Explaining the EU deal: child benefit

The Prime Minister’s renegotiation deal on the UK’s European Union membership is a package of changes to EU rules. It was agreed by European leaders on 19 February 2016. In this series of articles, some of the country’s leading experts in EU law explain the deal and what it changes.

Last November, David Cameron proposed an end to the practice of ‘exporting’ child benefit to families in other EU countries.

Under existing EU rules, the country where a person works and pays taxes is responsible for paying her family benefits, no matter where in the EU her children live.

These cross-border child benefit payments have become politically controversial.  

Why is child benefit paid for children living in other EU countries?

The idea of exporting benefits is based on a principle of non-discrimination.

A rule that children should have to live in the country where family benefits are paid would indirectly discriminate against migrant workers, who are more likely to have family members in another country.

That’s banned by the EU treaties.

The EU deal involves continuing with the exportation of family benefits, but changing the amount paid.

Governments will be able to adjust the payment based on the standard of living in the country where the child lives, and the level of child benefit paid in that country.

Existing claims won't be affected for now, only new ones. But from 1 January 2020, countries can adjust existing payments as well.

There might still be legal problems with paying a lower rate

At first glance, the idea of benefits reflecting the environment in which they’re received might not seem unreasonable.

But it means treating people differently because of their nationality—even though they do the same work and pay the same contributions.

That still risks breaking the rule in the EU treaties that workers can’t be discriminated against because of where they’re from.

The EU court would ultimately decide that.

What would the EU court make of the change?

If the change were challenged as indirect discrimination, the next question is whether it’s “justified”.

The EU court would consider whether the rule pursues a “legitimate purpose”, and whether it’s “proportionate” for that purpose.

The “legitimate purpose” might be to avoid excessive burdens on the UK public purse.

So the rule would have to be an appropriate and logical way of doing this, and it would have to comply with general principles of EU law—such as not treating people who are in the same situation differently.

Here it might run into some difficulty, because EU workers whose children are in another country would be treated differently to EU workers whose children are in the UK.

This difference wouldn’t fit the justification of reducing costs, since those who have children living elsewhere in the EU cost the UK less. Costs like education, healthcare and housing are generally met by that other country.

On whether the rule is “proportionate”, the EU court might ask if it creates an obstacle to free movement.

That could be the case if it transpires that EU workers here lose out compared to workers back in their home country as well as British workers, because that would mean they would be disadvantaged as a result of using their free movement rights.

Linking benefits to the cost of living, but without considering other factors, might result in some EU workers getting less than their UK counterparts, and also getting less than people in their home state who have never moved.

For instance, child benefit might be a relatively bigger fraction of household income in some countries than it is in the UK.

And some countries continue to pay child benefit for longer than the UK does.

Update 22 February

We revised the article to take into account the final version of the EU deal published on 19 February, rather than the draft of 2 February as in the original.