The BBC reports that Prime Minister David Cameron has made welfare reform one of his primary European Union (EU) demands.
Legal restrictions prevent EU citizens from being discriminated against in relation to social security benefits, which has led to the government focusing on ideas that would also prevent thousands of UK citizens from claiming in-work benefits. Ministers say that an EU treaty change will be required to make any major welfare changes.
The legal barriers to direct discrimination within the treaty have meant that ministers are focusing on welfare cuts that are based on ‘indirect discrimination’ – options that would affect not only EU migrants but also UK citizens.
One proposal under consideration would mean that all claimants will be denied in-work benefits unless they have received unemployment benefit in the previous year. The proposal could see someone who has worked for many years failing to qualify for support if their income fell because, for example, their employer cut their hours.
Whitehall officials have told the BBC that people claiming some in-work benefits may be better off giving up their job temporarily, as a direct consequence of the government’s EU negotiations.
David Cameron insists that he has a mandate to pursue EU welfare reform, following the Conservatives’ general election victory.
He wants to renegotiate the terms of the UK’s membership ahead of an in/out referendum by the end of 2017. He has said that he will campaign for Britain to remain in the EU, but only if he gets the reforms he demands.
However, Cameron said he would “not give a running commentary” on the negotiations.
A document seen by BBC News in the Summer from government lawyers to ministers indicated legal problems with current government proposals.
“Imposing additional requirements on EU workers that do not apply to a member state’s own workers constitutes direct discrimination which is prohibited under current EU law.”
The legal opinion came several months after a speech by David Cameron last November, in which he first announced his intention to stop EU migrants from claiming in-work benefits – housing benefit and working tax credits – for four years. This could be illegal under EU law, because it would actively discriminate against EU migrants.
However, a four-year residency test for all benefit claimants has now been fully costed and is being considered by Treasury officials.
It would also mean that UK residents, even if they had lived in the UK all of their lives, would be ineligible for in-work benefits for four years from their 18th birthday.
A third suggestion has been proposed by Oliver Letwin, the former policy minister who now oversees the cabinet office. Letwin has proposed that in-work benefits should be denied to people who had not paid enough National Insurance contributions for three years.
This proposal was seen as being problematic however, said one official, as it would change the nature of Universal Credit and may conversely make EU migrants eligible for out-of-work benefits.
The prime minister remains insistent about pushing for welfare reform in his EU negotiations, despite officials believing the changes already introduced have tightened the system considerably.
“New EU migrants now face one of the toughest in-work benefit systems in Europe when they come here,” said one official.
“We have made benefit tourism a thing of the past.”
BBC News said that Whitehall officials told them they were not fully consulted about the legality of the proposals prior to Cameron’s speech in November.
However, it’s not just the legality of the proposals that are problematic: some officials have said that the politics behind the changes are questionable too.
Conservative ministers remain wary, because these options will affect tens of thousands of British people and could undermine one of the government’s key messages, that ‘people should always be better off in work’.
UKIP leader Nigel Farage said that the prime minister’s renegotiation strategy was unravelling. Speaking on the Radio 4 Today programme, Farage said:
“Even the one area where he was going to go to the European Council and try to get a rule change, actually we’ve surrendered already by saying we will change the British social security system.”
“So young couples in this country, aged 21, who work and have got children, will, if this goes ahead, be better off not working than being in work. I think it’s appalling.”
The EU welfare proposals follow on from controversial proposed cuts to tax credits, which were widely criticised by both Conservatives and the opposition, partly because they undermine the ‘work ethic’ that the Tories claim to value so much.
Last month, Paul Johnson, the director of the Institute for Fiscal Studies, said it was “arithmetically impossible” for the increase in the minimum wage to compensate for the loss in tax credits.
In the post-budget briefing, the IFS said 13 million families would lose an average of £240 a year, while 3 million families would lose over £1,000 a year.