Immigration risks British exit

John Major speaking to the Konrad Adenauer Stiftung in Berlin said on November 13 that he considered there was a near 50% chance of the UK leaving the EU, the main reason being the allegedly excessive level of immigration. If the chances of the Conservative Party doing well enough in the May 2015 UK election to form a new government and carry out its promise to hold a 2017 referendum on EU membership are 50% then the implication is that if the referendum is held there is a near 100% of it leading to exit. This would be surprising given that an Ipsos-Mori poll on showed a large majority in favour of staying in. However, John Major’s assessment could prove right. In late November David Cameron came close to making demands that were self-contradictory. On the one hand he seemed about to demands a reform of the priniciple of free movement of labour to the extent of applying and the other hand he rightly called in his speech to the CBI on November 10th for the “safeguarding the internal market” amongst all 28 members at a time when the majority euro zone countries are developing closer integration amongst themselves.

The internal market which was designed in 1985 and 1986 by the commissioner appointed by the then British prime minister, Margaret Thatcher, Lord Cockfield, has four pillars, the free movement of goods, services, capital and labour. If quotas can be introduced on the free movement of labour one of the four pillars is fundamentally weakened and the precedent set for a member state (or the whole euro zone towards countries outside the euro zone) to introduce quotas on the movement of capital, services or goods.

On November 28th Cameron stepped back for calling for immigration quotas calling instead for more reasonable limits to in-work benefits but he could yet be persuaded into making such a demand.

The issue is linked to other government policies

How has immigration, particularly from other European countries, become such a concern in the UK? Germany has had similarly large numbers of immigrants from other EU countries in recent years and as a relatively strong economy is also likely to remain a magnet for immigrants. But immigration in Germany is not now a major political issue, although the leading governing party, the Christian Democratic Union used to insist that Germany was not an “immigration country”.

There are a number of reasons that those concerned about immigration put forward as reasons for their concern, of which the most substantial are that it puts a strain on health and social services, it reduces job opportunities for existing British citizens especially young people and reduces wages, and that adds to the problems caused by the shortage of housing in parts of the country, especially the south-east. The first concern, though possibly true in particular localities, does not stand up to evidence overall. As a recent study by University College, London, has shown EU immigrants put more into tax to fund social services than they take from them and from welfare benefits. Moreover many of those working in the health and care sectors are immigrants, both from in and outside of the EU. With regard to schools, it has been noted that schools with large immigrant intakes as in London or other inner cities are performing better than those in rural areas with low immigrant intakes.

Arguments that immigration depresses wages for the lower paid and that it puts pressure on housing cannot be so easily refuted. In both cases, however, the problems are also linked to longstanding aspects of UK government policy.

Although the UK has done well, compared with many EU counterparts, in increasing the number of jobs and so in limiting unemployment, it is being increasingly noted that the wages and conditions of these jobs is often low and may be deteriorating. The UK has prided itself on a very flexible labour market and there is little doubt that this leads to lower unemployment, especially of young people, than countries in southern Europe. Certainly the UK does not want to copy the labour market conditions of southern Europe which have resulted in low employment rates and high youth unemployment.

However, the extent to which the scales are weighed in favour of employers in relation to employees, and the behaviour of employers in boosting profits, and pay for higher management, at the expense of wages and conditions for most employees, especially those at the bottom, has gone too far. This means not only that wages are often very low, and subsidized by tax and welfare benefits provided by the UK taxpayer, but also that other conditions, such as the reliability of income as a result of the prevalence of zero hours or very short term contracts, and the provision of training, are now very poor and despite government efforts to squeeze welfare benefits for unemployed, are very unattractive to British citizens. They are more attractive to people from eastern Europe because they send money back to their own countries where living costs are much lower and when they see themselves as only temporarily based in the UK are willing to live in crowded or low standard accommodation.

One example is given by the road haulage sector. With EU rules on working hours coming into force after a period of exemption for the UK, representatives of the sector complain they do not have sufficient numbers of trained drivers. But this is because they have failed to invest in their staff by providing adequate conditions and training to attract British citizens, relying instead on the use of agencies providing temporary work often to foreigners. It is not just a matter of wages, but the lack of a reasonable degree of job security (it is accepted that jobs for life are a thing of the past, but employees should be able to look forward in normal circumstances to staying in the same place for at least 12 months unless the company they work for is in acute difficulty); training; and other conditions such as pressure to work excessive overtime at the expense of long-term health and family life.

This is not a call for massive new regulations. Legal changes such as the imposition of a minimum wage can be successful in achieving modest improvements in conditions without reducing employment opportunities, but they need to be carefully thought and can only achieve limited improvements. They cannot change the labour market culture to one like Germany where employers feel that providing good training, working under a meister (mentor) and time off to study, are a part of being respected in the locality to which they belong, where works councils are considered a normal part of governance which helps to overcome difficulties and seize opportunities and where unions are seen as part of a “social partnership”. The latter certainly looks far-fetched in the UK but improvements are possible. The government does have a role for example in the message it sends by the way it treats its own employees. The practice of outsourcing public services which do the same as previous government agencies but save money purely by reducing the wages and conditions of employees carries a lot of responsibility for sending the message that poor employment conditions is good business practice.

Another element of government policy which links with the concerns of those who claim that immigration is too high is housing. Since the 1980s social housing has been sold without the proceeds of sales being used to replace the stock so that social housing provision is inadequate. Instead a large part of public money spent on housing goes on subsidizing the rents of those on low to moderate incomes. Whereas no-one would expect immigrants to jump the queue for social housing they have been entitled to the rent subsidies. Given that these subsidies are part of government policy to provide housing to those already resident but inadequately housed the government ought to be able to justify requiring a substantial delay before providing such subsidies to new immigrants, but it should also do more to boost the availability of social housing in areas of need.