Habitual Residence Test

HC Deb 29 April 1996 vol 276 cc877-84

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brandreth.]

10.21 pm

Mr. Stephen Timms (Newham, North-East)

In October 1993, the Secretary of State for Social Security stood before the Conservative party conference and described a new scourge which he said was sweeping the continent. In the abusive terms that our European partners have come to expect from the British Government, he employed a range of "'Allo, 'Allo" accents to conjure up a vivid picture of benefit tourists—back packers and the like from around Europe who come to Britain, pretend to look for work and claim benefit.

If one can ignore the crudity of that speech, which may have been required to please the Conservative party conference, it is easy to feel some sympathy for the Secretary of State, who had identified a problem that required a solution. Benefit tourism certainly was not the largest fraud in the social security system—indeed, it had never satisfactorily been quantified—but it was an undesirable phenomenon.

Having identified the problem, the Secretary of State announced his solution—the habitual residence test. It was introduced in August 1994 and it soon became obvious that, whatever its original intention, the test was reaching well beyond the scope of benefit tourism. In its first 15 months of operation, only 36 per cent. of those who failed the test were from other European countries; 22 per cent. were from Britain and 42 per cent. were from elsewhere. The figures for February this year—the latest available in the Library although I am grateful to the Minister who today provided me with the figures for March—show that the proportion of non-Europeans failing the test remained at just 36 per cent. while the number of British failures has risen dramatically to the same figure.

The position is clear. The habitual residence test does not merely deal with the Secretary of State's benefit tourists from elsewhere in Europe; it casts a much wider net and it withdraws the means of subsistence from many people from whom the Government did not and should not intend to withdraw subsistence. By withdrawing support from UK citizens, the Government are failing the test. The Minister will be aware of an important study by the National Association of Citizens Advice Bureaux published in February, "Failing the Test", which draws on evidence from more than 200 bureaux throughout the country. The report's conclusions are succinct, reasonable and fiercely critical of the Government. It stated: After eighteen months of its operation, the CAB Service has concluded that the test should be withdrawn. It has proved expensive, unfair and unworkable and has no part in a sensible and humane welfare system. That is a ringing and unequivocal verdict by an unimpeachable source. The report backs that conclusion with great detail, and shows that in seeking to deal with one relatively small problem, the Government has created many more. The report points out that the test has created a class of people who, whilst able to live freely and work in the UK, are denied access to its welfare system. The report adds that many people from ethnic minorities who lived and worked in this country for years have been excluded from help because they have travelled abroad for a period to stay with relatives. The report states that it has proved impossible to produce a workable definition of habitual residence that can be consistently applied. Appeals against failing the test by CAB clients are won in the majority of cases, adding to the evidence that the test is being inconsistently and unfairly applied. The test is costing much more than was anticipated to administer. However one looks at the test, it is doing great damage that greatly outweighs the cash savings to which it has led. I will return to NACAB's detailed recommendations, but real, human problems are at the centre of habitual residency cases.

One welfare adviser in my constituency remarked recently that public attention has shifted from the hardship caused by the test in recent months. She does not think that things have got any better or that the hardship has become accepted, but that newer injustices equally forcing people into penury—she was thinking in particular of the removal of benefits for asylum seekers—have stolen the spotlight. One way to stem criticism of an unfair measure is to introduce another, but the Government must not be allowed to ignore the large number of real and unintended hardship cases caused by the test.

The Newham docklands advice bureau, which covers part of my constituency, was visited recently by a young woman who went temporarily to Ghana, where her mother lives. When she returned, she was forced to undergo the habitual residence test and failed. That woman is disabled and unable to find work, and now she cannot claim benefits. What is she supposed to do? She was born in Britain and is a British citizen, but that is how her country is treating her. Sometimes the hardship is temporary, but it is no less unjustified for that. A Newham pensioner went to visit relatives in Bangladesh for six weeks, and on his return was forced to undergo the test. While he awaited the result, his income support was withdrawn. His family was forced to borrow money to buy food to subsist. Where is the sense or humanity in a system that works that way?

The worst aspect of the test is that it often hits people who are already facing a crisis. Twin 17-year-old sisters who recently sought advice in Newham both hold British passports and had lived in the UK with their father since 1994. Last year, their father died and after a habitual residence test interview, the sisters were refused income support. In addition to their bereavement, the Government forced them to face destitution.

When the Secretary of State set off in pursuit of back-packing benefit tourists at the Tory party conference, did he have in mind any of the people to whom I have referred? The answer is no—but those people and thousands like them are being hit by the test. The Government responded to their critics by saying that no one has devised a fairer measure that would make the same savings, but that argument is indefensible. It is absurd to say that a measure is good because it saves money, regardless of its ill effects on innocent people. It is like saying that the way to stop football hooliganism is to ban everyone from soccer grounds. If Ministers are really saying that they will do anything to cut the social security budget, irrespective of its effect on people who were not intended to be affected, they must accept that they will lose any claim to decency that they retain.

It is not true that critics of the test have not offered constructive proposals to refine it and to reduce its injustices while keeping loopholes to Euro-scroungers firmly closed. The National Association of Citizens Advice Bureaux set out seven specific recommendations in its report—short of abolishing the test, which is what it and I believe should happen—to fulfil the objectives. The first three involve changes to secondary legislation. NACAB proposes, first, that benefit regulations should be amended so that those who are considered settled by immigration authorities are treated as habitually resident. Secondly, where a claimant is certified as having no other means of support, an appeal against a habitual residence decision must be held within four weeks. Thirdly, failed applicants should be paid income support pending their appeal.

In response to the first of those points, the Government told NACAB—I just received today the Government's response to its proposals—that under the European treaties it is not possible to discriminate on the basis of nationality. That is true within Europe and is why the regulation was framed in a rather convoluted way in the first place. The proposal is not that the Government discriminate in that way between citizens of European nations. NACAB points out that a person with settled status is, by definition, not an European economic area national, so no discrimination between member states can be involved.

On the second proposal, the Government implicitly concede that the tortuously slow processes of their appeal system cause hardship, but they argue that it would be unfair to relieve that hardship in habitual residence cases and not in others. We are talking about the means for people to subsist. Surely something must be done to speed the process up and end the extremely long periods that people must currently endure with no means of subsistence other than that gained from borrowing from friends.

In response to the third NACAB proposal, the Government told it: The intention behind the habitual residence test is to curb abuse of the benefits system. It would be contradictory to deny these people benefit on one hand only to pay it on an emergency basis on the other. The Department's logic is alarming. Whatever the merits of the arguments I am proposing, whether we believe the habitual residence test is right or wrong, I am sure that we can all agree that there are occasions when emergency aid should be provided while eligibility for long-term help is determined. In many cases there is reason to believe that an initial adjudication on habitual residence may be wrong, and the number of reversals on appeal prove that. Sometimes it is simply good governance to offer short-term, emergency help. Neither of those possibilities seems to be recognised by the Department in its response to the CAB report.

In addition to those three suggestions for changes in secondary legislation, the CAB report also offered three proposals concerning the collection of information on the effect of the habitual residence test. First, it proposed that information should be collated on the ethnic group of passed and failed test applicants. There is growing circumstantial evidence that black and Asian people are more likely to be subjected to the test than others. That is alarming.

Secondly, the CAB proposed that data should be gathered on the appeals process, including the overall number of appeals and how many are successful. Thirdly, it proposed that the time taken to process appeals should be monitored and published.

The Government told NACAB that they had no intention of collating information on those subjects. They argued that principally on the grounds of cost. Although no estimate of that cost had been made, or at least not to my knowledge, it is hard to believe that any extra cost could not be found in the £37 million saving that the Government claim to have made from introducing the test.

There is certainly a need for more information. Even those statistics that are available do not seem to be understood by the Department of Social Security. For example, in their response to NACAB, the Government assert: the majority of people found not to be habitually resident are EEA nationals. That is simply not true. On Government figures, only 36 per cent. are EEA nationals; that is confirmed by the new figures that the Minister has given me for March 1996 and by the cumulative figures from August 1994 to March 1996. Significantly fewer than 40 per cent. of those affected by the test are EEA nationals. I hope that the Minister will acknowledge that.

There is one other important matter that I want to raise. After we debated the subject in March last year, I asked the Minister to place the results of habitual residence tests every month in the Library of the House. I am grateful that he agreed to do that for the year 1995–96; I have asked him if he will continue to publish the details for the coming year, and I am glad that he has confirmed that he will do that—it is most helpful.

More information, however, is needed. It is little wonder that NACAB expressed its disappointment at the Government's response to its report, which was an impressive one. There are grave concerns about the operation of the test and the human hardship it causes my constituents and those of my hon. Friend the Member for Newham, North-West (Mr. Banks), who I am pleased to see in his place this evening. Critiques such as the one produced by NACAB are constructive and valuable, and I hope that the Government will respond in similar vein.

The national association has produced a devastating critique of the test. The Government's response has been weak and, in at least one respect, simply wrong. It is as if the Government are not taking seriously the points that have been made. I hope that they will give careful consideration to the future of the test before the damage becomes too great. I hope that the habitual residence test will be scrapped, because I am quite sure that if it is not, more and more hon. Members and others will be raising the serious problems that it causes in the weeks and months ahead.

10.36 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)

I congratulate the hon. Member for Newham, North-East (Mr. Timms) on obtaining, for the second time in just over a year, an Adjournment debate to discuss this subject. It is a matter of considerable concern, and of general importance.

I was pleased to hear the hon. Gentleman say that my right hon. Friend the Secretary of State, in identifying the problem of benefit tourists, had identified a problem that required a solution. The question he asked was whether the solution implemented was the right one. The hon. Gentleman mentioned a number of percentages; it would perhaps assist the House if I gave the up-to-date absolute figures since August 1990, when the new arrangements came in. Sometimes absolute figures give a better impression than percentages.

These figures are to 31 March; answering oral questions on the last occasion, I gave figures to the end of February. Fourteen thousand European Economic Area nationals have passed, while 14, 032 have failed. Of British citizens, 95, 973 have passed; 9, 738 have failed. I cite those figures because it appears, by a factor of nine to one, that British citizens succeed—as one might have expected—in establishing themselves as habitually resident in Great Britain more easily than do people from other European countries.

It is not contested that the drawing up of a test to prevent benefit tourism was a very difficult task. The treaty of Rome obliges us not to discriminate on grounds of nationality. At first blush it might seem enormously attractive to the man in the street to give residents of several years in this country favoured status under some arrangement. Under European law, however, we simply cannot do that.

We picked on habitual residence, because it is a test embodied in the relevant European directive: 1408/71. It is a concept of European law that we are entitled—we believe, and so far we have been vindicated by the courts—to apply for the present purpose.

The hon. Member has not suggested how we should replace the test. He has rightly and properly said that there are some very hard and difficult examples of its application. They are bound to be sad and cause considerable anguish. The NACAB report—which, of course, I have read carefully, and which Ministers and officials have studied carefully—gives several detailed examples. I cannot comment upon the three specific cases in the hon. Member's constituency, for which he did not give names, because I do not have particulars. No doubt there are circumstances in which the test is not a happy test to apply.

Nevertheless, we are not prepared to entertain the situation that obtained in summer 1994, when larger and growing numbers of Europeans—Spaniards, especially, were cited by my right hon. Friend the Secretary of State for Social Security—were coming to this country on holiday and claiming income support, housing benefit and council tax benefit. The news had got around in Europe, and more and more were coming. Unless and until something was done, the problem would not have diminished or remained static, but would have grown.

The NACAB report primarily—as the hon. Member for Newham, North-East emphasised—recommends rejection simpliciter of the habitual residence test, and I think that that is what the hon. Member would like to see. The report argues that labour market conditions, such as the tightening up of the availability test and the requirement actively to seek work—which will apply when the Jobseekers Act 1995 comes into force—would be sufficient. We are not satisfied that labour market conditions would be sufficient at all.

Some people came to this country for relatively short periods, and they enjoyed all the benefits that our welfare state provides. That was one-way traffic, because, when British nationals visited France or other European countries, they did not have the same kind of entitlement. The equivalent social assistance benefits in those countries are usually locally administered and highly discretionary.

The unique British feature, which the Labour Government introduced in 1966, was that supplementary benefit—later income support—was a matter of legal entitlement, provided that a person was in the United Kingdom and met the other conditions. Until we imposed habitual residence as an additional requirement, everyone was entitled to the benefit as a matter of right; that was what was so attractive about coming to this country, and it did not apply in reverse.

NACAB argues that we should simply abolish the test. We are not so persuaded. As for NACAB's secondary recommendations, which are designed as an alternative, we regret that either the totality of them is not sufficient or there are problems in some of them.

The first recommendation to which the hon. Member referred was the suggestion that people from third countries—that is, non-European Economic Area nationals or British citizens—recognised for settlement purposes in the United Kingdom for immigration status, should be treated automatically as habitually resident. On the face of it, that sounds plausible, until one realises that the recommendation would involve putting that category of persons in a better position than British citizens. I do not believe that that is likely to be generally acceptable.

The second proposal is to create a special class of appeal on such cases which must be heard within four weeks. I readily accept, and Ministers are concerned, that the independent tribunal service should dispose of appeals as quickly as may practically and properly be done. We wish to see the time taken from beginning to end of appeals speeded up, but whether a particular appeal or particular class of appeals should be expedited is essentially a judicial matter for application to the relevant tribunal at the relevant time.

It is easy for the hon. Member for Newham, North-East and myself, given the circumstances of especially sad and difficult cases, to say that they should have priority in the queue. But that is essentially a judicial matter, and we do not believe that it is appropriate that Ministers should interfere.

The other recommendations are perhaps properly described as subsidiary, and they relate to the collection of statistics. The Benefits Agency is fully aware of its responsibilities to ethnic minorities and for the delivery of the benefits, but we are trying to reduce the administrative costs of the Department, not to increase them. We do not see that there is an administrative need to record the statistics.

Similarly, the recommendation made on statistics on appeals seems plausible, until one realises that income support is a complex benefit. There are a number of conditions to be satisfied, as we all appreciate. But what are we measuring? The claimant may win on the issue of habitual residence and lose on some of the other many conditions.

We are talking about a matter of administration that would be expensive to bring up to date, if that were desired, to deal with the detail that has been requested.

We would find ourselves undertaking some form of manual, clerical, statistical sample. That is not entirely satisfactory.

I have dealt with the time that is taken to process appeals. The National Association of Citizens Advice Bureaux has special experience in these matters. We should never forget that all the most difficult cases, if they have not found their way to the hon. Gentleman's surgery, or mine, are likely to end up in the local CAB. It is a body that receives public assistance from Government and from local authorities. It performs an excellent job. It sees the problems raised by the hon. Gentleman at the hardest and sharpest points. It deals with human problems in individual cases.

As a Department, we have responsibility to the taxpayer. The lacuna in the argument so far presented by the hon. Gentleman, and by NACAB, is what to do to stop benefit tourism. If we abolished the habitual residence test, we would provide opportunities for fraud and exploitation of the system. That was the position before August 1994. It was catching on. People knew increasingly about the opportunities. How do we stop that?

We cannot discriminate in favour of British citizens, however much that may seem the simple, easy, logical, politically desirable, practical and humane solution, because of the restrictions of the treaty. What do we do? My right hon. Friend took the concept of habitual residence, which I readily accept is a complex idea. It is not something that can necessarily be simply applied, because it involves guidance, the expertise of the adjudicating officers, who are independent, and the appeals process.

There have been numbers of appeals. Being turned down matters a great deal. The law has a vagueness that sometimes attaches to European legal concepts. It is a concept that people want properly to test. Inevitably we shall have many appeals.

We are familiar with the test of domicile. The Inland Revenue has a test of ordinary residence, to ensure that it gets its tax out of us. Habitual residence was a slightly related and not entirely unfamiliar test. Inevitably, as I have said, there have been a number of appeals.

We have seen what we hope is the last word—at the moment it is—in the form of a decision by Commissioner Howell. It sets out some general guidance. It may or may not be binding, but that is a matter for the independent tribunal service, the commissioners and the courts to decide. It appears to give some general guidance on how the test should be applied.

The point in it, apart from distinguishing it from other legal concepts, is a practical consideration. A British citizen who has lived in this country for a long time is likely to be able more readily, easily and in a readily shorter period to re-establish habitual residence, if it has been lost, than someone who has never set foot in the country before, or someone who has done so only for a short and transitory period.

We readily accept that there will be some hard cases. We are driven to the conclusion, however, that there is nothing else in European law that we have yet heard of, or that anyone, to my knowledge, has suggested, that would prevent benefit tourism and at the same time produce a more favourable result for British citizens. The general figures show that, by nine to one—95,000 to 9,000-odd—British citizens pass the test. I accept that there are hard cases, and I have no doubt that each one of the 9,738 involves a human problem. We suggest that that is a test which, in practical administrative terms, does the best possible.

I summarise the matter as follows. There was a problem, as the hon. Gentleman has fairly recognised. We had to find a solution within the European treaty, and we believe that we have done so. It is a solution for which the vires have been tested, and, as litigation presently stands, it has been upheld.

I accept that the habitual residence test has problems in terms of its exact meaning, but it appears, as the case law evolves, that we are getting a clearer picture, and that the adjudicating authorities are getting a clearer understanding of how properly to operate the test as they receive guidance from higher appeals to tribunals and the commissioners.

We believe that, at the end of it all, what we have implemented is as fair as any system can be to the British citizen and, at the same time, protects the interests of the British taxpayer and prevents the abuse of benefit tourism that we had.

My right hon. Friend the Secretary of State has read out to the House on several occasions—I shall not weary us at this late hour with the extracts from the Spanish and other continental press—evidence that the fact that London was an easy touch had become generally appreciated. That was not a problem to which we could simply turn a blind eye, and we could not just try to tighten up the administration of fraud, which is what the NACAB report ultimately suggests. We had to do something more than that.

We decided, because we were advised that it was the sensible solution—and, as far as we can yet see, the only solution in European law—to introduce the habitual residence test. That is working. I cannot say that it is working perfectly, but, in a less than perfect world, given the restraints of the European treaty, it appears to be working at least as well as anything for which either the hon. Gentleman or any other hon. Member has contended.

The hon. Gentleman and you, Madam Speaker, will not be surprised to know that I have received numerous letters from hon. Members on both sides, asking the simple question, "Is there some better way in which to do it?" We are not yet aware of it.

The motion having been made after Ten o'clock and the debate having continued for half an hour, MADAM SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at nine minutes to Eleven o'clock.