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Before the referendum, it appeared that a Brexit vote would mean that the UK faced a clear choice on immigration policy.  If we wanted as far as possible to retain access to the Single Market,  either by maintaining membership of the European Economic Area (like Norway) or via a series of bilateral agreements (like Switzerland) then we would need to accept that freedom of movement would continue much as now. Recognising this – and regarding it as an unacceptable price to pay – both UKIP and, eventually, Vote Leave rejected Norway/Switzerland type options, accepted that we would not be members of the Single Market on anything like the current terms (although we could negotiate a bilateral trade deal) and argued for an immigration system that did not discriminate between EU and non-EU nationals, as I discuss here.

However, since the referendum result, political and economic realities have made both of these options look increasingly unattractive.  There appears to be a growing consensus, uniting almost all pro-Remain politicians and much of the Leave camp, that the UK should seek to maintain as full access to the Single Market as possible. At the same time, as I noted ex ante, and many other have since, it is impossible to view the referendum result as anything other than a rejection of free movement in its current form.   Some degree of control of EU migration for work purposes would appear to be a political necessity.

As a consequence, it looks likely that the UK’s negotiating position (particularly if Theresa May, the current favourite, becomes PM) may coalesce around “EEA-minus”, described by George Osborne’s former Chief of Staff Rupert Harrison as “a bit more immigration control and a bit less single market”.  This implies that we will not have, as Vote Leave promised, a system that gives effectively equal treatment to EU and non-EU nationals; there will still be a considerable degree of preference for the former. I will leave it to others to analyse what “a bit less Single Market” might mean; this blog attempts to set out some detail on what, in practice, “a bit more immigration control” might entail, in terms of a negotiating position for a government that wanted to demonstrate that we do indeed control  immigration from the EU, within the limits of administrative and political feasibility.

The first point to make is that it seems highly probable that EU nationals currently resident will be granted permanent residence rights. There is clearly majority support in the country as a whole and in the House of Commons for this in principle; and it is very difficult to see in practice that depriving significant numbers of people who have lived here for any period of time of the right to remain would be politically or administratively sustainable, regardless of the legal position.

This might appear like a purely retrospective issue, not influencing future migration flows, but in practice things are considerably more complex. The UK has no population register and no remotely comprehensive database on the movements of EU citizens in and out of the country. This means that the most obvious administratively feasible mechanism for granting rights to EU citizens who have already exercised their free movement rights would be to grant those who have registered for a National Insurance number (NINo) indefinite leave to remain, or its equivalent (perhaps giving them a time period in which they had to apply). Given the very large increase in short-term migration identified by the Office for National Statistic, this means that there are (conservatively) at least 1.5 million EEA nationals not currently resident in the UK who already have some connection with the UK labour market and who would therefore retain, at least in principle, the right to move to the UK in the future without being subject to any new controls. Nor does it end there: at the moment, EU citizens have (mostly) the right to bring partners and other close family members, even if they are not workers and even if they are not EU citizens; a literal preservation of “acquired rights” would cover such migrants I the future as well.

Another important point is that it does not seem likely or feasible that we would restrict EEA nationals’ right to enter the UK without a visa. For the reasons set out above, it is difficult to see how we would find and remove EEA nationals who were “overstaying”; nor, frankly, to see why this would be priority for an already woefully overstretched Borders Agency.

Nevertheless, this does not mean that it is infeasible to restrict future EU migration for work purposes.  How would this work? There are two obvious ways to implement a system that imposed restrictions on EEA nationals that were more restrictive than the current system, but less so than that applying to non-EEA nationals

a)     To oblige EEA nationals who want to work legally to apply for a work visa, as non-EEA nationals, but with less restrictive rules. This could mean lower qualification thresholds; a wider variety of occupations for which work visas were automatically issued; a separate and higher quota for Tier 2 visas; fewer or no restrictions on intra-company transfers; and so on.  EEA nationals would presumably, unlike most non-EEA nationals, be permitted to apply for work visas from within the UK as well as from their home countries.

b)    To impose no specific restrictions with respect to occupation or skill level, but simply to restrict the issuance of new National Insurance numbers to EEA nationals, with a monthly or annual ceiling.  Once that ceiling was hit, any further EEA nationals seeking to work in the UK would have to apply through the system that currently applies to non-EU nationals.  This would not stop them travelling to or living in the UK, but they would not be able to work legally.

Either system would in principle be feasible, albeit hugely complex. For example, what would be the status of the spouses of “qualifying” EEA nationals, whether from inside or outside the EU, who did not “qualify” in their own right? Would they be entitled to work, and if so in any job? Or to reside, but not work? Under both options self-employment would presumably be permitted (as it was for new and prospective EU members, even while employment was restricted) but there would need to be controls to prevent abuse, especially in sectors such as construction; again, this would add additional complexity. For all these reasons, the impact of either option on immigration numbers (either actual migration flows or the official migration statistics) would be partial, indirect and would take some time to show up in the data. However, both would undoubtedly demonstrate that the UK government controlled EU migration in a way it does not at present.

The advantage of a) would be that it would at least partially address the concerns of those who complain that, unlike non-EEA nationals migrating for work purposes, we do not “select” EEA nationals by occupation or skill level, and as a consequence a very large proportion work in low-skilled, low-paid jobs. The disadvantage, however, is that it would replicate the bureaucratic and inflexible Home Office work visa system, albeit at a different level. This would require significant extra resources, which are unlikely to be forthcoming, and even if properly resourced would result – if the current system for non-EEA nationals is anything to go by – in large costs to business and a significant reduction in labour market flexibility. It is reasonably safe to assume that the consequent extra regulation would, in itself, more than outweigh any remotely plausible gains from reducing “EU red tape” post-Brexit.

Option b) also has disadvantages – it would mean that much continued EEA migration would be for relatively unskilled or low-paid jobs. Another possible downside might be an increase in irregular work, of people who were “waiting” to get a NINo, or who “borrow” NINos from those who have previously registered but are not currently working in the UK. But against that, it could be administered in relatively cheap and light-touch way – the only obligation on employers would be to verify that an EEA national had a valid NINo. And, although it is difficult to judge at present, since it has at least some resemblance to the type of “emergency brake” currently available (though never used) by EEA members, it is likely to be considerably easier to negotiate with the remaining EU member states than something which looks like a watered-down version of the system applying to non-EEA nationals. Finally, it also has the potential advantage that if EEA migration does indeed fall sharply over the next two years, as the UK economy weakens and EEA nationals feel less welcome here, any quota may in practice not have much impact.

Are there other possible options? At one point in his unsuccessful renegotiation, the Prime Minister suggested that free movement could be restricted to EEA nationals who already had a job offer, and when he failed to deliver this he was much criticised, with the Leave campaign making much of the fact that the latest immigration statistics showed that an estimated 77,000 EEA nationals arrived last year to look for work, but without having a job to come to.

However, this displays a remarkable ignorance of how flexible labour markets actually work in an integrated market. How, in practice, would such a restriction be imposed? As noted above, we won’t be stopping EU migrants at the border. Would we require them to apply for a NI number or work visa from abroad – with evidence of a job offer? There would be nothing stopping them from coming to the UK, finding a job, returning home, and then re-entering with their “offer”; the only impact would be on Ryanair’s profits. Alternatively, agencies would no doubt spring up to offer a package deal service.  There would be some extra transaction costs for employers and workers, but not much impact on migration.

To sum up; given the political will, outside of the EU we could indeed restrict free movement without ending it. Such a system would inevitably be bureaucratically and administratively complex, further complicated by the position of EEA nationals who have already exercised their free movement rights. It would constitute a significant increase in regulation and “red tape” and a reduction in labour market flexibility, with the attendant economic costs. However, it is feasible, some version is probably negotiable, and there would be ways to implement it that would at least minimise the damage.  Let’s hope the government’s new “Brexit unit” is doing some serious thinking.

 

Jonathan Portes is Principal Research Fellow at the National Institute of Economic and Social Research, and Senior Fellow at UK in a Changing Europe.

6 thoughts on “Ending free movement of people in Europe will create a bureaucratic nightmare”

  1. Posted 08/07/2016 at 11:41 | Permalink

    Very simple. if they have a job they can come in. No benefits. If they lose their job, they go home pronto. All EU nationals with no job to be deported. We tell them how things will be. German industry still want to export to us as does France, Italy et al.

  2. Posted 08/07/2016 at 13:13 | Permalink

    I don’t know (and don’t particularly care) what would be “politically feasible” at the moment in the UK.

    I just know two basic truths:

    1. (In the long run) one cannot afford open borders AND a universal welfare state at the same time
    2. Government planning of immigration is cumbersome and expensive (as pointed out by Jonathan Portes)

    So why not simply make the welfare state two-tiered, i.e. exclude first-generation immigrants from its benefits?

    This way, the British can keep their welfare system (if they wish so) AND one avoids the bureaucratic monstrosities associated with government planning of immigration.

    Immigration would finance itself.

    Instead of having to sacrifice resources for immigrants (by having to finance the immigration bureaucracy and/or welfare benefits) the British would profit by trading goods and services with them.

    P.S. @Dr Evil: If there aren’t welfare benefits for immigrants, then immigrants without a job will leave anyway to find a job elsewhere. They would, of course, be happy to be deported by the government – instead of having to pay for the flight themselves.

  3. Posted 08/07/2016 at 14:35 | Permalink

    A large article that assumes access to the eu market more important than immigration. Wrong assumption.

    I beginning to think that ukip is going to win the next election as current politicians and business leaders are determined to sabotage our democratic vote.

  4. Posted 08/07/2016 at 22:10 | Permalink

    Good article – as always with good articles it is easier to pick out the obvious error than to expand on the good stuff. The obvious error in this case being “it is impossible to view the referendum result as anything other than a rejection of free movement in its current form”.

    The referendum question was on EU membership alone. I know a lot of people didn’t read and understand the question, like you’re told to before you do your A-level exams, but EU membership was the only question. Surveys indicate that immigration was not the dominant reason for voting leave. And even among those for whom immigration is a big issue, a good portion of that is fear of terrorism which currently comes overwhelmingly from one specific sect of one religion.

    More on topic, I know the UK had free movement with Ireland before joining the EU. Why would we want to include Ireland in some kind of NINO quota when they were not previously limited? How could you then justify treating say Spanish or other EU workers differently from the Irish. And were there any other countries with which the UK had free movement with before joining the EU in the 70s?

  5. Posted 10/07/2016 at 21:27 | Permalink

    @Evil.
    IEA publication: “Recent EU migrants (those who arrived after 1999) contributed 34 per cent more in taxes than they received in benefits over the same period. In contrast, over the same period, the total of UK natives’ tax payments was 11 per cent lower than the transfers they received. Recent EU migrants were more than 50 per cent less likely than natives to receive state benefits or tax credits. They are also far better educated than natives: 32 per cent had a university degree. The comparable figure for UK natives is 21 per cent.”
    http://www.iea.org.uk/sites/default/files/publications/files/Chapter%2006%20Freedom%20of%20movement%20Legrain.pdf

    Perhaps the biggest problem lies in the system of British welfare state. Maybe government should kick out everybody without work from the UK? Even unemployed Britons…

    PS. Some people love democracy much more than freedom. Their choice. I love freedom and economics. I’d like to see benefit-cost analysis first.

  6. Posted 11/07/2016 at 20:01 | Permalink

    MartinCh: EU migrants contributing 34% more taxes than they receive in benefits is likely true because people who have the ability; motivation; and confidence to move country are likely to be a success. It is also true for those over 20 years old the UK state will not have to pay for their education. However does this figure include in rich EU nationals who live in London and drive sports cars? If so they will bring the average up.

    I don’t see Immigration as a problem myself but I’m from Scotland. We have not had as much immigration as down South. We also have a small population and have a large financial services sector; oil and gas jobs and Barnett formula for our public sector. We even get one fifth of the lottery money for our charity sector despite being an eleventh of the population.

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