What impact will Cameron’s EU free movement changes actually have on the ground?

We’ve laid it out in our response today, but in an attempt to elucidate things we’ll go into a bit more detail in this post. In addition to the general 'fairness' discussion - making sure that there's a link between what people put in and what they take out - the debate is now centred on the practical impact of the proposals.

In a twitter discussion we had last week with Michael O’Connor and Jonathan Portes on the number of EU migrants effected by these sorts of curbs, they seem to claim that around 10% of "Eastern Europeans" will be affected. The conclusion they seem to draw is that the proposal won't make that much of a difference.

To reach that figure they seem to simply take the percentage of Eastern European's claiming benefits in 2013 - it does not seem to be based off the data over four years or compared over time to see if this snapshot is representative. The data available is unfortunately pretty bad, but there's enough data to look over time, rather than a single year.

 

As we have laid out in our response today, we think these measures will hit between 14% and 16% of total EU migrants - one in seven EU migrants. This is shown in the table above and taken from the average of the final four years percentages in the graph below.  As we have noted before, its obvious and logical that the longer migrants stay in the UK the more benefits they claim (as they have more children etc) - but from that it's hard to draw the conclusion that the impact is insignificant.

As a share of gross flows (shown in graph below) this will likely impact around 100,000 people over the four year period. This is based on flows from the four years before 2008 and 2014.

Is this a significant impact?  Depends on what you want to achieve. If you want to end free movement, it's not. If you want to put a cap on free movement, it's not enough either. That's not what we want, however - we think free movement should stand. That's the point.

If, however, you want to target the one area that seems to be of the most concern to the UK with respect to EU migration - the low-wage sector - then 100,000 over four years matters. This number will be largely at the low-wage end of the labour market - since these are the workers that claim significant amounts of in work benefits. In other words, as we've said all along, this is a targeted policy, intended to take away the de facto taxpayer-backed subsidy to perform low-paid jobs which does not exist in most other EU countries.

It's impossible to put a firm number on how many people will decide not to come due to this measure. We've provided plenty of figures showing how this would take away the incentive in many cases to move from a minimum or an average wage in some parts of Europe to a minimum wage in UK, using in-work benefits as effective top-up, in turn making the move financially attractive in the first place. In other cases the de facto income gap between the sending state and the UK will be massively reduced.

Taken together, and as anyone who has moved across borders will know, changes in the cost of living in the country of destination will feature in any decision to make the move in the first place. Perhaps not in a detailed spreadsheet kind of way, but it does clearly feature.

The volume dimension is one part of the the package - and it shouldn't be over-stated. However, it certainly shouldn't be under-stated either. Unless, of course, you want to end free movement. 

Labour turns its attention to restricting EU migrants' access to in-work benefits

Iain Duncan Smith's opposite number, Labour's Rachel Reeves, has written an interesting piece on EU migrants' access to welfare for the Mail Online, in which signals an important shift in Labour's policy.

Last week we noted that IDS had set out that he wanted to restrict EU migrants' access not simply to out-of-work benefits but also in-work benefits such as tax credits - something that our Research Director Stephen Booth and LSE Professor Damian Chalmers proposed in a recent Open Europe pamphlet.

Reeves sets out three proposals to reform the EU rules on access to welfare. Firstly:

"We believe that it is right to extend the period that EU jobseekers need to live and support themselves in the UK before claiming out-of-work benefits from three months to two years."

This had been hinted at by senior Labour figures before. But, for the first time, Labour have said they also want to address in-work benefits:

"We must also look at the role of in-work benefits. It is far too easy for employers in Britain to undercut wages and working conditions by recruiting temporary workers from elsewhere in Europe on very low pay and with no job security, knowing that the benefit system will top up their income." 

"So while some have said that we cannot negotiate changes to benefits paid to people in work, I am determined to look at how we can deliver reform in this area too."

As we have noted before, restricting access to this low-wage welfare supplement could reduce the incentive to migrate to the UK for the lowest paid jobs as the UK's system of in-work benefits can make a significant difference to the incomes of the lowest paid.

And thirdly, Reeves has said:

"We will work with European countries to end the absurdity of child benefit and child tax credits being claimed for children living in other countries."

This is near unanimous consensus among all the main parties on this point.

The change in stance on in-work benefits is significant and would have the biggest impact, and it is therefore interesting why this wasn't given top billing in the article?

What are David Cameron's options on EU immigration?

Following reports that David Cameron is considering a new announcement on how he would renegotiate EU free movement, potentially considering an "emergency brake", we have set out in a short briefing what his potential options are.

Here are the key points:

The debate about internal EU migration has two dimensions. Though inter-linked they should be treated separately. “Fairness” – who can access what benefits and when; and “volume” – how many migrants come to the UK every year. David Cameron is reportedly considering moving from addressing fairness to making a demand to curb the numbers of EU migrants to the UK.

There is substantial support at the EU level to give national governments greater control over access to their welfare systems and doing so would not require treaty changes but a qualified majority vote among governments and the agreement of the European Parliament.

Any move to limit the numbers of EU migrants coming to the UK would most likely require treaty change (with the possible exception of an ‘emergency brake’) and therefore the unanimous agreement of other EU governments. It is currently unclear what exactly – if anything – Cameron might ask for on volume, but he may have three broad options, which in order of increasing difficulty to secure EU agreement are:

1. An ‘emergency brake’ triggering temporary controls on EU migration if the flow is considered ‘destabilising’, too large and/or concentrated;
2. Permanent quotas on EU migrants;
3. A points-based system, similar to that which exists for migrants from outside the EU, differentiating between “skilled” and “low-skilled” migrants.

There are a number of questions around how an ‘emergency brake’ could be organised practically, but if this is David Cameron’s top EU negotiating priority he may just achieve it, given that there are precedents for brakes in other areas in the EU treaties and there is increasing awareness across the Continent that public concern about free movement is contributing to the EU’s unpopularity.

Whatever the merits of the proposal, as a domestic political strategy, it is unclear whether an ‘emergency brake’ would be enough to see off UKIP – as Cameron could still be accused of failing to secure full control over Britain’s borders and migration policy – although it may reassure 'swing voters'. Therefore, Cameron risks spending a lot of political capital abroad for limited political return at home.

Securing either option 2 or 3 would be an extremely difficult task as it would involve fundamentally rewriting the EU treaties and unpicking one of the founding principles of EU membership. There is likely to be little or no political appetite for such a move among other EU countries. The Swiss experience shows that, even outside the EU, measures to limit EU migration could result in threats from Brussels of reduced trade access to EU markets.

This is not to say that EU rules on free movement can ever be changed, but rather that this is one area where Number 10 will find it hard to get away with creating the headline first, and the content later. Given the domestic sensitivity of the issue and how deeply it strikes at the heart of existing terms of EU membership, successfully negotiating change requires a well thought out plan that has domestic and European level buy-in.

David Cameron and his Ministers continue to tread fine line on EU migration reform

UPDATE: The Prime Minister has now given his conference speech. This is the passage on EU migration:

"Immediate access to our welfare system, paying benefits to families back home, employment agencies signing up people from overseas, not recruiting here, numbers that have increased faster than we in this country wanted and at a level that was too much for our communities and for our labour markets. All of this has to change and it will be at the very heart of my renegotiation strategy for Europe. Britain: I know you want this sorted, so I will go to Brussels, I will not take no for an answer and when it comes to free movement I will get what Britain needs."

So, no new policy announcement today. However, David Cameron's reference to the "numbers that have increased" and "at a level that was too much for our communities" leaves the question we posed below hanging. He could argue that tackling migrants' access to benefits (particularly in-work benefits) will help with the numbers, as it could reduce the incentive for some to migrate, particularly those at the lower end of the job market. Will he be prepared (or be allowed) to stop there?

Original post: The Times and the Mail today both feature stories on the increasing pressure on David Cameron to take a stronger stance on migration from the EU.

The Times suggests that senior figures within his party are calling on him to use his renegotiation to explore the introduction of quotas on migrants from existing EU member states. It quotes London Mayor Boris Johnson saying that

“We all want change, we all want a renegotiation. We want sensible control of the numbers of people coming in. I think you would agree that it is the right and duty of every state to have some idea of how many people want to settle in its boundaries, what jobs they propose to do there, and how much they cost the local authorities. Isn’t that fair enough?”

As we have noted before, the free movement debate is about fairness and volume. So far, David Cameron and his Ministers have concentrated on the former - rules on migrants' access to benefits can be changed through secondary EU legislation via QMV and co-decision with MEPs and there is widespread support for addressing the issue among like-minded countries in Northern Europe. David Cameron is also on the record saying that he wants new conditions placed on migrants from countries that join the EU in future. However, the latter issue, addressing the numbers of migrants coming from existing EU member states is much tougher - it means addressing what is seen as a fundamental tenet of the EU and altering it would require unanimous agreement, almost certainly via treaty change.

Home Secretary Theresa May and Foreign Secretary Philip Hammond have both been quoted on the subject today, but both have stuck to line that an 'emergency brake' or measures to tackle the numbers of migrants would apply to new members of the EU, not existing ones.

May said:

"This is an area where David Cameron and I have said we need to look to the future to talk about the rules, particularly for countries coming into the EU in the future, and putting some sort of brake on their access to full free movement. For example, one idea we’ve suggested is they shouldn’t have full free movement rights until their GDP, their economy, is at a certain level compared to other economies within the EU."

Similarly, Hammond told an Open Europe fringe event that:

“It isn’t going to be enough just to look at benefit abuse...We are going to have to look at how we accommodate future new member states with the implementation of free movement, future new member states and how we restrict them. We are going to have to look at how we deal with destabilising flows."

There has been speculation that Cameron will address the issue in some way in his conference speech today, it will be interesting to see how he treads what is an increasingly fine line.

Latest UK migration statistics likely to further turn up political heat on EU migration

The ONS has this morning released its latest long-term UK migration statistics and they are likely to increase the intensity of the spotlight on EU migration - if that was possible. The headline statistics are:

• 560,000 people immigrated to the UK in the year ending March 2014, a statistically significant increase from 492,000 in the previous 12 months. Two-thirds of the increase is accounted for by immigration of EU citizens (up 44,000 to 214,000).
• 28,000 Romanian and Bulgarian citizens immigrated to the UK in the year ending March 2014, a significant increase from 12,000 in the previous 12 months.
• This contributed to overall net migration rising to 243,000 from 175,000 the previous year, way over the totemic 100,000 figure targeted by Conservative ministers.
• It is also interesting to note that the decline in non-EU migration (the part the Government can control) seems to have stopped. The latest estimates for the year ending suggest that 265,000 non-EU citizens immigrating to the UK, a slight increase but not a statistically significant change, from 246,000 in the previous year. Net migration of non-EU citizens increased from an estimated 145,000 in the year ending March 2013 to 162,000 in the year ending March 2014.

Source: ONS

These estimates show that 54%, 30% and 14% of total EU immigration was accounted for by citizens of the EU15 (the 'old' EU member states), EU8 (central and eastern member states that joined in 2004) and EU2 (Bulgaria and Romania) respectively. Overall net migration of EU citizens was 131,000, a statistically significant increase compared to 95,000 in the previous year.

This highlights, once again, that a large part of the recent increase in EU migration is being driven by migration from the more established EU member states, presumably a large number of them looking for an alternative to the high levels of unemployment in the countries worst affected by the eurozone crisis.

In contrast, migration from the 2004 accession states has been relatively stable. Net migration from these countries was 41,000, not a statistically significant increase compared to the 34,000 in the previous year. For Bulgaria and Romania, it looks as though the ending of transitional controls on access to the UK labour market in January 2014 could have had some impact with a 12,000 increase in migration on the previous year (although we should be careful since this data mostly reflects 2013), and almost 80% of EU2 citizens arriving for work-related reasons.

Yesterday saw the German government announce tough new domestic rules on EU migrants' access to benefits, which closely mirror those announced by David Cameron late last month. Downing Street has welcomed the German proposals and added, "Clearly there is now a case for looking at other things we want to do where we may need to change the [EU] rules". The question now is whether Cameron can muster enough European support to change the EU rules in this area sufficiently to satisfy public and political opinion in Britain.

Fairness vs Volume: EU free movement debate hotting up in upper echelons of the Tory party

The Times yesterday noted that pressure among some senior Tories is building on David Cameron to prioritise the negotiation of 'curbs' on the free movement of persons. The word 'curb' is used often in this debate, but it is not always clear what it is that people are demanding be 'curbed'.

There are essentially two issues here: one about fairness - fair, sound and transparent rules around who can access what benefits and when. And one about the level of EU migration - volume. The first is what David Cameron and Downing Street have been trying to address by tightening EU migrants' access to out of work benefits. As we've noted before, more could certainly be achieved through amending legislation at the EU level.

Other issues that arguably fall into this category are access to the UK's system in-work benefits, such as working tax credits, which are meant help to boost incomes at the lower end of the labour market and ease the transition from out of work benefits. However, the UK is currently unable to regulate EU migrants' access to these under the EU's current non-discrimination rules and the definitions of an 'EU worker' set down by EU courts. This is another area that could potentially be addressed to some degree by amending secondary legislation.

But what is clear is that an increasing number of Tory 'big beasts' - Iain Duncan Smith, Theresa May and Boris Johnson - are looking to address the second issue: public concerns about the volume of EU migrants (the latest stats showed a marked increase in the number of central and eastern EU workers). This is a much taller ask and would almost certainly require treaty change and therefore unanimity. This does not make it entirely impossible but certainly more difficult than addressing concerns about fairness. Remember, this involves amending one for the most fundamental principles of the EU treaties.

Another massive question is how, exactly, strengthened control over the volume of EU migration could work in practice.  There have already been suggestions that the Home Office is considering options that fall under this category. In May 2012, at the height of the Greek social and economic crisis, it was reported that Theresa May was looking at whether emergency immigration controls could be applied if required by exceptional circumstances. Another proposal, put forward by David Goodhart, is that governments should be able to introduce qualifications or restrictions on free movement "if the EU inflow breaches a cap of, say, 75,000 in a single year".

In any case, this will be a key debate within Tory ranks leading up to the potential 2017 EU referendum.

Latest employment stats suggest no new 'wave' of Bulgarian and Romanian migration

The ONS has today released its UK labour market statistics for the period April-June 2014, which include the latest estimates of the number of EU migrants in the workforce. These are the key points:

• In total, there were around 820,000 more people employed in the UK than a year earlier, of which around 500,000 were UK born and 327,000 were non-UK born. 
• Of the non-UK born, 187,000 were from the EU and 140,000 from non-EU countries.
• The number of Bulgarian and Romanian born people employed in the UK stood at 153,000, up by 13,000 from the same period last year (a 9% increase), before transitional labour market controls were lifted.
• However, the numbers from other central and eastern European countries increased far more dramatically to 861,000, up by 178,000 from last year (a 26% increase).
• The number of migrants from the ‘old’ EU member states fell by 9,000 (a 1.2% decrease).

This is only one set of data and refer only to employment (not the same as migration figures, the latest batch of which will be released later this month), and it will be interesting to see how the figures match up.

Source: ONS

The chart above breaks down the share of EU born employed and shows that the group responsible for the biggest increase is the central and eastern European countries that joined the EU in 2004. The Romanian and Bulgarian share is up a little but, as we noted before, there has not been a major change since the lifting of transitional controls on 1 January 2014. Interestingly, the number of people employed from the 'old' EU 14 states has dropped slightly - the number of migrants from this group had been increasing as a result of the eurozone crisis. Is this a sign that this trend is slowing or reversing?

Government's Balance of EU Competences Review sets out need for reform - finally

Today, the UK Government has published the third batch of its reports reviewing the ‘Balance of Competences’ between the UK and the EU. We have noted before that many of the previous reports, whilst interesting on much of the detail, have for various reasons turned out to be rather disappointing and dodged the major questions facing Britain in the EU, so how do today’s tomes compare?

Most interestingly, the controversial, and much delayed, report on the free movement of persons has finally been published and, unlike many of the previous reports, it is much clearer about the Government's thinking in what is one of David Cameron's primary targets for renegotiation. The report, which was trailed in today's papers and quotes extensively from our submission to the consultation, which you can read in full here, makes the following points:

• "Whilst there is broad consensus that highly skilled migrants from the EU have been beneficial to the UK, there is less agreement regarding low skilled migration, with some arguing that gains for employers are offset by negative impacts on the lowest paid workers."
• "The scope of free movement rights has now expanded beyond their original intention, and is no longer limited to economic factors."
• "Successive judgments by the ECJ have interpreted the right to free movement set out in the Treaties and the Free Movement Directive broadly, with the consequence of expanding the rights of entry and residence which may be asserted in reliance upon them, and consequently restricting Member States’ competence in this area."
• Other concerns expressed were criminals' exploitation of the rules, the localised impact on public services, and falling public confidence in the concept of free movement.

Specifically regarding the existing rules on EU migrants' access to welfare, this is the key passage:

"The Government considers that now is an appropriate time to review the EU level rules with a view to modernisation and ensuring they are fit for purpose in the EU of today. The rules have evolved beyond the original scope as the EU has evolved and the interaction between rules on residence and social security coordination becoming increasingly complex. This complexity has led to an increasing number of challenges through the ECJ, creating uncertainty and, in the majority of cases, weakening the ability of Member States to determine how their systems operate."

"Without reform, legitimate public concern about how EU migrants access social security in other Member States is likely to significantly undermine support for the principle of free movement."

This is the most explicit any of the BoC reports has been about the need for reform and, while there is no settled policy prescription (the report discusses OE's and David Goodhart's reform proposals at length), the key issues have been clearly identified.

This is apparently the third iteration of the report, following several rounds of coalition ping-pong. Nevertheless, it highlights the degree of cross-party consensus on the need for reform of benefits rules - which Labour has also called for. It would however be intriguing to know what was cut in the various edits.

We will be leafing through the other reports published today and will return to them on the blog later this afternoon.

EU migration closes gap on non-EU migration into UK

The ONS has this morning published another set of updated migration figures. As always they make interesting reading with respect to EU migration - many eyes are on the figures for Romanians and Bulgarians in particular.

As the graph above shows, net immigration from the EU increased from 82,000 in 2012 to 124,000 in 2013. While non-EU immigration still accounts for a larger share of the total, the gap has narrowed significantly recently. This jump in EU migration has not been driven by an increase in one particular group, inflows from EU 15, EU 8 and Bulgaria and Romania have all increased.

Looking a bit deeper, it’s clear that these different groups of migrants have very different reasons for moving to the UK. As the ONS graph above highlights, the number of non-EU migrants moving to the UK for work has fallen steadily while those from the EU, and EU 15 in particular, have increased quickly. Furthermore, as the graph below highlights, work related reasons dominate EU migration but non-EU migration is now mostly driven by studying or family migration.

Perhaps the most interesting figure from all of this data though is the sharp rise in the number of Bulgarians and Romanians applying for national insurance numbers in the year up to March 2014 – which jumped by 7,000 and 29,000 respectively.  This is over the past year, not in a single quarter, so broadly fits with the previously released figures (which we analysed here) which showed that 29,000 workers from these countries had moved to the UK in the past year. So there's a gap between people from these countries who got a NIN on the one hand and who are working on the other. However, this doesn't necessarily mean that the 7,000 who make up the difference are on benefits (as the periods don't necessarily overlap).

In any case, as the ONS itself points out, the overall impact of removing transitional controls will not be clear for some time, will full data for 2014 not out till mid-2015. Still, Ukip and others are likely to run with these figures.

The gates are open but so far no flood

Official data from Office of National Statistics published this morning shows that the number of workers from Bulgaria and Romania have dropped from 144,000 to 140,000 since transitional controls were lifted for workers from the two countries on 1 January 2014. As we said all along, not quite the opening of the floodgates that some had predicted.

Nevertheless, this still represents an increase of 29,000 workers from Bulgaria and Romania year-on-year. And the quarterly numbers do not present a full picture on which to judge any longer-term change or pattern.

More broadly, the data shows that, while coming from a low base, EU employment has driven quite a lot of the recent increase in employment. In total, the number of  employed in the UK has increased by 741,000 year-on-year. Migrants from the Central and Eastern European 'EU 8' countries only account for 2.3% of total UK employment but, over the past year, workers from these countries have accounted for 15.5% of the increase in UK employment (see graph below).

It remains to be seen whether these figures will have any effect on the political debate about migration in the UK, particulalry from the EU. Annual migration (rather than employment) figures released later this month (potentially on European election day) are expected to show that EU migrants from the EU will outnumber migrants from non-EU countries for the first time - which has the potential to be politically explosive.

EU migrants' access to benefits: A cross-party concern in Denmark

We flagged up last week that the debate on EU migrants' access to benefits was kicking off in Denmark - potentially leading to a row with the European Commission.

New figures have been unveiled that will do little to assuage political tensions. According to the Danish Employment Ministry, government spending on unemployment benefits to migrants from Eastern and Central Europe has increased tenfold between 2008 and 2012 – from DKK 32 million to DKK 345 million.

The data prompted criticism from across the political spectrum - confirming that EU migrants' access to state welfare is very much a cross-party issue in Denmark.

Claus Hjort Frederiksen, a former centre-right Danish Finance Minister, commented: 

We need to discuss what kind of protection we're able to offer in these cases. It's not a problem that will disappear.

Nadeem Farooq, the spokesman of the governing centre-left Social Liberal Party, warned:

The figure has risen quite dramatically, so we must take it seriously. We cherish freedom of movement, which makes Denmark wealthier. But we're also prepared to introduce controls and the necessary safeguards.

Interestingly, a proposal by the left-wing opposition Red–Green Alliance to make sure that EU citizens also pay Danish social insurance contributions in order to create "a level-playing field to qualify for unemployment benefits" is being supported by the anti-immigration Danish People's Party.

Meanwhile, the European Commission has announced that it will take legal action against Finland, which has a similar welfare system to Denmark and will therefore be backed by the Danish government in the legal challenge. The Commission has said it hasn't yet had time to look properly at how the Danish system currently works and what is being proposed (check out our previous blog for more detail), but informally it has said that the newly proposed measures look "illogical".

This looks set to run and run...

EPP manifesto: EU migrants should be allowed to access benefits only if they've worked in the country where they live

At its Congress in Dublin on Friday (which also saw U2's Bono delivering a speech), the European People's Party (EPP) officially nominated Luxembourg's former Prime Minister Jean-Claude Juncker as its leading candidate for European Commission President.

More importantly, the EPP also adopted its manifesto for the upcoming European Parliament elections. You can read it in full here. We would just like to draw your attention on the following paragraph:

Free movement of people within the European Union is one of our greatest achievements together, and we are committed to ensuring it remains so [...] However, we are against social fraud - social benefits for EU citizens should only be available if they have worked in the country where they live.

This shows how, once a clear distinction between free movement of workers and free access to other EU member states' welfare systems is made, many are in favour of the former - but many are also wary of the latter.

The EPP includes over 70 parties from 40 different European countries. This suggests the UK is far from alone when it comes to a desire to reform the rules on EU migrants' access to benefits - or at the very least when it comes to admitting there is an issue at hand. Whatever the outcome of the European elections, this will be one topic that will not go away. The next European Commission and Parliament would do well to tackle it head-on, rather than skirting the issue.