'Benefit tourism' is a red herring but welfare and low-income migration are inextricably linked

Today’s UCL report on the fiscal impact of migration to the UK has understandably provoked a lot of interest.

The top line findings are that:

• Between 1995 and 2011, migrants from EEA countries made a positive fiscal contribution over that period of more than £4bn, while those from non-EEA countries made a negative contribution of £118bn, compared to an overall negative native fiscal contribution of £591bn.
• The positive net fiscal contribution of recent immigrant cohorts (those arriving since 2000) from the A10 (the ten Central and East European EU member states that joined since 2004) amounted to almost £5bn, while the net fiscal contributions of recent European immigrants from the rest of the EU totalled £15bn. Recent non-European immigrants’ net contribution was likewise positive, at about £5bn. Over the same period, the net fiscal contribution of native UK born was negative, amounting to almost £617bn.

The obvious conclusion to draw from such studies is that the economic case for EU migration is clear and that ‘benefit tourism’ is simply a myth in the immigration debate (as others point out, there are social and economic arguments for and against migration). Open Europe has consistently sided with those who argue that on net, EU migration is positive for the UK, also from a purely transactional point of view.

Why then the focus on EU migrants’ access to welfare?

We and others have suggested that the Government should prioritise this as an issue for negotiations on the reform of EU free movement - rather than seeking to impose caps on the number of EU migrants or end free movement. Not because we think the majority of EU migrants are ‘benefit tourists’ but because that, unlike many other EU states, the UK offers effective income support to low-paid migrants. This creates some unintended consequences.

Again, at the aggregate level, free movement brings economic benefits. But the aggregate net benefit masks net losers (similarly, there is no such thing as a typical EU migrant – they perform different jobs, earn different wages and, if they are entitled to claim welfare, may not do so). Nevertheless, it is the duty of governments to come up with policies that mitigate the effect on those who might lose out from migration.

The labour market is the obvious area where the impact of migration is felt differently. The evidence overwhelmingly supports the view that low-skilled and low-wage workers can be adversely affected in the form of greater competition for jobs and a depressing effect on wages, even if the magnitude of this tends to be overstated. Higher-paid workers tend to gain.

This is where welfare does come into it – particularly for a country such as the UK which supports low incomes with fairly generous levels of income support in various forms. ‘Benefit tourism’ is indeed a red herring, in the sense that the vast majority of migrants move to work, not to ‘sponge off the state’. However, as our recent pamphlet argued, it is hard to justify to domestic electorates in economic and social terms why low-paid migrant workers should be immediately entitled to income support paid for by their new host country. These relaxed rules on access to state top-ups not only act as an extra incentive to migrate into low-income jobs, they prevent national governments from targeting these policies at their own citizens.

Many have suggested that reform to EU access to welfare rules is simply about tackling ‘abuse’ and ‘welfare tourism’. This not only stigmatises migrants, the vast majority of whom do not ‘abuse’ the system but simply abide by the current rules, it devalues the fundamental point – which is that it is probably not politically sustainable for national governments, in some instances from the get-go, to subsidise low-income migration via their welfare systems.

Two additional points. First, such a system need not mean that EU migrants are left to fend entirely for themselves, only that like in most other EU countries, benefits are tied to contributions through employment. For example, non-EU migrants who have a right to live in the UK but 'without recourse to public funds' are entitled to basic safety net benefits tied to their National Insurance contributions, but not income support. There are also discussions to be had about raising the floor for working conditions in general, including revisions to the minimum wage.

However, secondly, the UK should also be aware of the trade-offs involved. Fewer EU migrants and higher wages - if that is the objective - could well make the UK a less competitive place.

German 'crackdown' on EU citizens’ access to benefits: what does it involve?

The issue of how to balance EU free movement and the rights of member states to control their welfare systems has been a long running issue, one which several countries (not only the UK) are struggling with. We've previously reported about how the influx of EU migrants has caused problems in Germany, prompting the grand coalition to commission a review into the issue.

In March, we reported on and analysed the key recommendations of the interim version, and now it appears the final version will be adopted by the German cabinet later this month. According to FAZ, here are the key points, which are virtually unchanged from the draft version:

• Limiting the period in which EU citizens can be registered as jobseekers to six months, after which they are obliged to leave the country if they are still unemployed. This is similar to the UK's current approach, although David Cameron announced last month that this would be toughened.
• Banning any EU citizens found guilty of “abusing or defrauding” the German welfare system from re-entering Germany for a period of five years. How easy this will be to enforce in the Schengen border-free zone is questionable.
• Making it harder to export child benefit abroad by demanding additional documentation and changing domestic taxation rules. David Cameron has also made this a priority and it remains unclear whether limiting payments to working migrants' children who live abroad is permissible under EU law.
• In addition, German municipalities are to get additional financial assistance from the government to cope with the effects of an influx of migrants to help cope with extra pressures on local services.

This 'crackdown' comes at an interesting time for two reasons. Firstly, today's Bild reports, according to new figures from the German Federal Employment Agency, the number of EU citizens from Greece, Spain, Portugal, Italy and the ten Central and Eastern European member states claiming unemployment benefits in Germany has for the first time exceeded 300,000 after going up by 53,216 (21.6%) in April compared with April 2013. Secondly, confidence in the German economy is on the decrease which could add political momentum to those who want to further restrict free movement.

Hungarian Commissioner says anti-immigration sentiment in Europe is a "non-issue" - days after a neo-fascist party gets 21% of the vote in Hungary

A bigger threat to the EU
than the UK's 'right to reside test'?

The Barroso Commission's term is rapidly coming to an end and Viviane Reding and Laszlo Andor are neck and neck in a pulsating contest for who will claim the wooden spoon - the award for worst Commissioner. Reding held the lead for a long time but Andor may have just caught up after his comments about immigration at an event yesterday on engaging the youth in EU politics.

According to EurActiv, when asked by an audience member about the rise of anti-immigration in EU member states, specifically towards Bulgarian and Romanian nationals, Andor replied that this was a “non-issue” raised mainly in the UK and Denmark, who were not founding members of the EU. He went on to say that:

“Discussions there are really annoying because they are discussing on non-issues like benefits tourism which is largely a myth.”

Leaving aside the extent of so-called benefits tourism - which we can debate - is a Commissioner from Hungary really saying that anti-immigration sentiment isn't a problem? A bit rich given that an outright fascist party - Jobbik - won almost 21% of the vote in last weekend's Hungarian parliamentary elections, a higher vote share for a similar party than in other EU country, and an increase from around 16% in 2010. Remember, this is a party that even Marine Le Pen from Front National has refused to cooperate with as she considers them to be too nasty.

There are plenty of unpleasant parties around Europe but aside from Greece's Golden Dawn, Jobbik really are in a league of their own. Despite running a more restrained and professional campaign, the party is at its core fundamentally anti-Semitic and anti-Roma, espousing a Hungarian nationalism that sees the inter-war dictatorship under Miklós Horthy when the country was aligned with Hitler and Mussolini as a source of pride. The party also has strong links with fascist paramilitary groups that have been involved with violent street clashes with Roma.

In 2012, the party's deputy parliamentary leader Márton Gyöngyösi infamously argued that

“I think now is the time to assess…how many people of Jewish origin there are here, and especially in the Hungarian parliament and the Hungarian government, who represent a certain national security risk for Hungary.”

The party's 2010 election manifesto meanwhile claimed that:

"The coexistence and cohesion of Magyar and Gypsy is one of the severest problems facing Hungarian society... a segment of the Gypsy community strive for neither integration, nor employment, nor education; and wish only that society maintain them through the unconditional provision of state benefits... certain specific criminological phenomena are predominantly and overwhelmingly associated with this minority, and that as a result such phenomena require the application of fitting and appropriate remedies."

Given their general outlook we imagine Jobbik wouldn't be too keen on large scale EU migrations into Hungary (other than of ethnic Hungarians from bordering countries which they have actively called for).

It is frankly ludicrous for Andor to single out the UK and other member states struggling to address the political and economic ramifications of unanticipated large scale immigration for criticism when a full blown fascist revival appears to be underway in his own backyard.

New rules on access to benefits: another UK legal stand-off with the Commission?

The Government has today announced the details of the "minimum earnings threshold" that will be applied from 1 March to EU migrants seeking to claim certain benefits in the UK. The plan was first outlined in David Cameron's FT article last year, and the DWP has today revealed the details.

Under the new system, EU migrants will have to demonstrate they have earned around £150 a week - the level at which employees pay National Insurance contributions - for three months in order to qualify for "worker" status, which opens the door to certain benefit entitlements. Jobseeker's will need to wait three months before getting income-based jobseeker's allowance and, after the introduction of new rules on April 1, they will be ineligible for housing benefit. Those deemed not economically active would need earnings above income support levels and comprehensive sickness insurance, to be eligible to claim child benefit or child tax credit.

In our briefing following David Cameron's article in November 2013, we noted that the proposal for an earnings threshold had the potential to intensify the legal stand-off between the Government and the European Commission over the rules on access to benefits.

The Telegraph today quotes a Commission spokesman as saying:

The Court of Justice's case law makes clear that part-time workers, trainees and au pairs can be classified as 'workers', provided their activity has an economic value and is genuine and effective. This case-law makes clear that a definition of a worker according to the amount he or she earns is not compatible with EU law.

This is only an initial reaction and the Commission cannot take further action until it has reviewed the proposals. But, as we understand it, the Government will argue that it is not illegal because the threshold simply acts as an 'alarm bell' at which point claimants will face a fuller assessment of whether their work is "genuine and effective", with the possibility of being denied worker status.

This extra step means that the threshold is not an automatic criteria and should therefore fulfil the EU requirement that each applicant be assessed on their individual case.

What the Commission will make of this argument we cannot say but, as we have argued before, rather than the constant battling between the Commission and member states on this issue (it's not just the UK), the rules on access to welfare need proper reform, with a much stronger link between access to welfare and an economic contribution to the host country.