Jonathan Portes / Feb 2016
Donald Tusk, president of the European Council, and David Cameron, the British prime minister. Photo: European Union
Free movement of workers within the European Union is certainly not the most important issue in the current negotiations between the UK and the rest of the European Union. But it is by far the most politically charged, and the easiest for most people to understand. So what does the deal currently on offer mean, both for the UK and the EU.
Perhaps the most important point is that there is no change to the basic principle of free movement (although some of the changes to the rights of third country nationals married to EU citizens chip away at the edges). Indeed, President Tusk's letter emphasised this point: fundamental principles remain unchanged, saying that
On social benefits and free movement, we need to fully respect the current treaties, in particular the principles of freedom of movement and non-discrimination."
However, the proposals do give the UK much of what it has been asking for in terms of restricting benefits. The "emergency brake" proposal would mean that:
- the UK could request, on the grounds of an "exceptional situation", the ability to restrict in work welfare benefits to EU migrant workers for up to four years.
- But the limitation would be gradual - that is they wouldn't be completely excluded for four years, but would get progressively more access over time as their "connection to the labour market" grew. So, as this stands, this is definitely not a total exclusion from in-work benefits for four years.
- the measures would be time limited - with the time limit, and that of any possible extension, undecided as yet.
- The Commission would make the proposal on the basis of the UK's request; the Council would decide
The UK would have to justify its proposal by showing that:
exceptional situation exists on a scale that affects essential aspects of its social security system, including the primary purpose of its in-work benefits system, or which leads to difficulties which are serious and liable to persist in its employment market or are putting an excessive pressure on the proper functioning of its public services.
Of course, there's an obvious problem here. There isn't a single economist in the Commission - or indeed in the UK government, for that matter - who really believes that free movement is leading to the type of "exceptional situation" described here. After all, London schools are outperforming the rest of the country by miles, partly because of immigration. NHS waiting times are actually lower in areas with higher immigration. And EU migrants pay more into the welfare system than they take out. As for the labour market.. Crisis, what crisis?
But - and this illustrates the Alice-in Wonderland nature of the whole debate - the Commission would precommit itself to approving the proposal, evidence or not:
The European Commission considers that the kind of information provided to it by the United Kingdom shows the type of exceptional situation that the proposed safeguard mechanism is intended to cover exists in the United Kingdom today. Accordingly, the United Kingdom would be justified in triggering the mechanism in the full expectation of obtaining approval.
The problem here for the UK is of course that the European Parliament would have to approve the proposal as well - and , since the Parliament is not bound by the decision, they might be less comfortable simply ignoring the evidence.
But if some version of this proposal is indeed eventually implemented, what are the likely impacts? The short answer is that this is likely to have some, but not much, impact on benefit receipt by EU migrants, but rather little on immigration.
On benefit receipt, we know that relatively few EU migrants claim benefits in the first couple of years after arrival. It is likely that considerably more do so after that, as they learn about the UK system and, crucially, have children. Given that the text above suggests that access would have to be progressively extended over the four-year period, what might happen is simply that the legal position comes closer in line with the reality, of gradually increasing use of the benefit system as migrants integrate into the UK labour market and society more broadly.
The impact on immigration flows is less certain but is highly unlikely to be substantial. There is no evidence the UK benefit system is a significant driver of migration from within (or without) the EU, while the availability of jobs and relative wage levels clearly are (and of course increases in the National Minimum Wage may make the UK even more attractive to lower wage workers). Research has shown that awareness of the UK in-work benefit system in source countries is low, and the low claim rates of new migrants also suggest benefits are not a major factor. So while one cannot exclude that there may be some impact, it looks highly unlikely to be quantitatively significant, and will be swamped by other factors - a recovery in the eurozone economy and labour market will have far more impact on migration flows.
So, if the proposals will result in only modest changes to benefit receipt by EU migrants, and even less to migration flows, what's the point? Well, from a political point of view, perhaps the real significance of these proposals is precisely that they do not challenge the basic principle of free movement, and will not make any significant difference to migration flows. Why does that matter? It matters because a frequent complaint of those in the UK who oppose either European migration, or EU membership itself, that somehow the British people were never consulted on whether or not we had "open borders" with the rest of the EU. Whatever the truth of that claim, it is one that has considerable resonance. But after the UK referendum, it will no longer be true. If the UK votes to stay in, it will have done so in full knowledge that staying entails a commitment to free movement of workers in the EU, both in principle and practice, and the resulting migration flows. If we vote to leave, we will have rejected that. Either way, the question will be settled.