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Cameron’s plan to reduce EU immigration by cutting in-work benefits is flawed

Anna Sonny, 18 December 2015

Today’s EU renegotiations are being touted as one of the biggest challenges of David Cameron’s premiership. Out of his key reform demands, the one meeting the most opposition from other EU leaders is his plan to stop EU migrants from claiming in-work benefits for four years.

The deal is being compared to the negotiations of 1984, when Margaret Thatcher won an unprecedented British rebate. But there were only 10 other EC members back then, while this time Cameron has 27 EU leaders to win round. This will be a real test of the Eurosceptic argument that Britain’s influence in the EU is waning as a result of enlargement, and the impact this has on Britain’s ability to decide her own laws.

Even if the Prime Minister does somehow manage to win the EU leaders over and strike a deal on cutting benefits for EU migrants, this still won’t be getting him exactly what he wants. The intention of reducing in-work benefits is to lower net immigration from the EU by reducing pull factors.

In the April-June 2014 Labour Force Survey, the employment rate for EU nationals living in the UK was 79 per cent, higher than the 73.2 per cent for UK-born workers. The UK was the only EU country to have a lower unemployment rate for migrants than nationals (7.5 per cent to 7.9 per cent respectively), suggesting a key reason for migration to the UK is to find work. But how much of a pull factor are in-work benefits for EU migrants? They certainly push up low wages, but much of the discontent over immigration among the British public in areas of high unemployment is that job competition is strong because EU migrants are willing to work for less money and are therefore undercutting British workers. This suggests that EU migrants are coming to the UK for the income and not necessarily for the income support.

Migrants to the UK tend to pay more in taxes overall than they take out in benefits. While this simple dichotomy between taxes and benefits does not take into account the other costs involved in immigration (Civitas has recently published a report on this by Robert Rowthorn), it does highlight a flaw in Cameron’s plan to reduce EU immigration into the UK through reducing in-work benefits. He may intend to weaken a pull factor, but the pull factor isn’t very strong.

The outcome of tonight’s negotiations in Brussels will have a serious impact on Britain’s future in the EU – but even if Cameron wins the deal on benefits, this may not have such a big impact on EU immigration into the UK.

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