Skinning the cat

The Prime Minister’s travels to secure agreement to his proposals for renegotiation last week (22 January 2016) took him to the Czech Republic. As the BBC reported

Prime Minister Bohuslav Sobotka rejected Mr Cameron’s proposals for a four-year ban on in-work benefits. But Mr Sobotka said allowing states to close borders temporarily — as a “brake” — could be considered if welfare systems were under pressure. Mr Cameron said he still wanted a benefit ban but welcomed other options.

So we are back to talking about an ‘emergency brake’ that would allow the UK to suspend some of the usual EU rules. The first thing to note is that there is no emergency brake and so any negotiations are not about whether the UK can apply a brake but whether everyone else would agree to the introduction of a brake.

Rights of free movement of people are granted by the Treaties, which are directly effective and take priority over national laws and even other EU legislation if it conflicts with Treaty rights. So any brake acting directly on free movement would need some sort of treaty amendment, something which seemed to have been taken off the menu long ago. However, the Czech Prime Minister’s comments about closing borders suggests that this is the kind of brake he’s thinking about.

But if it’s back, in what circumstance could a brake be applied, and what would would it mean to apply that brake? Following an interview with the Foreign Secretary published on 18 January, the Guardian felt he was clear that the only goal of the proposed four-year benefit restrictions was to deter migration …

Hammond said: “There is no magic about four years. It is just a figure that we calculated would provide a sufficient deterrent. We are looking to deter people.”

and

“If someone was to say it has to be less than four years, they would have to show there is a compensating mechanism that would mean it would have the same effect on migration,”

That would imply that a suitable brake would have to ‘have the same effect on migration’. Emergency brakes allowing direct restriction of free movement were actually part of the accession treaties with the Eastern European countries, and these might give an idea of the terms of a brake to which other member states might agree. The relevant clauses in these treaties permitted the free movement of workers to be suspended during the transitional period of seven years after accession if a Member State ‘undergoes or foresees disturbances of its labour market which could seriously threaten the standard of living or employment in a given region or occupation’.

As it turned out, Spain did ask to apply the brake, and was given approval to suspend free movement for Romanians on the basis of

serious disturbance of the Spanish labour market, affecting all regions and sectors; and the labour market situation of Romanian citizens residing in Spain as well as the risk that an unrestricted inflow of Romanian workers would increase pressure on the Spanish labour market

At the time the Spanish economy was suffering from the highest unemployment rate in the EU: 21% against a 9.4 % average in the rest of the EU, a dramatic 45% rate of youth unemployment, and a higher than average unemployment rate of 30% among Romanians in Spain.

When the Spanish authorities requested an extension of the restrictions in December 2012, they provided

statistical evidence indicating that the economic and labour market situation has further worsened since mid-2011, leading to record levels in unemployment and youth unemployment, and that the economic forecasts point to a contraction of the GDP in 2012 and 2013 and a further increase of unemployment.

and

further provide[d] statistical data indicating that the number of Romanian residents in Spain has continued to increase (despite restrictions on free access to the labour market for Romanian workers) and that they numbered 913 405 in September 2012; that the share of Romanian nationals who contribute to the social security system is decreasing; that the numbers of Romanian nationals registered as jobseekers and of those receiving unemployment benefits are relatively high…

Now if that gives an indication of what might be agreed to be an emergency of the kind that would justify a suspension of free movement rights, consider that the situation in the UK is almost the exact opposite, with the whole economy showing record levels and rates of employment, diminishing numbers claiming unemployment benefits, and employment rates among Eastern European migrants even higher than the average. It is hard to imagine how this could be characterised as an emergency or where the statistical data might come from that would support any credible suggestion of serious disruption to the UK labour market. While it seems that migration does exert some downward pressure on wages, the observed impact does not seem to be one that could realistically be said to provide a serious threat to the standard of living either.

Other emergency brakes exist but don’t act directly on free movement. For example the extension of qualified majority voting to social security arrangements for migrant workers was accompanied by a ‘brake’ allowing a member state to refer things to the European Council if it felt that fundamental principles of its social security system were threatened by draft new legislation. The ability to refer things to the European Council gives no guarantee of any particular outcome though, as it is essentially comprised of just the same people with whom the Prime Minister has been negotiating. As to fundamental threats or unsustainable pressure on the UK social security system, the total cost of UK tax credits (which are the focus of the present negotiations) have now declined to levels last seen in 2011. The new phrase of the moment isn’t even about a threat to the welfare system but its “unnatural draw”, the Prime Minister saying

“For example, because of Britain’s generous in-work benefits system, a graduate from the Czech Republic could be financially better off stacking shelves in a supermarket in Britain rather than undertaking skilled work in the Czech Republic…That doesn’t make sense for Britain or for the Czech Republic.”

In fact, full-time work at the present National Minimum Wage in the UK will give annual earnings 50% higher than the average wage in Czechoslovakia of around £8,750 a year. If anything is unnatural, it’s more the relative availability of jobs in the UK compared with other countries, and their pay levels, at least in the sense that it does not necessarily reflect any kind of geo-historical ‘normality’. Whether this is turns out to be an anomalous blip in economic history, only time will tell, but the unnatural-ness of any draw certainly seems to be one of disparities in jobs and pay rather than availability of benefits, the magnitude of the differences in pay alone being rather more than typical benefit entitlements.

And it should be remembered that divergences allowed from the usual rules must always be proportionate and not go beyond what is strictly necessary , as the Commission noted in the Spanish case

The Decision to authorise Spain to continue its restrictions on the free access of Romanian nationals to the Spanish labour market is subject to certain conditions to ensure that those restrictions are strictly limited to what is necessary to the envisaged purpose.

Now one of the difficulties that we observers have is that we don’t actually know enough about what the UK’s purpose is. Taking Mr Hammond’s words at face value, the purpose is to reduce migration of EU citizens by a specific amount. Saying that ‘we’ want to deter people and that we have calculated that four-year restrictions on benefits would be a sufficient deterrent, and that any alternative must have the same effect on migration, clearly implies that there is a number (known within government) that answers the question ‘By how much must migration be affected?’ The problem is that the rest of us don’t know that number.

This of course brings us back to the question of why in the government’s eyes this number is the right number, and what difference to anything else (like employment, welfare, public services etc) the government thinks its sufficient deterrent to migration from elsewhere in the EU would make. With the best will in the world, if there is no clarity about what in practice is sought to be achieved, it is literally impossible to think about ways to get there.

Jonathan Portes thinks that it isn’t in fact about affecting the amount of migration, saying

George Osborne made it obvious in his Today programme interview recently that neither he nor the Treasury think limiting migrants’ entitlement to in-work benefits will reduce EU migration much if at all, and any senior Whitehall official will tell you the same, off the record of course

But the point about clarity applies regardless. If it isn’t about reducing numbers of people moving to the UK, what is it about?

UPDATE 29 January 2016

So now it really does look like an emergency brake on benefits is in the offing as the BBC reports today…

The current idea would be that Britain could initiate a request for this emergency brake for up to four years if it could prove Britain’s social and welfare system is under excessive strain from immigration.
But that brake would have to be approved by the majority of other EU member states — and of course, right from the beginning, they have been opposed to suspending benefits for other EU migrants.

Which is just the point I made in the original post, that the use of the brake would need approval from just the people who say they will not accept a straight restriction on benefits.

Bearing in mind also as above the general requirements for proportionality and restriction to intended purpose of EU instruments, the barriers to any substantive or substantial impact in practice seem very high.

  1. There would have to be clear and persuasive evidence of excessive strain or unsustainable pressure on the welfare system (or possibly public services) for the brake to be applied.
  2. This pressure would have to be the direct result of newly arriving or recently-arrived people (rather than caused by people who had been in the UK for a longer time).
  3. The proposed brake on benefits would have to be shown to be likely to reduce the pressure below unsustainable levels and that no other alternative means were possible.
  4. The brake could only be applied until the pressure had lifted.

My feeling is that this is highly unlikely in particular because the available data suggests that the amounts of benefits claimed or likely to be claimed going forward by recent EU arrivals is nowhere near an amount that could credibly be said to be putting excessive or unreasonable strain on the system — whether in absolute cash terms or as a proportion of spending on particular benefits let alone as a proportion of total welfare spending.

But who knows? For now we do not know the critical and all-important detail of the proposed brake, and nor of course do we know the amounts involved as the government continues to refuse to release them. So watch this space …

Previously from me here on the original proposal to restrict benefits generally in Binning the Turkey, and on the alternative of changing the definition of worker in First the turkey, now the baby …