U.K. Faces Complaint on Foreigner Benefits, Fanning EU Row

Britain was hauled to court over restrictions on welfare benefits for workers from other European Union countries, stoking the argument over immigration and the U.K.’s status in the EU.

Britain, now weighing a possible pullout from the bloc, sets an unfairly high bar in doling out childcare, jobseekers and social-security benefits to foreigners who pay into the U.K. system, the European Commission said.

The Brussels-based commission appealed to the EU’s high court to force Britain to end the discrimination, just as Prime Minister David Cameron’s government explores ways of further curbing welfare and health benefits to foreigners.

U.K. Work and Pensions Secretary Iain Duncan Smith vowed to fight back, telling BBC radio: “We will do whatever it takes to get control of our benefits system. We cannot have British taxpayers coming under the cosh of the EU.”

The commission, which enforces EU law, said the U.K. improperly sets a “right to reside” test to determine whether foreign workers are eligible for benefits. The EU imposes a looser “habitual residence” test under a policy approved by the U.K.

‘Hand Grenade’

Using the stricter standard, the U.K. rejected 64 percent of 42,810 benefit applications by European residents between 2009 and 2011, the commission said in a statement. Some also wouldn’t have qualified under the looser standard, it said.

British critics of European regulation seized on the court case as an example of Brussels meddling that is likely to energize the movement that wants the U.K. to become the first country to secede from the EU.

“The European Commission has thrown a hand grenade into an already intense debate,” Stephen Booth, director of the Open Europe think tank, said in an email. “If the commission wants to push the U.K. out of the EU, it’s doing a pretty good job.”

The commission said it isn’t pleading for a blanket entitlement for non-British residents, noting that the EU provisions don’t cover needs-based benefits such as income support or housing allowances.

Costs Consequences

Britain won’t face “significant financial consequences” by applying the EU benefits standard, the commission said. It said that while British media have played up the potential costs, the U.K. hasn’t produced “conclusive data.”

The commission turned the costs argument on its head. It pointed to a 2009 study by University College London which showed that eastern European immigrant workers paid in more than they got out of the U.K. system and were 60 percent less likely than British natives to receive state benefits or tax credits.

The EU case won’t prompt a wave of “benefit tourism” to Britain, commission spokesman Jonathan Todd told reporters. He said there is no record of British expatriates complaining that they have been denied similar benefits in other European countries.

The case will be heard by the European Court of Justice in Luxembourg, which typically takes about 18 months to issue a ruling.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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