UK MEP Dan Hannan: EU rules threaten the Coalition’s welfare reforms

One chap works, saves and provides for his retirement. When the time comes, he gradually exhausts his savings, and perhaps has to sell his house, to pay for care. His neighbour, by contrast, makes merry and never puts a penny aside. He gets the same care in retirement, funded wholly by the taxpayer.

The first chap is understandably aggrieved (really aggrieved, believe me: every MP has met a version of him at a surgery). It’s the second, though, who has behaved rationally.

All benefits systems run up against the problem. Economists call it the Freeloader Dilemma. Wherever you draw the line, you will always end up penalising some people for being provident, rewarding others for being idle.

We can, after all, be pauperised by circumstances beyond our control. We might have been too ill to work. We might have spent our life caring for someone else. We might have lost our pension in a Maxwell-type scam. Or we might simply have been feckless. The law cannot distinguish one category from another, nor leave us destitute. So, inevitably, it ends up creating injustices, unintended consequences, perverse incentives.
But, under EU rules – at least, under EU rules as now interpreted following a series of power-grabs by the European Commission and Court – any benefits made available to the citizens of one member state must be equally available to other EU nationals residing there. In other words, a pot filled by 60 million can be emptied by 600 million. And that, plainly, is unaffordable.

So which is it to be: welfare reform or EU membership?