I think the Telegraph article is completely missing the point in order to prove some kind of eurosceptic point, and it seems to me that the government are probably also publicising / distorting the facts around all this in a particular way because they are having a big party conference season publicity drive to speak to their traditional core voters (see also the 80mph speed limit stuff).
At least as I understand it:
If you read the actual example quoted in the EU’s case, where they are arguing that someone should get benefits, it is of someone who lived and worked in the UK for some years, but was still told they hadn’t gained a ‘right to reside’, so weren’t able to claim JSA when they were made redundant, despite having paid UK NI and tax prior to that.
It isn’t about people being able to just move here without any money and claim benefits – it is about people who have been allowed to move here for work having the same rights as people from the UK.
The particularly relevant EU thing guarantees free movement of *workers*, not free movement of anyone. You can move to get a job, and in doing/applying for that job you should be treated the same as anyone from anywhere in the EU including the nation the job is in. Unpaid people in whichever other EU state can’t just choose to move here, they need to get a job here (and hence pay tax, NI and all the other ways people contribute to society financially) to move here.