent to defend their restrictions on EU migrants’ access to non-contributory benefits (i.e. the ‘right to reside’ test which could be subject to an ECJ legal challenge).

It also states clearly that ‘special non-contributory benefits’ are a national competence – much of the dispute between the UK and Commission over the ‘right to reside’ test relates to the categorisation of certain UK benefits. This could be useful to the government but it is also true that the UK's case still rests on how the benefits they restrict are defined (i.e. do they fall under the label of 'special non-contributory benefits'), and whether the Commission and the ECJ agree, which we still don’t know yet.

In short – this is likely to be a helpful precedent for the UK and potentially a sign that the Commission/ECJ are prepared to back down over the ‘right to reside’ issue. But more fundamental changes on in-work benefits, which are increasingly important issues in this debate and particularly for the UK, will require changes to EU law - here we set out how this could be done while keeping the principle of free movement itself intact.

EU migrants' access to benefits: A cross-party concern in Denmark

We flagged up last week that the debate on EU migrants' access to benefits was kicking off in Denmark - potentially leading to a row with the European Commission.

New figures have been unveiled that will do little to assuage political tensions. According to the Danish Employment Ministry, government spending on unemployment benefits to migrants from Eastern and Central Europe has increased tenfold between 2008 and 2012 – from DKK 32 million to DKK 345 million.

The data prompted criticism from across the political spectrum - confirming that EU migrants' access to state welfare is very much a cross-party issue in Denmark.

Claus Hjort Frederiksen, a former centre-right Danish Finance Minister, commented: 

We need to discuss what kind of protection we're able to offer in these cases. It's not a problem that will disappear.

Nadeem Farooq, the spokesman of the governing centre-left Social Liberal Party, warned:

The figure has risen quite dramatically, so we must take it seriously. We cherish freedom of movement, which makes Denmark wealthier. But we're also prepared to introduce controls and the necessary safeguards.

Interestingly, a proposal by the left-wing opposition Red–Green Alliance to make sure that EU citizens also pay Danish social insurance contributions in order to create "a level-playing field to qualify for unemployment benefits" is being supported by the anti-immigration Danish People's Party.

Meanwhile, the European Commission has announced that it will take legal action against Finland, which has a similar welfare system to Denmark and will therefore be backed by the Danish government in the legal challenge. The Commission has said it hasn't yet had time to look properly at how the Danish system currently works and what is being proposed (check out our previous blog for more detail), but informally it has said that the newly proposed measures look "illogical".

This looks set to run and run...

EU free movement: Denmark is in an almighty mess

After the UK, Denmark is now the country in which the intersection of the single market, social security and domestic politics looks the most complicated and contentious.

EU migration has become front-page stuff in Denmark. We're talking papers publishing a comprehensive list of the benefits EU migrants are entitled to, complete with the cost to the Danish taxpayer (2 billion Krona or €270m per year - according to Ekstra Bladet).

The reason is that Denmark has hit a bit of a perfect storm involving the complex interaction between EU law and three separate subsidies: child benefits, student grants and unemployment benefits. Basically, Denmark is accused of breaking EU law in all three areas:

Child benefits: In 2010 the then centre-right Danish government introduced a requirement for EU citizens to have worked in the country for two years before being entitled to claim benefits for their children (the "børnecheck"). The European Commission said last year this practice violates EU law, forcing the Danish minority government to seek to bring the rules in line with EU law. However, the opposition has so far refused to support a proposal to make EU migrants eligible for child benefits from day 1.

Student grant: In Denmark, students pay no tuition and are eligible for a grant while they study. In a ruling last year, the European Court of Justice said EU students must also be eligible for the grant - a very controversial ruling for various reasons (not least since few students from elsewhere in the EU seem interested in sticking around once they are done studying).

Unemployment benefits: According to figures from the Danish government, EU migrants are less likely to claim social benefits than the national average, but more likely to claim unemployment compensation (though the margins are small). The perception that EU migrants claim more of this benefit than natives is political dynamite. In response, the Danish coalition is planning to tighten access to unemployment benefits, by requiring Danish language courses, a mandatory call for availability to work and stricter requirements to be domiciled in Denmark.

The European Commission has hit back against these changes, calling them "illogical". And to add fuel to the fire, Copenhagen may soon be forced to change its existing rules on unemployment benefits (Under Danish rules, EU citizens must have worked three of their past 12 months on Danish soil before being eligible for the "dagpenge").

In a case likely to set a precedent for Denmark, the Commission has taken Finland to the ECJ over similar rules. The Danish government this week submitted its own defence in support of Finland but diplomats in both countries think they might well lose, meaning the rules have to change.

All of this is creating a very awkward situation for Danish Statsminister Helle Thorning-Schmidt. So far she has insisted on EU law needing to be respected - but Danish voters are aware she's also eyeing a top EU job in the EU institutions later this year and cynicism is growing.

Needless to say, the Danish People's Party has had a field day, saying stuff like:

“Either our entire welfare system collapses or the EU rules are changed. I would prefer the latter.”

DPP (DF) is now at over 20% in some polls and could win the European elections. 

So what does this mean for David Cameron? Well, he can take heart in the fact that one country faces a greater legal - though certainly not political - dilemma over EU migration than he does. Logic would suggest that Denmark is a strong, potential ally to the UK in reopening, say, the EU Social Security Regulation (which regulates access to a number of benefits, including child benefits).

Worryingly for Cameron, this is not quite how some people in Copenhagen see it though. But, we must say, it would be an accomplishment for the UK government to fail to sign up the Danes' support on this issue.

The Danish situation is seriously messy.