The fact that immigrants’ benefits are vastly outweighed by the benefits of migration appears to matter little to Britain’s politicians. The public may vote to leave the EU, with serious consequences for Britain’s economy and foreign policy.
British Prime Minister David Cameron hopes that restricting benefits to European immigrants will be a political winner. It certainly ticks all the boxes: Britons are hostile to immigration from the rest of the EU, and are fearful about Romanian and Bulgarian immigrants. Germany and the Netherlands are making supportive noises, suggesting Cameron could have some needed allies. If he wins the 2015 election and manages to get the EU’s rules changed, he will be able to claim it as a major renegotiation victory, which should help him win the referendum in 2017.
Cameron’s strategy, however, is highly risky, as it requires him to broker a compromise between public opinion at home, the UK’s national interest (which is not the same thing) and other EU member-states. If no compromise is found, Britain could leave the EU.
Let’s start with the first constituency Cameron must tackle: the British public. Its hostility to immigration has been on the rise for a decade: according to the UK’s Social Attitudes Survey, the proportion of Britons who would like to see a large reduction in immigration has grown by nearly 40 percentage points since the EU’s eastward enlargement in 2004. Britons repeatedly cite immigration as the second most important issue facing the country, after the economy.
Politicians have responded to public hostility by competing to look tough on the issue. Both left and right-leaning voters dislike immigration, and this fact is known to the social democratic Labour party, which has been in opposition to Cameron’s Conservative-Liberal Democrat coalition since 2010. Its leadership has apologized for the “mistake” it made by opening the UK’s labor market to the new member-states when in government in 2004. (It is now difficult to find a Labour or Conservative politician willing to defend this move.) Soon after enlargement, the Labour government introduced a residence test to try to limit European immigrants’ access to welfare benefits, which probably violates EU law. The European Commission has taken Britain to court over this test, as it breaches the EU principle of non-discrimination: British and Irish citizens that return to the UK after living elsewhere in the EU automatically pass it.
Labour’s strategy is defensive: it wants to make sure that the Conservatives cannot portray the party as weak on immigration. But the UK Independence Party (UKIP), a stridently nationalist party that calls for Britain to leave the EU and immigration to be strictly curtailed, is more aggressive, harrying the Conservatives’ right flank. Its vote share is currently in double digits, according to opinion polls, which could be enough to stop the Conservatives winning next year’s election. Conservative backbenchers are fearful that UKIP candidates will cost them their seats in parliament, and are rebelling on immigration and EU issues. Cameron has felt impelled to respond to Labour, UKIP and backbench pressure, by promising to reduce European migrants’ access to welfare as part of his renegotiation.
Whatever the public hostility, leading figures in mainstream political parties know that European immigration is beneficial: civil servants, academics and think tankers have all been at pains to tell them. Study after study has found that Central and East European migrants have little impact on Britons’ wages and none on their job prospects. Meanwhile, EU immigrants are on average better educated than Britons, and disproportionately work in sectors where Britain faces skill shortages. New technologies are taking over the work of the medium skilled worker—manufacturing or book-keeping, for example—and the British economy is creating more high and low skilled jobs. To fill them, Britain will need to be open to immigration. And the British population is aging, which will increase public expenditure on pensions and healthcare. Immigrants from the EU tend to arrive in their twenties and thirties—so their schooling has largely been paid for by their country of birth –and over the course of their time in Britain they pay more taxes than they receive in public expenditure, on average. Immigrants are important contributors to Britain’s public finances, which will be in deficit in the long term. If the UK accepted fewer immigrants in the future, it would need more tax increases or spending cuts to close that deficit.
Britain is one of the winners from the EU’s liberal migration rules, which allow people to move to places where they can find work or higher wages. And migration flows, given the parlous state of Europe’s south, are now even more favorable to the UK: migrants from Central and Eastern Europe are being joined by well-educated young adults from depressed Spain, Portugal, and Italy. All this adds up to a demographic dividend of immigrants who are easy to economically and socially integrate.
Therefore, Britain’s national interest lies in remaining open to EU immigrants. But public opinion is against. To channel voter antipathy, both the previous Labour government and the current coalition have focused on EU rules on migrants’ access to benefits—and have made no promises to reduce the numbers of immigrants coming from the EU. Cameron has made some vague pledges to extend transitional migration controls for countries that join the EU in the future. He hopes that a renegotiation of benefit rules would be enough to soothe Britons into voting to stay in the EU and so keep access to the European labor market.
Yet, such a renegotiation will have to be won. The UK must convince other member-states that reducing migrants’ welfare rights is worth the hassle of rewriting the rules. This will not be easy. A thorough crackdown on benefits eligibility would require treaty change. Eurozone memberstates are desperate to avoid a new treaty, as it would be predominantly motivated by the need to change eurozone governance, and so may be rejected in referendums. A more mild curtailment of rights could be done by rewriting EU directives, which is governed by qualified majority voting on the EU’s Council of Ministers and by the European Parliament. This requires Britain to make allegiances—and so far, it has angered others more than it has won them over.
Unsurprisingly, Central and Eastern European member-states will not be part of any coalition to reduce migrants’ rights to take up benefits. The Polish foreign minister, Radosław Sikorski, reacted furiously to British plans to tighten benefit criteria. He pointed out that Cameron was happy for Polish workers to pay tax in the UK but unhappy about paying child benefits for their children left back in Poland. For their part, Bulgarian and Romanian politicians have expressed anger at the way their countries have been portrayed by British politicians and newspapers. The Conservatives’ repeated claims that a significant number of Central and Eastern Europeans are “benefit tourists”—moving to western Europe predominantly to take up welfare—has destroyed any chance of alliance with the new member-states.
David Cameron no doubt derives some consolation from the supportive noises he has received from the Netherlands and Germany on restricting access to benefits. But this does not mean that Western Europe will line up in support of Britain. Germany will not move too far, because of the damage this would do to German interests in Central Europe. (Germany’s dire demographics also mean that the German government is working hard to attract more immigrants, not repel them.) Most member-states welfare systems are based upon the “contributory principle” to a far larger extent than Britain’s. Broadly speaking, benefits are tied to the contribution that a particular worker has made to the welfare system on the continent, while in Britain they are flat rate benefits that are paid if a worker loses their job or if their income falls below a certain threshold. This means that migrants to other member-states must wait longer for full benefit eligibility than they must in Britain—and so it is far less of a reform priority for them than it is for the British. France, Belgium and the Netherlands are far more concerned that companies that employ immigrants are not paying the minimum wage or trying to avoid rules on working conditions. And they are frustrated that the British have tried to water down the ‘posted workers directive,’ which would curtail the ability of companies to move cheaper, foreign workers from one EU country to another.
The last reason why Britain may struggle to convince other member-states is the lack of evidence that “benefit tourism” exists—or that migrants’ benefit rights are particularly costly. The Centre for European Reform found that only 0.8 percent of EU migrants were on unemployment benefit after a year of residence in Britain, which hardly suggests a rush onto the welfare rolls. (The equivalent rate for British nationals is 4.1 percent). Moreover, many EU immigrants do not claim benefits that they are entitled to under EU law: 6 percent who have been in the UK for two years or less are unemployed but not claiming Jobseeker’s Allowance. The European Commission has repeatedly asked the British government for evidence that immigration poses a serious threat to the public purse—which the British have not provided. A leaked UK government response complained that the Commission “places too much emphasis on quantitative evidence.”
David Cameron’s renegotiation may lead to the worst outcome—a British exit from the EU—if he cannot broker a compromise. The “clampdown” on benefits eligibility is likely to be largely cosmetic, as it will prove difficult to build a coalition of other member-states for far-reaching reform. This is clearly in Britain’s national interest—migrants’ welfare eligibility is a trivial issue, and it is not worth alienating potential allies for more important EU reforms. But the public, convinced by UKIP, the euroskeptic press and Conservative backbenchers that any reforms are insignificant, may vote to leave the EU, with serious consequences for Britain’s economy and foreign policy.
The fact that immigrants’ benefits are vastly outweighed by the benefits of migration appears to matter little to Britain’s politicians, who are competing to appear toughest. But the stakes are high, after Cameron’s referendum pledge. And short-termist dalliances with populist anti-immigrant politics may prove to be their—and Britain’s—undoing.
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