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Intelligence > Immigration & Justice > Report > Policy Changer
Policy ChangerReport Immigration & Justice
Save EU free movement: Make it fair to keep it free
Rather than trying to put an outright cap on the number of EU migrants coming to the UK every year, David Cameron should seek to bring back control over who can access in-work benefits in the UK and restrict EU migrants' access to tax credits and social housing for a number of years. Under Open Europe's proposal, in some cases, the take-home pay of EU migrants without access to in-work benefits could drop below what they would receive in their home states – meaning that moving to the UK would no longer make financial sense for them.
Experts: Stephen Booth, Christopher Howarth
Report Influence
Open Europe was first to produce comparative estimates of the impact of restricting EU migrants' access to in-work benefits in terms of reducing the financial incentives for them to move to the UK.
In his key Immigration speech in November, David Cameron adopted a number of these Open Europe proposals rather than an emergency brake on EU migrants, which Open Europe had advised against.
Following his speech, David Cameron acknowledged that Open Europe's research into this area is compelling.
These Open Europe proposals have been adopted to varying degrees by all of the UK's mainstream political parties.
The aggregate economic benefits of EU free movement to the UK economy mask several challenges
EU free movement is a net benefit to the UK economy. However, the aggregate economic benefits mask several concentrated challenges, which are now undermining public confidence in free movement and the EU more broadly.
The evidence suggests EU migration keeps wages down for the lowest paid. This is often presented as an overall benefit, since it helps keep production costs low – which in turn makes the UK economy as a whole more competitive. However, downward pressure on wages is simultaneously cited as a challenge, since it has a disproportionate impact on native workers at the lower end of the pay scale.
This balance must be taken seriously and be constantly reviewed if free movement – and its benefits – are to stand democratically. The best way to address these challenges without ending free movement is to re-write the rules around migrants' access to benefits.
EU migrants' access to the UK welfare system: Why in-work benefits should be the focus of reform
EU migrants can access the UK's welfare system in two different ways:
1) Out-of-work benefits (including unemployment benefits): EU rules governing this specific area need to be changed to ensure fairness, but so-called 'benefit tourism' is in many ways a second order issue. EU migrants are far less likely to claim unemployment benefits than UK natives.
2) In-work benefits (including tax credits, housing benefit, access to social housing and the NHS): Unlike in the vast majority of EU countries, these benefits are non-contributory and universal in the UK. This is far more significant. EU migrants are slightly more likely to claim in-work benefits than UK nationals. Data show that EU migrants make up 5.56% of the UK workforce, but families with at least one EU migrant make up 7.7% of in-work tax credit claims.
Having to make in-work benefits immediately available to EU migrants effectively acts as an incentive or 'subsidy' for them to perform low-paid jobs in the UK – which does not exist to the same extent in France or Germany. It also prevents the UK from deploying tax credits specifically as an active employment policy targeted at facilitating the re-integration of unemployed UK natives back into the labour market.
Open Europe's proposal: How to save EU free movement by making it fairer
Under Open Europe's proposal to save EU free movement, national governments would be allowed to limit newly-arrived EU migrants' access to non-contributory out-of-work and in-work benefits, social housing and publicly funded apprenticeships for a certain period. After this qualification period, EU migrants would have full access to the welfare system of the host country. The exact period could be anywhere between one and five years, with somewhere in the middle (2-3 years) being the most politically feasible at home and abroad. The proposal would substantially decrease the income gap between the UK and the most common 'sending states', in turn reducing the financial incentive to come to the UK for low-income work.
The biggest overall impact of our reform proposal will be on those member states with large flows of migrants into low-pay employment in the UK. Our illustrative examples are therefore based on three EU member states to where this generally applies: Spain, Poland and Bulgaria. Individual reasons for migrating are various and complex, but our examples highlight the impact that our reforms could have on the financial incentives for the lowest-paid.
According to Open Europe's estimates, 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%. Similarly, a single worker earning the minimum wage in Spain coming to the UK to work on the minimum wage would see their income boosted by a third under the current rules. However, under Open Europe's proposed new rules, their average weekly income would in fact drop by 8% compared with what they would earn by staying in Spain.
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%.
Newly-arrived EU migrants in the UK would still qualify for contributory benefits, as in other countries. Open Europe's proposal would therefore not end the basic right to work anywhere in the EU. As such, it could simultaneously win the backing of the UK public while also drawing support in Europe.
That said, British politicians, as well as commentators and voters, should constantly be aware of the running trade-off involved in these policies. Fewer EU migrants could well make the UK economy less competitive overall – particularly given that firms often consider them more productive than UK natives. Similarly, migration policies alone cannot address the challenge of getting UK citizens into work. This requires that domestic policies on skills and welfare equip and incentivise British nationals into the job market.
Policy ChangerReport Immigration & Justice Experts: Stephen Booth, Christopher Howarth
Talking of our Report
If you look at the Open Europe report [on access to welfare] they actually find this will radically reduce the incentives for people coming from some [EU] countries to such an extent that they would actually be better off staying in their own countries and working in their own countries' wage and benefits structure structures rather than coming here, so I think you'll find the evidence for that is pretty compelling.
David Cameron, Immigration Speech, 28 November 2014
Open Europe… pioneered an approach now (to varying degrees) adopted by Labour and the Tories.
Gary Gibbon, Political Editor Channel 4, 28 November 2014
The think tank Open Europe has been among the few public voices to offer constructive and detailed analysis of the reform options [on EU rules around access to benefits.]
British Future, 'How to talk about immigration', 20 November 2014
Open Europe's [free movement report] makes recommendations so luminously sensible that one wonders why they have never – apparently – been suggested before.
Janet Daley, The Telegraph, 24 November 2014
Cameron and his most senior aides are working on proposals by the think tank Open Europe to end access to tax credits, housing benefits and social housing for two or more years.
The Sunday Times, 23 November 2014
Open Europe has demonstrated that Britain's in-work benefits markedly inflate take-home pay for many low-paid EU migrants above what they could earn at home. Cameron's package would bring Britain closer to France, Germany and other countries where you cannot claim before you've made a contribution.
Camilla Cavendish, The Sunday Times, 30 November 2014
[Open Europe's free movement] report has a sound analytical basis.
Witold Sobków, Polish Ambassador to the UK, 24 November 2014
The biggest control contained in this speech is that if you reduce the massive cash incentive for people to come from Europe to our country, they are less likely to come. I think that is absolutely clear from all the work done by the analysts and experts at Open Europe.
Open Europe's research charts a legal and political path that is achievable within the EU. Open Europe is seen as having the ear of the Chancellor on EU matters, though these proposals [on access to welfare] should appeal across the political spectrum.
Guido Fawkes Blog, 24 November 2014
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