EU welfare rulings challenge benefits of open borders

After EU residents are given easier access to student grants and child support, will “benefit tourism” undermine the value of Europe’s open borders?

Recent EU rulings on Danish welfare have led to the government and opposition parties Venstre and Konservative postpo-ning their negotiations to draw up a joint EU policy until after the summer holiday.

In April, the European Court of Justice ruled that it should be far easier for EU students to claim student grants (SU), and last week, the European Commission (EC) ruled that all EU citizens should be entitled to the quarterly child support benefit as soon as they are legally registered in the country.

Following the EC’s ruling, tax minster Holger K Nielsen (SF) stated in a press release that the government will have to abolish the policy that requires two years of residency to qualify for the benefit.

“The government has looked at the commission’s statement [and] it is our conclusion that we cannot maintain the demand for having to have a certain employment or residency period in Denmark,” Nielsen stated.

The government anticipates that extending the child support benefit to all EU residents as soon as they are registered in Denmark will add 15 million kroner to a benefit that costs the government around 17 billion kroner a year, which previously required five years of residency.

And extending SU to EU students in Denmark – so long as they have worked at least ten hours a week in the months before they start their studies – will add 200 million kroner to the 19 billion kroner annual cost of the student grant programme.

The two cases have highlighted a downside to the right to free movement, which is guaranteed by the EU and is the cornerstone of European cooperation.

Following the EC’s recent verdict, opposition party Venstre argued there was a need to balance the benefits of free movement with the unintended financial burdens it places on countries.

“Fifteen million kroner won’t ruin the kingdom of Denmark, but we risk weakening the trust Danes have in the benefits of the free movement of labour, and that could be dangerous,” Venstre EU spokesperson Jakob Ellemann-Jensen told the Ritzau news bureau.

Denmark is not the only EU country to raise concerns about extending its social welfare to other EU citizens. In April, ministers from Germany, the Netherlands, Austria and the UK warned that some migrants were taking advantage of their right to freely move to countries with the express purpose of claiming benefits – so-called “benefit tourism”.

“This type of immigration burdens the host societies with considerable additional costs, in particular caused by the provision of schooling, healthcare and adequate accommodation,” the ministers wrote. “On top of this strain on vital local services, a significant number of new immigrants draw social assistance in the host countries, frequently without a genuine entitlement, burdening the host countries’ social welfare systems.”

Responding to the letter, prime minister Helle Thorning-Schmidt stated that the ministers had raised a relevant discussion.

“I think it is important that there is not an unacceptable burden on these types of benefits, which would lead people to question free movement,” Thorning-Schmidt said.

But not everyone agrees that benefit tourism can be proved, and Jonathan Todd, the spokesperson for the EU commissioner for employment, social affairs and inclusion, Laszlo Andor, argues that no statistics have ever been presented to back up the claims of the ministers.

“There are no figures in the letter,” Todd told Euractiv. “They mention the phenomenon, but there are no facts or figures to illustrate the issue that they raised. And we have not received from any other member state any specific figures concerning the extent of this alleged benefit tourism.”

Professor Dorte Sindberg Martinsen from the Department of Political Science at the University of Copenhagen also questioned whether benefit tourism could be proven.

“The issue is high on the agenda in Denmark because our benefits are tax financed, universal and are perceived as fairly generous,” Martinsen told The Copenhagen Post. “This makes us feel like we are vulnerable to migration, but benefit tourism has never been verified and there is little proof of people moving for welfare.”

Nine EU countries placed temporary restrictions on Romanian and Bulgarian workers, after the two countries joined the EU in 2007, in order to limit the number of migrant workers from these countries travelling for work.

These restrictions will be lifted in January 2014, which has sparked fears that a wave of poor Romanians and Bulgarians will  travel to their wealthier neighbours in search of better welfare.

But if Sweden’s experience is anything to go by, there may be no reason to fear. According to research by Joakim Ruist, an economics researcher at the University of Gothenburg, Sweden has not witnessed any benefit tourism after opening its labour market to all 12 of the new, mostly eastern European members in 2004.

“Eastern Europeans claim less social security per head than the general population,” Ruist told The Copenhagen Post. “The net impact is very close to zero. On average they earn less and pay less in taxes, but they are young, which means they cost less.”

According to Ruist, Sweden has not actively tried to restrict access to welfare for other EU residents, and the trouble of having to navigate a new system would be enough of a disincentive.

“It would take an enormous amount of skill to travel to Scandinavia with the express purpose of trying to claim a benefit they are not entitled to,” Ruist said.

Given that students tend to be rather clever, however, the government may have cause for concern over opening its student grant system to all EU residents who can find part-time work in Denmark.

“Denmark is an attractive place to study because of the lack of fees and the possibility of claiming SU,” Martinsen said. “As word spreads, it may end up further internationalising our education system and make Denmark an even more popular destination.”

But while this may increase the cost of the SU system, Jens Boe Andersen, the deputy chairman of the pro-EU group Europabevægelsen, argues that the increase in the number of EU students could benefit Denmark if they remain in the country and contribute with their skills.

“Denmark has a small and open economy that makes free mobility important for ensuring we attract the talent needed to stay at the top of the value chain. We have to accept that while free mobility will place challenges on the Danish welfare system, we have to be careful not to put in place policies that prevent us from attracting the talent our economy needs.”

Martinsen argues, however, that this degree of investment in foreign students contradicts the norms that Danes associate with the welfare state.

“When EU students are granted SU, they are using a system that they haven’t paid into,” Martinsen said. “This disrupts the perceived value of institutions and schemes that are based on solidarity and require that people pay into them.”

Martinsen thinks that if countries can prove there is a significant financial burden to making access to welfare easier, such as the 200 million cost incured by Denmark’s SU system, that the EC will have to consider letting EU members place some restrictions.

“Economic fusion creates new social problems and requires new social answers. I don’t know whether it means EU members will have to take responsibility for each other’s citizens, or whether it will mean developing welfare in all states. But it’s extremely difficult to roll back the free movement principles, so the issue has to be addressed now. The cat is out of the bag.”