The basic idea is that instead of putting an outright cap on the number of EU migrants who can come here, David Cameron should look elsewhere: Let free movement and its benefits stand, but bring back control over who can access in-work benefits in the UK, restricting EU migrants’ access to tax credits and social housing for an initial period.
It would reduce pressures on both UK wages and local services. At present tax credits provide a big boost to low income wages – sometimes doubling a workers wage. Under OE’s proposal, in some cases, without access to in-work benefits EU migrants’ take home pay would therefore drop below that which they would receive in their home states, meaning that the move would no longer make financial sense. It would also redefine EU free movement to mean the movement of “workers” – not access to benefits – as originally intended. We have a lot of figures to back up our argument that tax credits contribute to the income pull factor to come to the UK – and an annex which elaborates at length about into the Spanish, Bulgarian and Polish income tax, insurance and welfare systems (all done in-house, mind you, Cyrillic alphabet and everything).
A few quick points: First, we clearly note the trade-off: free movement is a net benefit to the UK economy and this would be a way to save it. On Today this morning, John Humphreys tried to frame the debate as us against Ken Clarke, “being on opposite ends of the debate”. The opposite end of the debate would be those who want to end free movement. Our proposal is a pragmatic one which aims to strike the right balance between an open economy and democratic control.
Secondly, Clarke’s substantive point of criticism was that the proposals would be “totally discriminatory”. Why should an EU migrant working in the UK get less, in benefits and tax credits, than a UK worker doing the same job?
- As we argued on Today, the UK’s system is much less contribution-based than most other EU countries. The UK can choose to either move to a full contribution-based system, or change EU rules to better accommodate for 28 different social and welfare systems.
- The UK’s tax credits are effectively social policy – not tax policy. There is no direct link between how much tax you pay and how much you get back in tax credits. They were designed to help UK workers back into work – it is not discrimination to say that these benefits, designed to help make work pay for UK workers, should not be open to the entire EU workforce from the outset. Free movement was never meant to be mutual and unrestricted to other countries’ full social policies.
- If our proposal is discriminatory, taking the argument to its logical conclusion, should we extend tax credits to migrants from outside the EU as well from day one? We look forward to hearing Ken Clarke or others making that particular argument.
This is a fair proposal to try and square the principle of free movement with differing social welfare systems across the EU, and the fact that the UK’s system is far more open than other systems - this proposal will help to reinstate some trust in free movement.
Responding to our report on Today, the Polish ambassador to the UK, Witold Sobkow said that the report has a “sound analytical basis” but argued that migrants don’t make a sophisticated spreadsheet analysis of income differentials before moving to the UK. That may or may not be the case but they will consider in broad terms how much better off they – and in many cases their families – will be by moving to the UK as migration is not a decision most people make lightly.
It stands to reason that state support will be part of that equation even if the exact level of things like housing benefit is very hard to pin down before moving. As our analysis shows, under our proposals, it would no longer make financial sense for someone to move from the average Polish wage to earn the UK minimum wage due to the withdrawal of the right to immediate in-work benefits – it stands to reason that this will impact on potential migrants’ decisions. But without, of course, taking away the basic right to come here to work.