Category: Europe

Greece: can't pay, won't pay

The outcome of the Greek referendum indicates strong support for the its government.  The decision is being construed by some commentators as the prelude to Greece leaving the Euro, and possibly the European Union.  It doesn’t have to be either.

First, the Euro.  Greece can use the Euro for as long as it wants to, and no-one in Europe has the power to stop it.  The Euro is a tradeable currency.  Greece might be forced off away from the decision making processes about the Euro, but that’s already happened.  It can’t be stopped from trading in it.

It has, at least up to now, been stopped from printing Euros – that’s done in Germany.   What would happen, though, if Greek banks were to print their own versions of Euros, in the same way as Scottish banks print off their own versions of pounds?   Other Euro members wouldn’t like it, but the sky will not fall in.  People couldn’t be required to accept Greek Euro notes abroad, as Scottish notes don’t have to be accepted in England, but  money is money; if people accept it, it will be used.  Besides, most money isn’t dealt in cash;  the real issue is whether the banks behave as if the money is there.  That would, of course, all be against the rules of the Eurozone: but I think we’re past that.

The second big issue is the debt.  Here, the position is plain as a pikestaff:  the debt is not going to be paid.   Greece’s European creditors have behaved very badly, as if moral rules applied only to debtors, not to creditors; but beyond that, the programme for austerity they have been insisting on is economically illiterate.  Greece cannot cut its way out of a its present position.   The main question is whether the default will be orderly or disorderly.

Effectively, the Greek government holds all the cards.  Beware of tangling with people who have nothing to lose.  They can’t be thrown out of the Euro, they can’t be forced to leave the EU and they will get debt relief.  It’s time for the EU to cede with good grace.

 

Barring benefits to EU citizens

In the last election, at least three major parties were undertaking to restrict the rights of EU citizens from claiming benefits.  The Labour Party manifesto said that “With a Labour Government, migrants from the EU will not be able to claim benefits until they have lived here for at least two years.”  The Conservative manifesto said that “We will insist that EU migrants who want to claim tax credits and child benefit must live here and contribute to our country for a minimum of four years”.   UKIP had said that “all new migrants to Britain will have to make tax and national insurance contributions for five consecutive years before they will become eligible to claim UK benefits, or access to more than non-urgent NHS services. ”  Between them, these parties polled more than 24 million votes.  As a committed European I dislike the policy, but it’s going to happen.

The basic obstacle to the proposal as it stands is that it seems to propose a breach of the European treaties, because it discriminates directly against European workers on the basis of their nationality.  It follows from that that either the UK would have to renegotiate the treaties, or they have to find some way to make the proposal compatible with European law.  Renegotiation is not going to happen – Poland has already said they will veto it.   Nor would it be possible to change the rules in a way that discriminates.  In 2014, the Coalition reviewed the possibility of offering workers the equivalent of their home countries’ benefits; the European Commission warned then that this would have to go to all EU members for approval.

That implies a different approach.   The UK can legitimately deny benefits to EU workers if, and only if, it denies benefits to British workers on the same basis.   It can do that.  The main problems come from some current ‘coordination rules’, which are not fundamental principles, but ways the EU has tried to interpret the situation: they are subject to interpretation.

There are three different kinds of benefits to consider.   Contributory benefits are relatively easy to regulate; all the government has to do is to impose contribution conditions.  Currently the NI system has two main conditions:  a ‘first contribution condition’ that that must be satisfied to receive any benefits at all, and a ‘second contribution condition’ based on payment in the relevant tax years preceding the current benefit year. The government could tighten up one or both conditions.  That would have an effect on groups who have never worked, primarily school leavers – but the government is committed to reducing their benefits already.  There is however a further complication, which is the principle of “aggregation” – that people who pay contributions in one country can have their contributions credited to meeting conditions in another.   It could lead to long delays in payments, but it would not necessarily relieve the government of the responsibility for paying the benefits.

The second category includes non-contributory benefits.  Here there are already several residence rules.  The CPAG Handbook  helpfully lists seven different types of rule, based on

  • presence in the country
  • past presence
  • “living in ” the country for a period
  • residence
  • ordinary residence
  • habitual residence, and
  • having the right to reside.

This sort of rule necessarily catches British citizens returning from abroad – and there are more than five million British expatriates.

The most tricky category is the third:  benefits which are also tax allowances – such as Child benefit, which incorporates the child tax allowance.  Having said that, there is no strong reason why tax credits and child benefit should still be treated as tax, and it would be possible to reframe the legislation to avoid the situation altogether.

It follows, I think, that the Government could create barriers to claiming within a specified period, and that it could do it in a way that would not violate EU law.  But should it?   The approach I’ve suggested would make particular problems for young people, who are already disproportionately represented in households on very low incomes.  There would be further problems for British citizens returning from abroad.  Then there are the probable effects on British citizens moving to Europe.  Many benefit entitlements are reciprocal, the EU rules assume that one state or another will be “competent” to pay benefits, and if both countries have a four-year restriction, the UK will be liable for supporting its people abroad for four years.  More than two million Britons live in rest of Europe – this restriction could end up costing money.   Last but not least, we should ask whether putting up barriers to claiming is such a good idea.  There is no reason to suppose that the claims of EU migrants present any problem, either administratively or financially.   The benefit system is far too complicated already.  Creating further restrictions will still include some people we want to exclude, and exclude others we want to include.  I suppose the idea must make sense to someone, to have been accepted by so many politicians, but I’m not sure I can see it.

Ava's appeal: should a child with a disability still get benefits if her father works abroad?

A former student  asked me if I’d comment on a particular case reported in last week’s press.  A girl from Preston with serious disabilities has been denied DLA because her father is working in Germany.  The picture shows her mother’s response.

https://pbs.twimg.com/media/B-JY9jrIcAAA-iD.jpg:large

The rules are complex.  When people are working in EU countries, they generally their benefits from the ‘competent state, which will usually be the place where someone works.  There’s a long list of benefits which are covered in these rules:  DLA care component is treated (oddly) as if it was contributory, and DLA mobility component is treated as a ‘special non-contributory benefit’, but the upshot of it is that only the competent state will be liable to pay.  That’s the position, then, which has led to the DWP claiming that Germany should be paying in this case.

The rule doesn’t make any sense.  Consider it first from the perspective of the operation of benefits in the UK.  Some benefits are income tested; many aren’t.  People’s pension does not go up or down because they have an occupational pension – or because they have overseas investments.  DLA is non-contributory and non-means tested; it isn’t affected because people have a court settlement, or an industrial injuries benefit, or a war pension.  So why should it change if people get a benefit in Germany as well – or if they don’t?

Next, consider it from the perspective of the European Union.  Benefits are not like residential care units, where people can only get one place at a time; people can draw income from several sources.  The European Union has been trying to develop networks of solidarity that cut across national boundaries.  Pensioners commonly get money from government and from occupational pension funds.  That’s what European integration means.  So a rule that leads to benefits stopping at national borders undermines one of the central principles of the single market.

I think the DWP’s interpretation in this case is doubtful, and it may well be challenged in the courts before long.  It looks too as if they’ve suspended benefits on the basis that Germany ought to accept liability for a non-resident disabled person, in circumstances where the UK itself wouldn’t.  There’s an evident  problem  in introducing rules that are so obscure that the DWP itself gets it wrong on its first go and where no-one has any hope of working out what ought to happen unless it goes to court.  This is bad practice in every sense, and it ought to stop here.

Expanding the European Union

Where, Gordon Brewer demanded on Newsnight Scotland last night, will it all end?  The baffled candidates for the European Parliament took a while to work out what he was talking about.  Should Israel, Turkey or Ukraine be admitted to the EU?  Most of them tried to deflect the query by saying these countries weren’t quite in Europe, but that misses the point.   The European Union isn’t just about geography – it it was, it could hardly include Réunion (in the Indian Ocean) or Guadeloupe (in the Caribbean), both legally part of France.  It’s about a system of legal relations,  not about location.

When I was at school, Spain was fascist; Greece was ruled by a slightly deranged miltary junta who imagined they could hold back modern life at the borders; Hungary and Czechoslovakia had been  invaded by Russian tanks; Portugal was an authoritarian dictatorship; East Germany was shooting people who tried to leave.  Things change, and sometimes they change at a startling speed; the European Union has been a significant element in that change.  Israel, Turkey and the Ukraine may fail currently to meet the basic criteria for EU membership – the acquis communautaire – but it’s perfectly possible to imagine scenarios where they might, and that in the not too distant future.

40 years of freedom

I’m two days late, but then I was late for my sister’s birthday as well, and I hope I can be forgiven if I mention it now.  It’s 40 years since the Carnation Revolution of 1974 led to the fall of the Salazar government in Portugal and the birth of a new social democracy.  (If you missed the anniversary in the British press, it might be because they didn’t think to mention it.) It’s too easy to forget what Europe used to be like before the EU. Portugal has its problems, but it’s more prosperous, more secure, better housed and better educated than it used to be. Happy anniversary.

Expelling Scotland from the EU

I’ve just read an illuminating paper in an academic journal, considering the position of Scotland in the European Union in the event of a vote for independence.  Daniel Kenealy’s paper, How do you solve a problem like Scotland?, is in the Journal of European Integration (doi 10.1080/07036337.2014.902942), which unfortunately means it’s not freely available on the internet.    The Commission’s current position is that in the event of a vote for independence, Scotland would be expelled automatically from the EU and would then have to apply for membership as a new state.  Kenealy argues that this position is entirely based in international law rather than European law, and that it is not consistent with the treaties, which require any departure from the EU to be negotiated and agreed, and transitional arrangements to be put in place. As I understand it, the EU would have to undergo a negotiation before it could expel a country that does not want to be expelled – a position that is sustainable neither politically nor in EU law.  Kenealy argues that expulsion ‘would be entirely inconsistent with the general principles of the EU.’

The Council of Europe considers Britain's benefits 'manifestly inadequate'

The Council of Europe has published its most recent report reviewing the conformity of the United Kingdom with  the European Social Charter.   (This is not a document from the European Union; the Council of Europe is an older organisation, established in 1949 to protect the rights of people throughout Europe.)  In the section covering  “the right to social security”, The report concludes

that the situation in United Kingdom is not in conformity with Article 12§1 of the Charter on the ground that:

  • the  minimum  levels  of  short-term  and  long-term  incapacity  benefit  is  manifestly inadequate;
  • the minimum level of state pension is manifestly inadequate;
  • the minimum level of job seeker’s allowance is manifestly inadequate.

They are right, of course;  provision in the UK is exceptionally low, it has been falling as a proportion of national income for several years, and many of the guarantees that used to underpin the system have been jettisoned.  That hasn’t stopped the press and the Conservative backbenches from exploding.

'Habitual residence' and benefits tourism: gobbledegook versus propaganda

The EU Commission has published a 55-page guide to ‘habitual residence’.  Entitled Practical guide on the applicable legislation in the European Union (EU), the European Economic Area (EEA) and in Switzerland, the Guide is the Commission’s attempt to counter the  accusations being made by the British government about ‘benefits tourism’.    It’s not a page-turner; I think I can safely say that it won’t make the shortlist for the next Costa Book Award.

The press release explains:

Under EU law there can be only one habitual place of residence and so only one Member State responsible for paying residence-based social security benefits.

In other words, it’s not possible to claim benefits in a new country without first establishing that you are ‘habitually resident”.  The criteria for habitual residence include:

  • family status and family ties
  • duration and continuity of presence in the Member State concerned
  • employment situation …
  • exercise of a non-remunerated activity
  • in the case of students, the source of their income
  • how permanent a person’s housing situation is
  • the Member State where the person pays taxes
  • reasons for the move
  • the person’s intentions based on all the circumstances and supported by factual evidence.

The UK has had a test of ‘habitual residence’ test in place since 1995.   A long series of legal cases has established that ‘national governments are entitled to restrict the right of residence of EU nationals and to restrict any social assistance to them’ (see Rowland and White, Social security legislation: Administration, adjudication and the European dimension, Sweet and Maxwell, pp 846-54).

The main point of contention concerns ‘inactive, highly mobile persons’ (Guide, pp 48-49).  People with no connections to anywhere become the responsibility of the place where they’ve landed.  That’s a long-standing principle applied in many fields of activity.  In the UK it runs back at least to the Poor Relief Act of 1662, which introduced the laws of settlement and removal.  This is not altogether a new debate.

The euro or the pound? Both, please

There’s a continuing controversy in Scotland as to whether an independent Scotland could or should be part of a ‘currency union’ with England. The assumptions are invalid; England cannot ‘stop’ Scotland from using the pound. The EU’s position is more complex – negotiations on entry to the Euro might be part of a negotiation about EU membership – but this seems unlikely to be a sticking point.

There’s another option, however, and it’s an option for the UK as well as Scotland. It’s not necessary to sign up to anything, or to be part of a currency union, to use a currency. For example, by convention oil production in Scotland, and I assume in the rest of the the UK, is traded in dollars. What’s important is to have the facility to hold, spend or trade the currency, and that’s currently not possible for most of us – the UK banks don’t let customers hold Euro accounts on the same terms as sterling. Why ever not? A rule that provided for banking in Euros would open the possibility for people to use either currency, or both, at their convenience.

Scotland in Europe

In a perceptive article, Michael Keating points to a series of misconceptions behind David Cameron’s position. Given the options that Cameron is proposing, which lie between moving half-way out of Europe or wholly out of it, Michael suggests that people in Scotland who are pro-European may need to vote for independence if they want to remain in the EU.

At the same time, various European officials and politicans have been lining up to say that Scotland can’t expect a smooth passage into the Union. That seems to me misjudged – and arguably contrary to European law. The Scottish Government has been denied access to political negotiations, but another route may be open to them. I’d be interested to know the view of the European Court of Justice on any proposal to remove European citizenship from the people of a successor state that is currently entitled to it.