A new deal for Britain on EU migration?
EU-wide reform is necessary to bolster support for European integration, but Cameron must tread carefully in any attempt to win UK-only 'fixes'
Migration is a huge issue that that affects many member states within the EU. To listen sometimes to our domestic political debate one might imagine that migration was an issue that uniquely ‘threatens’ Britain. The truth is that other member states have experienced migration on a far bigger scale both absolutely and in proportion to their population. Germany and Sweden are two examples. If migration creates political problems within EU member states, where there are important similarities of political culture, then it ought to be possible in theory to develop a common approach. A ‘new deal’ ought to be negotiable.
However, the migration problem is multifaceted as well as politically toxic. Most member states now have a significant political party whose support base largely rests on anti-migrant feeling. Migration is a major political issue for them, as well as for us. This creates an inevitable domestic political angle to any change or ‘concession’ on migration policy that might be offered Britain. For our partners, any specific deal for the Brits could become a major domestic complication in ways that the question of ‘ever-closer’ union or ‘fairness to “euro-outs”’ never would. This poses Cameron with a significant and awkward political choice. Does he accept political reality and narrow the scope of what he can in practice achieve, yet trumpet the outcome as a major victory? Or does he try for a genuine ‘new deal’ on migration which can win support from other member states? In a way it is a choice between the politics of public relations and the politics of substance. But if he goes for the substance, a package deal may involve reforms that would be a hard sell with his target audience in Britain.
The current focus in most of the EU is on refugees: the tide of desperate people seeking a new life in Europe as an escape from the horrors of war and dire poverty in Africa and the Middle East. Of these, many are refugees genuinely entitled to asylum; others are often equally desperate ‘economic migrants’ and the distinction is often hard to draw. The question of how to control these flows, how to assess their refugee status and how to share the ‘burden’ of accepting legitimate new arrivals is acutely divisive within the EU. The British government has accepted that this is a matter of ‘common concern’ to EU member states and has joined humanitarian and rescue efforts, but has so far refused to participate in EU burden-sharing schemes that would involve the UK accepting an agreed quota of refugees. Cameron has agreed only that Britain will, over a five-year period, accept 20,000 additional Syrian refugees from camps in surrounding countries.
Rather, the British government has chosen to put its main effort into strengthening our national border controls at Calais, which we continue to exercise as a non-participant in Schengen, in order to deter migrants from crossing the Channel. The effectiveness of such efforts depends on the continued willingness of the French and Belgian governments to allow the UK to police its border within their territory. The present UK policy is acutely vulnerable to a breakdown in cooperation with our closest EU partners. The British negotiating position on the migration question is far weaker than most of our politicians accept, and still less acknowledge.
In Britain by contrast, over most of the last five years, the debate has mainly focused on ‘freedom of movement’ within the EU. This is also an issue in other parts of Europe: for example, one million Romanians are estimated to be living and working in Italy, but on the whole, in other member states, it is not such a difficult one. The German economy has been needing and accepting migrant labour from other parts of Europe (and Turkey) since the 1950s. In France, there have been periodic demands from the far right to abandon Schengen and reintroduce national border controls on all forms of migration. In the mid-2000s a major public concern was the ‘Polish plumber’ stealing French jobs. But immigration also touches on fears of loss of French identity in face of what anti-immigrant politicians describe as the creeping ‘Islamisation’ of French society. Mainstream French politics has not been insulated from these pressures. Nicolas Sarkozy, in his desperate efforts to win over National Front (FN) voters in the second round of the French presidential election in 2012, pledged to reinstate national border controls. In the autumn of 2014, Marine Le Pen, the FN leader, demanded action to protect the French borders and prevent the ‘floods’ of migrants from outside the EU making their way to Calais in their attempt to seek work in the deregulated labour markets of the UK. Yet for all this sound and fury, the Schengen agreements – in France and other EU countries – that have led to the dismantling of vexatious border controls over much of the continent (from which the UK and Ireland have opted out) have become an accepted and welcome part of modern European life.
Cameron approached the migration issue warily – and he was right to do so. It was not mentioned in his January 2013 Bloomberg speech, except to warn that withdrawal from the EU could affect the lives of Britons living and working on the continent. Until the October 2014 Conservative party conference, Cameron was careful to confine himself to supporting new rules on migration that would apply to new countries joining the EU, not interfere with migration rights for existing EU members. However, the Conservatives had added curbs on ‘benefit tourism’ to their list of renegotiation demands in the light of the UK Independence party’s surge in the spring and summer polls of 2013. These demands encompassed curbing entitlement to unemployment benefits beyond three months residency in the UK, and restricting access to public services free at the point of use, principally the NHS. The media frenzy over the ending of the UK’s transitional controls on free movement of labour from Bulgaria and Romania in January 2014 added to the pressure to sound ‘tough’. In December 2014, Cameron had added to his renegotiation demands a specific proposal to deny EU migrants access to in-work benefits until they had worked for four years in the UK, on the basis that such benefits were a significant ‘pull factor’ in attracting EU migrants to Britain. However, in deference to warnings from the German government and the European commission, he fell short of arguing for the introduction of temporary quota controls on EU free movement which John Major had floated earlier.
Cameron’s caution was for good reason. Free movement of labour is one of the founding ‘four freedoms’ established in the treaty of Rome. It is as much a part of the common market (which is all, according to the Eurosceptics, that we voted to join in 1975) as freedom of movement of goods, services and capital. What’s more, millions of Brits have taken full advantage of it. The question for any renegotiation is whether this freedom is absolute, or can in some way be qualified, and whether to so do, requires treaty change or can simply be obtained through clarifying or amending existing EU directives.
On the issue of so-called ‘benefit tourism’, the evidential basis for believing that abuse of benefits by EU migrants is widespread is thin, if ‘abuse’ refers to those who come to Britain with no intention of seeking work, but with the sole purpose of living a life of idleness and sloth off UK social benefits. Most EU migrants are young people only too keen to work and earn: their employment rate is higher than native citizens of a similar age. Nonetheless, claims of benefit tourism strike a chord across the EU, not just the UK. One reason for this may be that anger at ‘benefit tourism’ is a polite proxy for widespread public prejudice against the Roma, who for all kinds of historic cultural reasons integrate as badly into western societies as in the south-east European nations of their origin, where they suffered centuries of harsh discrimination.
UK tensions over benefit tourism reflect the way in which the British social security system has evolved since the Beveridge report in the 1940s. What started as an ‘insurance’ model has gradually become a means-tested system. Over decades, the British welfare system has prioritised ‘need’ over ‘contribution’, in part because generous contributory benefits were judged unaffordable. There is little earnings-related element in unemployment insurance; instead social benefits mainly reflect family size and housing costs. Social housing is allocated on the basis of need and homelessness, not length of stay on a waiting list. Tax credits vary according to earnings. Benefits that were once universal, such as child benefit, are no longer available to higher-rate taxpayers. Whether or not Britain had seen large-scale labour migration, it is questionable whether the present welfare consensus among the elites chimes with the attitudes of the general public. But the reality of large-scale labour migration has broken the perception of ‘fairness’ necessary to underpin any social welfare system.
Finding acceptable solutions to those problems depends mainly on reform of national social security systems to shift entitlements back towards the contribution principles of William Beveridge. Yet it ought also be possible to change EU law to reflect the legitimacy of the principle of contribution before an entitlement to benefits (and access to other non-emergency services offered by the welfare state) is established. Most social democratic parties, certainly in northern Europe, would advocate such a change.
It should also be negotiable to tighten the rules on so-called ‘benefit tourism’ and send home migrants who fail to find work. There is political momentum among our EU partners behind the demand for benefit abuses to be tackled.. The general principle that there is an absolute right to travel across internal EU borders and an absolute right to work in any member state will be reaffirmed. Yet our EU partners will agree that there is no right to remain beyond a strictly limited period unless migrants demonstrate their ability to support themselves and their families through obtaining and keeping a job. Stricter enforcement of existing ‘free movement’ rights should therefore be achievable.
However, while these actions would tackle ‘abuse’, they would not significantly reduce the scale of internal migration, which is largely driven by economics. The eurozone has been locked in stagnation and at best slow growth. Huge divergences in living standards between all EU member states remain, and between north and south they are growing. In these circumstances, the plentiful supply of jobs in the UK’s loosely regulated labour market will continue to be a strong magnet.
Large-scale eastern European labour migration has occurred in a decade when wages and standards of living for families in the broad middle of the income distribution have been squeezed and on average have fallen. Most economic research disputes the reality of any general causal relationship. Yet it can be no surprise that the public makes a link between the two phenomena. There are clearly some instances of competitive wage undercutting, for example where foreign subcontractors bring over groups of migrant labourers to work at (or below) the minimum wage or where highly skilled migrants can undermine and outperform pockets of labour monopoly that particular groups once enjoyed because of previous shortages of skilled labour.
Some of the labour market problems that UK citizens experience as a result of migration are mainly ones for national labour market regulation: for example, the setting and enforcement of minimum wages or a new ‘living wage’ as George Osborne proposed in his July 2015 budget; the abuse of subcontracting; and the regulation of zero-hour contracts. The UK could take domestic action to make its labour market less flexible. These are not matters the rest of the EU can resolve for the UK, but EU action could help. A less ideologically free-market British government could press for strengthening EU rules on the ‘posting of workers’ that better protect enforcement of minimum wages and collective agreements. This is a Dutch objective for their presidency of the council of ministers in the first six months of 2016, which the UK could back. The UK could also argue for EU curbs on the abuses of some employment agencies. Also, the idea of setting up a new EU fund to help localities that are suffering the stresses of migration should be developed; it is a sensible reform of the EU budget for which the UK should argue.
Numerical controls on internal EU migration are altogether another matter – and clearly impossible within the EU treaties as they stand. Cameron is seeking to find a way though this dilemma with his proposal to deny EU migrants access to in-work benefits – tax credits and child benefit – for four years. In the UK, tax credits serve to top up low wages and are available universally on the basis of family income (wherever the rest of the family lives) not on the basis of past contribution. The impact of Cameron’s proposed tightening of the tax credit rules would be on migrants, the vast majority of whom (to repeat an overworked political sound bite) ‘work hard and play by the rules’. The belief is that a four-year wait before migrants can claim in work benefits will reduce the incentives for EU citizens to come and work here.
However, the proposed four-year stay on benefit entitlements would obviously not deter highly skilled people who come to work in the UK in well paid jobs. Nor does it seem plausible that it would have much impact at the bottom end of the labour market on single young people who come to Britain to work because there is a plentiful supply of low paid jobs – jobs, it has to be said, that employers in many parts of the UK find it difficult to fill with native British talent. The main reasons for this are not much to do with low-wage competition forcing British young people into involuntary unemployment. Rather they reflect: the deep regional imbalances within the UK; the mismatch between the availability of decent housing and the places where jobs are plentiful; the failure of the English education and training to produce people with right levels of basic skill and aptitude for employability; and cultural barriers to undertaking certain types of work such as fruit-picking and service in hotels.
For these reasons, it is highly problematic whether the proposed curbs on in-work benefits would create new job opportunities for British workers or do much to stem migration flows. The likelihood is that they would have a partial but not significant impact. They therefore come into the category of political promises that are dreamt up to address a general grievance that may turn out to have a small practical effect. A legitimate question is whether this is the way to rebuild the appallingly low levels of trust people have in politicians and politics, especially on immigration.
Unfortunately, Cameron’s demands on in-work benefits appear to contradict our existing European treaty obligations, which have been agreed by every member state on the basis of unanimity and supported by successive British governments of all parties. Article 45 of the treaty on the functioning of the European Union lays down that citizens of other EU member states should enjoy “equal treatment with nationals in access to employment, working conditions and all other social and tax advantages”. It is difficult to see how the European Court of Justice (ECJ) could regard any new EU directive or national law to deprive EU citizens of access to tax credits and other in-work benefits as compatible with that treaty article.
Treaty change is of course technically feasible, as the foreign secretary, Philip Hammond, has hinted. It might be achievable quickly, if member states agree that the treaty change be made within the simplified revision procedure of the Lisbon treaty, as happened in 2011 when the European Stability Mechanism was established. But such a change to the treaties cannot be made on the simple say so of David Cameron, the European commission or even Angela Merkel, the German chancellor. Every single member state has to agree the change and obtain parliamentary approval within their own country for it.
Why would Poland or other eastern and south-eastern EU member states voluntarily agree to forgo the rights of their nationals in this way? Why should they give in to what they will see as Cameron’s attempted blackmail on the basis of a threat to leave the EU? Most will regard his threat as empty bluster given Britain’s dependence on access to the single market. Is the British prime minister seriously going to put at risk the half of UK goods exports and over a third of our overseas services earnings that depend on access to the European single market, all because he cannot obtain a four-year delay in migrant entitlements to in work benefits?
There are three possible ways through this likely impasse. First, Cameron drops or softens this set of demands: this will of course offer the kiss of life to Ukip. It will delight those Eurosceptic backbenchers now joining the ‘Conservatives for Britain’ group, who hypocritically claim they want to stay in the EU if better terms can be renegotiated, but in fact are itching to condemn the whole exercise as a fraud so they can campaign for withdrawal.
Second, the UK could agree to pay a price in future for getting other member states to agree to a treaty amendment. This price might well involve increased British contributions to the EU budget. The poorer member states who have been the source of much low-skill migration to the UK might reasonably argue that if their unemployed citizens are to be denied their fundamental treaty rights to fair access to labour markets in more prosperous member states, then their member states should be entitled to increased structural fund transfers to promote their faster domestic development. One possibility would be a supplementary fund to the social fund to enable eastern Europeans to receive training and work experience in their own countries without moving elsewhere. Would that be an impossible price to pay?
Third, the government could alter the benefit entitlements of UK citizens so that access to in work benefits would be restricted until after completion of say, two or four years of contribution. This would meet EU non-discrimination principles and treat all EU citizens equally, including British citizens. There is a strong case for this as a desirable reform to rebuild public confidence in our welfare system: a return to the principles of Beveridge for a new century, on the lines that Frank Field, for example, has advocated.
However, this would involve an admission by the government that this major change in Britain’s social security entitlements was being implemented to comply with EU rules. What would the Daily Mail think? They might agree with the policy, but criticise its European inspiration. A weaker alternative would be to argue for a ‘residency requirement’ before in-work benefits are paid: this would restrict entitlements for Britons who had worked abroad (but not to all British resident citizens) as well as migrants from other EU countries. There is some risk that such a policy might come under legal challenge before the ECJ as a quasi-discriminatory measure, though in all likelihood some time only after a referendum had taken place!
On the migration question, as matters stand, there is no obviously happy outcome. Pro-Europeans need to start making the argument that the free movement of people is as much part and parcel of the single market as the free movement of goods, services and capital. Internal EU migration has been a considerable economic benefit all round, including to many millions of Britons. Free movement is increasingly vital to the viability of the public services that British citizens hold most dear: for example, in the NHS, it is one of the few means by which the present shortage of qualified nurses can be addressed. However, the present situation is leading to unacceptable social tensions. All markets, including the labour market, within the ‘social market’ economy of the EU need to operate in a reformed and strengthened framework of social and public interest rules that apply across the whole EU. A major reform package to re-regulate migration within the EU is necessary to bolster public support for European integration. This would involve:
• more proactive deployment of a larger EU budget, to tackle migration pressures at source, both outside and inside the EU, as well as help member states and localities under migration stress;
• better enforcement of the EU common border;
a fair sharing of the refugee burden;
• tightening EU-wide labour market and social security rules;
• a recognition that contribution is a condition of entitlement;
• and action to curb potential benefit abuse.
Yet elements of this reform package could put David Cameron at odds with his own supporters. His UK-centric approach in his renegotiation risks crossing an extremely difficult and dangerous line. He is putting at risk the rights to free movement of which millions of British citizens take full advantage, including the two million British citizens estimated to be currently resident in other EU member states. If he wishes to secure a new deal on migration, then Britain will have to show more sense of collective European responsibility for tackling the migration problem. To promise to ‘solve’ the migration problem with national ‘fixes’ that in practice will affect migration flows very little, would simply undermine further the public’s trust in politics.
Roger Liddle is co-chair of Policy Network. He is the author of the forthcoming book, The Risk of Brexit: The Politics of a Referendum, from which this article is taken