The President of the European Council, Donald Tusk, wrote today to the members of the Council (EU Heads of Government) setting out his proposals for a “new settlement for the UK within the European Union”. What does the proposal mean for free movement of workers in the EU, immigration to the UK, and our in-work benefit system? My very quick (apologies in advance for any inaccuracies or oversimplifications) are as follows.
As expected, President Tusk’s letter emphasises that the fundamental principles remain unchanged, saying that
On social benefits and free movement, we need to fully respect the current treaties, in particular the principles of freedom of movement and non-discrimination.” What is proposed therefore “builds on the clarification of the interpretation of current rules
On the totemic issue of limiting EU migrants access to in work benefits, the key propoosal is the following:
in order to take account of a pull factor arising from a Member State’s in-work benefits regime, a proposal to amend Regulation (EC) No 492/2011 on freedom of movement for workers within the Union which will provide for an alert and safeguard mechanism that responds to situations of inflow of workers from other Member States of an exceptional magnitude over an extended period of time. A Member State wishing to avail itself of the mechanism would notify the Commission and the Council that such an exceptional situation exists on a scale that affects essential aspects of its social security system, including the primary purpose of its in-work benefits system, or which leads to difficulties which are serious and liable to persist in its employment market or are putting an excessive pressure on the proper functioning of its public services. On a proposal from the Commission having examined the notification, the Council could, by means of an implementing act, authorise the Member State concerned to restrict access to in-work welfare benefits to the extent necessary. The implementing act would authorise the Member State to limit the access of Union workers newly entering its labour market to in-work benefits for a total period of up to four years from the commencement of employment. The limitation should be graduated, from an initial complete exclusion but gradually increasing access to such benefits to take account of the growing connection of the worker with the labour market of the host Member State. The Council implementing act would have a limited duration and apply to EU workers newly entering its labour market during a period of [X] years, extendable for two successive periods of [Y] years and [Z] years.
What does this mean? As far as I can see, the key points are
- the UK could request, on the grounds of an “exceptional situation”, the ability to restrict in work welfare benefits to EU migrant workers for up to four years.
- But the limitation would be gradual – that is they wouldn’t be completely excluded for four years, but would get progressively more access over time as their “connection to the labour market” grew. So, as this stands, this is definitely not a total exclusion from in-work benefits for four years.
- the measures would be time limited – with the time limit, and that of any possible extension, undecided as yet.
- The Commission would make the proposal on the basis of the UK’s request; the Council would decide.
The documents published today also state:
The European Commission considers that the kind of information provided to it by the United Kingdom shows the type of exceptional situation that the proposed safeguard mechanism is intended to cover exists in the United Kingdom today. Accordingly, the United Kingdom would be justified in triggering the mechanism in the full expectation of obtaining approval.
So the letter pre-commits the Commission to approving the UK’s request; of course, it cannot pre-commit the Council. One might imagine that this could matter in particular for the “graduation” of the proposal; that is, the Council might accept the UK’s request to limit benefits for four years but insist that access to some benefits for some people came considerably sooner.
If – and it is a big if – this text survives more or less unchanged, what are the likely impacts? The short answer is that this is likely to have some, but not much, impact on benefit receipt by EU migrants, but rather little on immigration.
On benefit receipt, we know that relatively few EU migrants claim benefits in the first couple of years after arrival. It is likely that considerably more do so after that, as they learn about the UK system and, crucially, have children. Given that the text above suggests that access would have to be progressively extended over the four-year period, what might happen is simply that the legal position comes closer in line with the reality, of gradually increasing use of the benefit system as migrants integrate into the UK labour market and society more broadly. Nonetheless, the impact would certainly be to exclude some EU migrants from some benefits that UK nationals in a similar position would be entitled to for some period of time; there would therefore be some (modest) savings to the UK welfare budget.
The impact on immigration flows is less certain but is highly unlikely to be substantial. There is no evidence the UK benefit system is a significant driver of migration from within (or without) the EU, while the availability of jobs and relative wage levels clearly are (and of course increases in the National Minimum Wage may make the UK even more attractive to lower wage workers). Research has shown that awareness of the UK in-work benefit system in source countries is low, and the low claim rates of new migrants also suggest benefits are not a major factor. So while one cannot exclude that there may be some impact, it looks highly unlikely to be quantitatively significant, and will be swamped by other factors – a recovery in the eurozone economy and labour market will have far more impact on migration flows.
On other immigration related issues, a compromise appears to have been reached that Member States may reduce payments of child benefit to children resident abroad to reflect the lower cost of living in their home country. This seems eminently sensible, although of course it should be noted that if, contrary to the evidence, benefits were genuinely a major pull factor, then the impact of this change will be to increase migration and pressures on the UK education system. Other changes relate to the rights of “third country nationals”, in particular those marrying EU citizens; explaining these I will have to leave to the lawyers!
Overall, the proposals are, as expected, a mixed bag, which will lead to some significant changes to benefit eligibility for some EU workers, but do not as they currently stand amount to permanent four-year waiting period for in-work benefits; but rather a mechanism (in principle temporary) which, while it is in force, will mean that migrants’ access to in-work benefits is extended progressively over four years. This will save a relatively modest amount of money and, it could be argued, reflects the reality of the UK labour market and benefit system. It is, however, highly unlikely to result in any significant reduction in immigration. The principle of free movement of workers, for better or worse, remains largely untouched.
Jonathan Portes is Principal Research Fellow at the National Institute of Economic and Social Research; and Senior Fellow, ESRC Britain in a Changing Europe