Will welfare changes slow the flow of migrant workers?

Access to welfare payments for those coming from elsewhere in Europe to work in the UK has been central to recent debates on Britain’s EU membership.

In 2014 the Prime Minister claimed that welfare is a ‘big financial incentive’ for workers to migrate to the UK, particularly if they are low skilled. And he committed to making restrictions on access to UK benefits for other Union citizens – and for those from other European Economic Area (EEA) countries and Switzerland, to whom the same rules apply – one of the main planks of future renegotiation of Britain’s relationship with the EU.

By the time of the letter to Donald Tusk, President of the European Council, setting out the UK’s negotiating demands the Government had two main objectives on welfare:

  • requiring that workers from other European countries live here for four years before having access to in-work benefits and social housing, and
  • ending the possibility for Union citizens to receive child benefits for children who live in another member state.

These were easily the most controversial of the UK’s demands, vigorously opposed both by governments of countries with large numbers of nationals currently in the UK and by defenders of core single market principles.

Despite going less far than the UK Government hoped, the final deal opens the way for substantial changes to the status quo on access to welfare for people moving across borders for work within the single market. The deal provides for child benefits in future being indexed on the cost of living in the child’s country of residence, so migrant workers with families remaining in poorer member states will receive less support. On in-work benefits, compromise was reached on the creation of an ‘emergency brake’ mechanism exempting member states experiencing inward migration pressures from some of their equal treatment obligations for a period of seven years. With this brake ‘pulled’ entitlements to in-work benefits for migrants would increase progressively from the date of their first employment and attain parity with nationals only after a period of four years.

Why restrict benefits for migrants?

The political importance of these agreements is clear. Opinion polling consistently finds that the benefits European migrants can claim are seen in the UK as the single most important area for change in how the EU functions, crucial for some two-thirds of the population. This is why the Government made the issue the centrepiece of the renegotiation, and why the principle of restrictions is supported by the other main political parties in Westminster.

Proponents of restrictions also frequently cite two main policy objectives. The first, implied by Cameron’s 2014 speech, is to reduce the financial inducements to move to the UK for work and help lower net migration, an explicit objective of government policy since 2010. The second is to increase fairness relative to the existing situation, where EU migrants become potentially eligible for some benefits as soon as they enter the UK labour market. Less openly discussed, but strongly suggested by repeated references to the proportion of total UK benefit expenditure on EEA nationals, is that these restrictions will limit the perceived fiscal burden arising from some European migration to the UK.

An almost entirely neglected dimension of the proposed restrictions is their impact on poverty and deprivation. For all the talk of Britain’s ‘universal’ welfare system being a draw, in-work benefits are in fact targeted at working households with the lowest incomes. And limiting the access of newly arrived EU migrants to these benefits will only aggravate the frequently precarious nature of their living conditions, often characterised by unsatisfactory accommodation in the private rented sector, high levels of housing mobility and interrupted schooling for children.

North-South divide

The restrictions to welfare benefits for EU migrants appear to be quite sharply at odds with the general thrust of current public policy in Scotland. The Scottish Government has in recent years articulated a distinctive pro-immigration stance, arguing that Scotland’s economic and demographic needs are ill-served by the restrictive policy pursued by Westminster. The need for increased numbers of migrants of working age has particularly been emphasised. If limiting access to some benefits were successful in reducing levels of migration, it would run counter to the stated aims of Scottish policy.

Even with no effect on migrant numbers, the restrictions would undermine current Scottish policy priorities in other ways. The Scottish Government promotes an inclusive model of citizenship, projecting Scotland as a welcoming country at ease with a highly multinational and multicultural population. This posture would be hard to square with a benefits policy that explicitly discriminates on grounds of nationality. The Scottish Government has also made fighting poverty and inequality one of its central aspirations. It sees improving the value and take-up of welfare benefits – which it prefers to frame as social security – as key instruments in that goal. By disentitling a section of the population living on low income, restrictions on access to benefits for EU migrants would undercut the Scottish Government’s social policy.

The Scottish Parliament is currently gaining new powers on welfare under the Scotland Act 2016. Among these will be the possibility to top up aspects of some benefits which remain formally reserved to Westminster, such as tax credits and the future Universal Credit. But it remains unclear if a Scottish government would have power to reverse or relax restrictive measures for migrants resulting from revised EU legislation following the referendum. And even if they could, this would depend in practice on the Scottish and UK governments surmounting formidable political and governance obstacles to effectively sharing powers in areas where their fundamental policy objectives diverge.

Are changes legally binding?

Disagreement between the ‘Remain’ and ‘Leave’ campaigns over the welfare restrictions the UK Government has negotiated has crystallised around three issues; the magnitude of the changes that are foreseen, how binding they will prove to be and their likely impact, especially on the scale of European migration to the UK.

The ‘Remain’ camp has understandably talked up the ‘tough new restrictions’ on access to the UK welfare system. It argues that, as the prospect for any deal on limiting access to in-work benefits was widely questioned, the Government has scored a major diplomatic victory. The ‘Leave’ camp suggests, by contrast, that the welfare demands were modest to start with and have only been agreed by other European governments after being heavily watered-down. While one side presents the welfare deal as proof of Britain’s ability to defend its interests from within the EU, the other holds it up as evidence for the fundamental impossibility of doing so.

The ‘Leave’ campaign further argues that the welfare restrictions might not make it unscathed into EU legislation, and complain that important aspects of their implementation – like authorisation for use of the emergency brake – are subordinated to future decisions by European institutions. The spectre of the arrangements being declared unlawful by the Court of Justice of the European Union (CJEU) is also raised. The ‘Remain’ campaign insists that the deal as it has been negotiated is legally binding and cannot be unpicked without the UK’s consent.

Potential impact of the changes on future migrant numbers has been the source of considerable dispute. While some on the ‘Remain’ side are openly sceptical, David Cameron has argued that the restrictions will ‘make a difference’ to migration to the UK. Open Europe, the think tank that takes credit for inspiring the government’s negotiating demands in this area, argues that the changes will especially dissuade low-skilled migrants from coming to the country to work. The ‘Leave’ campaign counters – somewhat ironically, considering how fixated Eurosceptics have traditionally been on the dangers of ‘welfare tourism’ in the EU – that benefits play little role in migration decisions, and that planned increases to the UK minimum wage will anyway negate any effect of benefit restrictions. They argue that leaving the EU is the only sure way to ‘regain control of our borders’.

Pain but no real gain

Each side is to some extent right about the welfare measures. The ‘Remain’ camp is correct that Cameron has won major concessions, especially on in-work benefits. While EU rules have long allowed migrants to be treated differently from nationals when unemployed or economically inactive, for workers the principle of non-discrimination has always been inviolable. If the emergency brake mechanism is adopted, this will change. But precisely because this would clearly conflict with principles enshrined in the European treaties this part of the deal is legally very insecure, as the ‘Leave’ camp maintain. The CJEU, in particular, is not bound by a political deal negotiated between governments, and if a challenge to the legality of the emergency brake was brought before it there is every chance that it would be upheld.

By contrast, each side is largely wrong on whether the benefit changes or ‘Brexit’ can help to limit migration. Against some claims from within the ‘Remain’ camp, there is no hard evidence suggesting that migration decisions are based on the accessibility and value of social benefits, with factors like the availability of jobs and language playing a much greater role. But, equally, there is little prospect that leaving the EU would give the UK ‘full control’ of its borders, as the ‘Leave’ camp asserts. All meaningful precedents of trade deals concluded between non-member European states and the EU have depended on these countries accepting free movement of labour, and there is little reason to think that any EU-UK trade agreement giving full access to the single market would be fundamentally different.

What of the objective of limiting the perceived costs of European migration to the UK? If the benefit restrictions were adopted and migration levels remained stable there would indeed be a fiscal benefit for the government; EU migrants would pay the same tax and national insurance but receive less in benefits. The scale of this windfall would likely be trivial, though. Firstly, numbers of child support claims for children resident abroad are vanishingly small, less than half of 1% for Child Benefit and even less for Child Tax Credit.

Secondly, while EU migrants account for around 10% of total expenditure on in-work tax credits and housing support despite representing only 6% of the workforce, the assertion that a large proportion of spending goes to recently arrived migrants – who would be affected by the emergency brake – has not been backed up by reliable statistical evidence and is widely contested. Finally, the introduction of Universal Credit is soon to sharply reduce the value of all in-work benefits, and therefore also the savings from excluding a section of the working population from receiving them. So while they may inflict considerable hardship on families they do hit, the changes will affect few people and save very little money overall.

This leaves the question of fairness. Tax credits and housing support are non-contributory, means-tested benefits, requiring that claimants demonstrate need rather than a specific record of employment or national insurance payments. Poor British people can receive in-work benefits irrespective of whether they have worked before, or indeed of their ability to prove any level of past ‘contribution to the country’. Should this really be different for poor migrant workers legally resident and paying tax in the UK simply on the grounds of their nationality? Different people would no doubt give different answers, suggesting the fairness issues are rather less clear-cut than their presentation by the Government has often implied.

So what will change? For all the political heat they have generated, the proposed restrictions on access to welfare benefits would probably do little to fundamentally change those aspects of Britain’s relationship to the EU that most exercise British voters. But it is far from clear that ‘Brexit’ would either. The Scottish Government articulates different policy priorities in this area, but the option that is best aligned with these is the status quo – and that option is not on the table.

 This article from Britain’s Decision: Facts and Impartial Analysis for the EU Referendum  is reproduced with permission. The online publication can be downloaded in full from The Centre on Constitutional Change

 

 

 

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