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Prime Minister’s speech on immigration strikes right balance between keeping movement free and making it fair as recommended by Open Europe

28 Nov 2014

Open Europe has today responded to the Prime Minister’s speech on immigration, welcoming his announcement that he will let free movement of workers stand while seeking to negotiate a four year restriction on EU migrants’ access to in-work benefits.

David Cameron was right to avoid pledging an ‘emergency brake’ or cap on EU migration as it would be very difficult to codify objective criteria for triggering it – particularly any that apply to the UK’s current situation. The UK economy is booming, unemployment is falling, EU migrants have high employment rates and the UK takes less EU migrants per head than several other EU member states. Even if it was possible to negotiate such a brake in Europe, it would be difficult to make it work in practice.

Somewhat surprisingly, David Cameron said today that the entire package he announced would require an EU treaty change. Open Europe believes that changes to in-work benefits – the key tenet of Cameron’s proposal – will not require EU treaty change. Therefore, such a change could be more a form of ‘political insurance’ at home to prove that the policy is firm and will stand the test of time.

Open Europe Chairman Lord Leach said:

“The Prime Minster has struck exactly the right balance between preserving the benefits of free movement of workers to the UK economy and ensuring that that the system is fair for the British public. This would both respect the right of free movement and protect British low-wage workers.”

“The Prime Minister was right to avoid a cap or brake on EU migration, which would have been unworkable in practice and simply stored up more problems for the future.”

“This is a pragmatic solution that must be part of our future negotiations with our EU partners. It is one that should win favour with European leaders who increasingly recognise that their electorates too demand reform and that public support for the EU is at an all-time low.”

Access to in-work benefits – reducing the incentive to migrate to the UK for low-paid low-skilled work
EU free movement is a net benefit to the UK but can pose particular challenges – particularly at the bottom end of the labour market, where it can put downward pressure on wages.

Open Europe research shows that restricting access to all non-contributory benefits, including in-work benefits, would reduce the financial incentive to migrate to the UK to work in low-wage jobs. For a single worker earning the minimum wage in Poland coming to work on the UK minimum wage, removing immediate access to in-work benefits would halve the financial incentive to migrate to the UK once the cost of living is factored in [on a Purchasing Power Parity basis], with the potential income boost falling from 155% of Polish weekly take-home pay to 72%.[1]

The effect of withdrawing immediate access to in-work benefits would be even greater for migrants with dependent children. For example, for a Polish single parent with two dependent children earning the average Polish wage, moving to the UK to earn the minimum wage, their average weekly income would in fact drop by 27%; such a move would make little sense from a purely financial perspective.

Individual reasons for migrating are various and complex, but the removal of access to in-work benefits as a top-up to low incomes would substantially decrease the income gap between the UK and the most common ‘sending states’, in turn reducing the incentive to come to the UK for low-income work.  By definition, restricting access to in-work benefits will only affect the decisions of those migrants who would potentially be claiming those benefits.

The impact
Opinion polling suggests the British public is most concerned by the impact of low-skilled low-wage immigration.


Source: YouGov/Sunday Times polling, June 2013[2]

Labour Force Survey (LFS) data suggests that migrants – including EU migrants – are more likely to receive in-work benefits, the longer they are in the UK – this probably reflects the fact that, the longer they are in the UK, the chances of them having children and adjusting to the way the UK system works increases.

Nevertheless, the four year time limit will have an impact. The data on these complex issues is quite poor but we are able to ascertain some rough estimates. Using data from the 2008 and 2014 Labour Force Surveys as a snapshot of recent EU migrants’ likelihood of claiming benefits suggests that between 16% and 14% of working EU migrants were claiming benefits within four years of their arrival. In gross terms this means that, if the four year restriction on benefits was in place in the four years prior to 2008 or 2014 (covering the peaks of migration flows), it would have impacted 100,000 (of a total gross inflow of 650,000 over the same period) and 96,000 (of a total gross inflow of 700,000 over the same period) EU migrants respectively. Therefore, these measures would change the decision making process about the costs and benefits of coming to the UK for a significant number of people.


Source: ONS Labour Force Survey and Open Europe calculations[3]

This is supported by new data published by the UK House of Commons Library yesterday.[4] According to the latest figures, as of March 2014, over 317,000 EU citizens are claiming tax credits in the UK at an annual cost of £2.2bn – up from 302,000 a year earlier. Similarly, according to unpublished UK government data, 150,000 EU migrants have been claiming in-work Housing Benefit costing £900m annually.

Furthermore, restricting access to benefits for up to four years could have a significant impact on the decisions of EU migrants to come to the UK to perform low-skilled or low-paid work, in particular.

According to the Migration Advisory Committee, just over 40% of the EU migrant workforce in the UK is in low-skilled jobs. This compares to 32% for those born in the UK.[5] Therefore, given that evidence suggests this is where the wage impacts of migrants are most concentrated and the likelihood of receiving in-work benefits is higher, the impact of the policy would be biggest for this type of migration and help to allay the concerns of many British voters about low-wage EU immigration. 

Is it fair?

On the point of ‘fairness’, it is only right that EU migrants are able to gain access to the UK’s benefits system once they have contributed to the UK economy and public finances for a substantial period. The polling evidence suggests that UK voters think that migrants should have full access to the UK welfare system after they have contributed.

At the same time, it is hard to justify to domestic electorates in economic and social terms why migrant workers should be immediately entitled to income support paid for by their new host country. Cameron’s proposal puts the UK in line with contribution-based systems on the continent – rather than bucking the trend in the EU, the UK is actually joining it through these reforms. It is also important to remember that tax credits are a social policy – targeted to get people back in to work. Free movement was never meant to cover unrestricted access to other countries’ social policies.

Is it legal and achievable?
This proposal would require negotiation at the EU level. EU rules already allow national governments to differentiate between EU migrants and their own citizens when it comes to accessing out-of-work benefits. Applying a four-year residence requirement for in-work benefits would simply be about extending that principle.

In early November, Open Europe and LSE Professor Damian Chalmers published a proposal for how restricting access to in-work benefits could be achieved via a new EU Directive tying welfare to national citizenship without having to change the treaties. David Cameron said today that the entire package he announced would require a treaty change and this might well suit him politically.

The proposal would not end the basic right to work anywhere in the EU – for UK and other nationals alike – and therefore does not fundamentally challenge the right to free movement – this should assuage both the European Commission and key national capitals. Ultimately, this will come down to political will – the EU has shown on many occasions that when the chips are down a pragmatic solution can be found if there is a political necessity.

David Cameron was right to avoid calling for an ‘emergency brake’ or cap on EU migration
David Cameron was right to avoid pledging an ‘emergency brake’ or cap on EU migration as it would be very difficult to codify objective criteria for pulling an emergency brake – particularly any that apply to the UK’s current situation. The UK economy is booming, unemployment is falling, EU migrants have high employment rates and the UK takes less EU migrants per head than several other EU member states. This would make an emergency brake very difficult to negotiate in Europe.[6]


Source: Eurostat

An emergency brake would be targeted at flows of new EU migrants not the existing stocks. UK Ministers have previously spoken about the need to manage “destabilising flows” – however, this remains a vague term that could mean many different things. Pinning down what would constitute a destabilising flow could prove incredibly tricky. If the bar is too high, the mechanism will never be used. If too low, the brake would become a long-term rather than temporary measure – a de facto limit – and be tremendously hard to negotiate in Europe.

Furthermore, at the very best a brake would only be temporary and would therefore only delay flows rather than actually reduce them – there would have been a risk of repeating the mistake of the net migration target and raising expectations that cannot be met. In the end, a brake is a sticking plaster over a larger problem. These reforms tackle long term underlying incentives to try and solve the issues at their source.

Notes for editors:

1) For more information, please contact Mats Persson on 0044 (0)779 946 0691, Stephen Booth on (0)7881 625 889 or the Open Europe office on 0044 (0)207 197 2333.

2) Open Europe is an independent think-tank calling for sweeping reform of the European Union with offices in London and Brussels, and a partner organisation Open Europe Berlin. Its supporters include: Lord Leach of Fairford, Director, Jardine Matheson Holdings Ltd; Lord Wolfson, Chief Executive, Next Plc; Sir Simon Robertson, Deputy Chairman, HSBC Holdings Plc; David Frost CMG, Chief Executive, Scotch Whiskey Association; Hugh Sloane, Co-Founder and Chief Executive, Sloane Robinson; Sir Stuart Rose, former Chairman, Marks and Spencer Plc; Jeremy Hosking, Founder, Hosking & Co Ltd; Sir Henry Keswick, Chairman, Jardine Matheson Holdings Ltd; Sir Martin Jacomb, former Chairman, Prudential Plc; Lord Sainsbury of Preston Candover KG, Life President, J Sainsbury Plc; David Mayhew, former Chairman, JP Morgan Cazenove; Tom Kremer, Chairman, Seven Towns Ltd; Michael Freeman, Co-founder, Argent property group.

For a full list, please click here:
http://archive.openeurope.org.uk/Page/Supporters/en/LIVE


[3] These figures are produced using a number of metrics from the Labour Force Survey including, ‘year of first arrival in the UK’, ‘country of birth’ and whether respondents in work or of working age are claiming ‘state benefits or tax credits’. Combined this gives a rough picture of the percentage of EU migrants claiming in work benefits. These proportions are then applied to the gross flow of EU migrants.

[4] House of Commons Library, ‘Statistics on migrants and benefits - Commons Library Standard Note’, 27 November 2014: http://www.parliament.uk/business/publications/research/briefing-papers/SN06955/statistics-on-migrants-and-benefits

[5] Migration Advisory Committee, ‘Migrants in low skilled work’, July 2014: https://www.gov.uk/government/publications/migrants-in-low-skilled-work

[6] Open Europe blog, ‘Why Cameron should stay clear of an 'emergency brake' on EU free movement’, 27 November 2014: http://openeuropeblog.blogspot.co.uk/2014/11/why-cameron-should-stay-clear-of.html

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