Eurosceptic evokes spirit of Thatcher as he warns Downing Street to ‘play the system hard’ in pre-referendum negotiations on in-work benefits

Iain Duncan Smith, the work and pensions secretary, is resisting a Downing Street move to compromise on the issue of EU migrants’ access to benefits as part of the referendum deal to be put to the British people.

Seen as one of the key cabinet players in the negotiations due to his ministerial portfolio and Euroscepticism, Duncan Smith repeatedly said on Tuesday that the Conservatives cannot renege on a manifesto commitment to stripping EU migrants’ right to in-work benefits for the first four years of being in the UK.

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It is understood some civil servants have suggested in private that the time period could be reduced to one year to secure an EU-wide agreement that could be put to the British people in a referendum in 2016.

Separately, Downing Street has floated proposals that all UK benefits claimants would also need to have contributed to the system for at least four years. These plans – which would get around claims that the UK was discriminating against members of other EU states – are also being strongly resisted by Duncan Smith and the employment minister, Priti Patel, as an unacceptable price for an EU deal.

Duncan Smith is convinced that EU migrants abuse the UK’s tax credits system, especially those working part time and those sub-contracting labour to other EU migrants.

At a briefing on universal credit, Duncan Smith insisted there was no scope for compromise on the issue, adding: “The important point is, I understand, the prime minister remains resolved on this matter”.

Facebook Twitter Pinterest Angela Merkel is believed to have told No 10 that she will not lean on Germany’s neighbours to shore up the UK’s position on migrant benefits. Photograph: Patrik Stollarz/AFP/Getty Images

The search for a political compromise follows Monday’s letter from Donald Tusk, the president of the EU council, stating that there was, as yet, no political consensus over the issue of EU migrants’ benefits across member countries, and that further discussion was required at an EU heads of government council this week, and in February.

It has also been suggested that Cameron was told by the German chancellor, Angela Merkel, that she would not come to Britain’s aid by putting pressure on Germany’s neighbours to relent on the issue. Eastern European countries, such as Poland, Bulgaria and Romania, are the most hostile to a deal on migrant benefits.

Duncan Smith also raised the bar for the tough bargaining stance he expects Cameron to adopt by recalling Margaret Thatcher’s refusal to back down over the UK budget rebate in 1984.

Downing Street is said to be frustrated over the issue because it already has legal agreement from the EU to bar migrants from receiving out-of-work benefits once jobseeker’s allowance is integrated into Duncan Smith’s universal credit system. At this point out-of-work benefits will be reclassified as social assistance and become a matter devolved to the nation state. But the UK has no corresponding agreement with the EU on discriminating against EU migrants seeking to claim in-work tax credits.

According to cabinet sources, Downing Street believes the bar on migrants accessing out-of-work benefits is the biggest single negotiation issue in the public’s mind.

“That means people who are unemployed cannot just come here to the UK and claim universal credit, so that puts an end to that,” Duncan Smith told a briefing on Tuesday.

However, the government can hardly claim this a victory in the negotiations because it was agreed before bargaining started.

Duncan Smith said: “The prime minister has made it pretty clear, as it was in the manifesto, that he wants to see an end to people receiving benefits for which they have not been resident or contributed. He has said it is a manifesto commitment and he wants to deliver – that is what the British people expect us to do. I am content with that.”

He added that he believed the carefully drafted Tusk letter this week “showed the door was open [to further negotiation]. It just showed we have not reached a final conclusion”.

Asked if he now expected a satisfactory EU deal that the prime minister could recommend to the British people, Duncan Smith replied: “I am very confident he will get the best deal that is possible and the important thing is, at the end of all that, everyone will have one vote [on] whether we stay in the European Union.”

Duncan Smith added: “It is worth remembering that when Mrs Thatcher went to the EU over the budget rebate almost everybody said it was not feasible, they won’t agree, and it will not happen, and then she came back with a huge budget rebate. My point is if you play the system hard, you go in very clear about what you want, you will be surprised the system will give you what you really need.”

He said most EU states recognised that the current benefit system does not work for the Netherlands, Germany, Denmark and Britain. “When I talk to ministers in Europe, I have yet to come across one person who does not agree there is something fundamentally wrong with this system that people can arrive in a different country and be eligible for benefits they have never contributed towards. This is as much an issue in Bavaria as Birmingham.”

The intervention by Duncan Smith came as Sir Stephen Nickell, an economist at the Office for Budget Responsibility, said the changes to the rules on benefits were “unlikely to have a huge impact” on the number of EU migrants coming to the UK. Nickell told the Treasury select committee on Tuesday that he had done no detailed analysis on the issue.

Duncan Smith, speaking on the BBC Radio 4’s World at One, said Nickell’s views were just one opinion, and insisted withdrawal of EU benefits will have a huge impact.



The chairman of the Treasury select committee, Andrew Tyrie, said: “I will be writing to Sir Stephen Nickell to ask him further to substantiate these remarks, and to offer a review of the robustness, or otherwise, of any conclusions that can reasonably be drawn on this.”