Unbiased Pros and cons of EU membership - Part One : The EU, Immigration and its Effects on the UK

Immigration is one of the big issues in the EU referendum debate, with a lot of claims about how harmful or beneficial it is to the UK. Some of this is based in fact. A lot of it is not.

As someone who is (relatively) neutral on the EU referendum, though tending towards reluctantly voting Remain, and knows a little about the EU, I’m  trying to provide some facts to help people looking for some unbiased information on the pros and cons of being in the EU.

EU Freedom of Movement

The EU does have a Freedom of Movement rule, but this rule only applies to  “workers” and citizens of EU member states and their families. It does not apply to refugees or other migrants coming from outside the EU. The only exceptions would be the minority of asylum seekers who are granted not only refugee status, but full citizenship in an EU member country.

Would leaving the EU end Freedom of Movement or not?

Norway and Switzerland, who are not members of the EU, trade with the EU through their membership of the European Economic Area or EEA (basically a free trade zone without political integration of the kind most of the Leave campaign back).

However EEA membership requirements include the same Freedom of Movement rules with the EU as EU membership does.

It is possible that the UK, which is a considerably larger country and economy than Norway or Switzerland, might be able to negotiate a special deal that granted it single market access without freedom of movement, just as it negotiated opt outs from the Schengen agreement and from adopting the Euro as a currency as an EU member.

It would however be one country of 64 million people negotiating with a bloc of 27 countries with 440 million odd people, so those could be tough negotiations.

And while some remaining EU member states might want to continue access to the UK for their exporters, Germany and France would have a motive to make an example of the UK to discourage other countries from leaving the EU. German Finance Minister Wolfgang Schauble recently ruled out allowing the UK to stay in the single market if it leaves the EU (though of course he is just one minister of one EU government) (1)

A migrant crisis in the EU?

The scale of the “migrant crisis” in the EU, and how much it affects Britain, is also greatly exaggerated by much of the media. To see the full details, see the blog post on this link. In summary though, last year (2015) the total number of people coming to the EU from outside it was under 1% of its 504 million population spread between 28 countries. Many of the people who arrive each year leave or are deported. Only a small minority of these come to Britain. The UK gets a very small share of asylum applications relative to our population compared to other EU countries (2).

Open Borders?

There is a lot of talk of “open borders”. The EU does not have open borders with non-EU countries. Until last year some EU states – those that signed up to the Schengen agreement – did have open borders with one another. This has never included the UK or Ireland, which did not sign the agreement and have always required passports to be shown and customs checks for people entering or leaving the UK.

Several countries, including Hungary, have broken the Schengen agreement last year during the “migrant crisis”, by closing their borders with other EU countries.

British citizens living or working in other EU countries under Freedom of Movement

Another factor to consider is that somewhere between 1.2 million and 2.2 million British people are living or working in other EU countries, mostly under EU Freedom of Movement rules. And some of them do claim benefits (though, like citizens of other EU states in the UK, some of these are in-work benefits). (3) – (5).

If the UK did leave the EU, and did manage to get a special deal that meant Freedom of Movement rules didn’t apply, it seems massively unlikely that remaining EU member states would continue to allow British citizens Freedom of movement in their countries.

Some lawyers argue that under the 1969 Vienna Convention anyone who had lived in another EU country before the UK left the EU would retain “acquired rights” to stay there even after the UK left the Union (6).

But other lawyers argue the opposite, saying the Vienna Convention applies only to bilateral agreements between two states, and not to relations between the EU and former EU member states (7).

Either way UK citizens who wanted to go to live, work or claim benefits in other EU countries after the UK left the UK would have no legal right to do so.

And if the UK expelled citizens of other EU countries, they would almost certainly retaliate in kind by expelling British citizens from their countries.

Citizens of other EU countries living in the UK under Freedom of Movement

Most of the estimated 3 million citizens of other EU countries living in the UK under the same rules are in work (8) – (9).

Whether they would be able to stay in the UK if the UK left the EU would depend on the same factors are for UK citizens living in other EU countries outlined above.

It would also depend on what policies the UK government decided on and what agreements it could make with the EU.

What is certain is that if no deal was struck then most EU citizens currently in the EU would not meet the current UK government standards applied to non-EU nationals as required for a visa (10).

What percentage of immigrants to the UK are from the EU?

Roughly half. Net migration to the UK from the EU in the last quarter was 184,000. From non-EU countries it was 188,000 (click this link and scroll down to table 2). (11)

The number of people coming from EU countries has increased a bit faster than those coming from non-EU countries since 1990 though, probably due to the new member countries that have joined since then.

How does immigration from the EU benefit or harm the UK?

The big area where EU membership does have an effect on immigration in the UK is immigration from other EU member states to the UK increasing our population. Is this harmful to the economy and existing population of the UK, beneficial, neither, or a mixture though?

Does immigration increase unemployment and /or push down wages?

It’s often claimed by anti-immigration campaigners that immigration is pushing down wages and increasing unemployment in the UK, as well as overloading public services like the NHS and schools with more people than they can handle.

A London School of Economics study looking at wages, unemployment and levels of immigration in each of England’s counties between 2004 and 2012 found no connection between levels of immigration and unemployment or wages (12).

Some other studies found a small increase in unemployment caused by immigration from the EU, especially during recessions, but overall found there has not been enough research to say for certain (13).

The idea that immigration just causes unemployment and lower wages is based on missing out half the picture though. Yes immigration increases the supply of labour, but any population increase, whether due to immigration or not, also increases demand for goods and services from the same extra people, not only from the public sector but from private companies too. More people means more sales of products and services for lots of businesses, meaning more profits and more jobs.

If that was not the case then every time a country’s population increased for any reason – whether immigration or more people being born than are dying, it would immediately get poorer. The UK’s population has been increasing for centuries – and it’s been getting richer all the time.

So the overall effect on the unemployment rate and wages from any population increase should be roughly zero, all other factors being equal.

The exception of course is that some migrant workers send or take much of the money they earn working in the UK back to their home countries, which would reduce the wealth of the UK and demand for goods and services here compared to if people born here or staying here permanently had that job.

Strain on public services?

A rapid increase in population may well put strain on public services in some areas, especially as more immigrants settle or work in London and the South East, where most of the jobs are, and where they are more likely to be able to make contact with family members or friends who came before them.

Citizens of other EU countries make up about 5% of NHS staff, about the same proportion of the UK’s population who are citizens of other EU countries, but they make up 10% of NHS doctors (14) – (15).

Immigrants and the EU are easy to blame for national governments looking for someone to blame for the effects of their own policies. The NHS and schools have been under considerable strain for decades due to the “internal market” introduced under Thatcher, and the exorbitant cost of Private Finance Initiatives or PFIs brought in under Major’s Conservative government in the 1990s, expanded under both New Labour (who renamed them ‘Public Private Partnerships’ or PPPs) and then by the Conservatives again (renamed ‘PF2s’) under Cameron and Osborne.

For more on this see e.g the Migration Observatory link here  (which basically says the statistics to decide this have never been collected),  Full Fact on this link and the anti-immigration Migration Watch page on this link

Housing shortages and immigration

It’s often argued that immigration is the cause of the shortage of housing and high rents and rising house prices in the UK. How true is this though?

Most studies show 60% or more of immigrants in the UK rent privately owned properties, and that immigrants are more likely to rent houses from private landlords than people born here (16) – (17).

Studies also show that house prices actually fall in areas where immigrants live, as less people who aren’t immigrants want to live there (18).

While about 12.5% of the UK’s population were born in another country, figures from pretty much every neutral source show about the same percentage of immigrants as people born here are in social housing. So the common claim that immigrants get to “jump the queue” for social housing is false (19) – (21).

The shortage of social or council housing is largely caused by governments from Heath’s on selling off council houses at a discount price in order to get votes, without providing local councils with anything like enough money to build or buy replacements for most of them. This, along with a fall in the percentage of new houses that are publicly owned, has depleted the UK’s stock of social housing massively.

There are also over 1 million privately owned properties which no one lives in. So inequality is probably another cause (22).

The rate of population increase (mostly driven by increasing immigration in the last few decades) can’t be ignored as a factor, but it’s far from the only one – and not as high as many people believe. The net increase in population of 336,000 last year for instance was an increase of just over half of one per cent on the existing population of 64 million (23).

Population increase resulting in harm to environment and quality of life
Versus Immigration helping with our ageing population

The one area where immigration might be more harmful is that any population increase when population is already high can lead to damage to the environment and to peoples’ quality of life by more of the country becoming urbanised as more trees are cut down, more fields built over with houses, more roads are built, more cars are driven etc.

Immigration is certainly the main cause of population increase in the UK and most other developed countries, with birth rates among people born here lower than those among immigrants. The net increase in population last year was around 336,000, added to an existing population of 64 million, an increase of slightly over half of one per cent (24).

It’s also certainly true that the long term trend of immigration since the UK joined the EC and then EU has been to keep increasing, especially since the 1992 Maastricht Treaty which established Freedom of Movement within the EU, though even before we joined the EU the trend was to increase (25).

It seems likely that that trend will continue.

I would argue that the damage population increase can do to the environment and quality of life is the one area that EU membership and Freedom of Movement could be harmful overall to the UK.

But this has to be balanced against the way that immigration from the poorest countries can help the poorest people in the EU, and their families. Money sent home by migrant workers dwarfs all foreign aid combined.

This , of course, means some of the money earned by immigrants in the UK is not spent here, so does not increase demand for goods or services here.

The people who are migrant workers sending money home though, are also the ones who go home after earning some money, so those people don’t increase the UK’s population in the long term.

Plus the UK, like all developed countries has problems caused by an increasing average age. The proportion of pensioners, who require both pensions and more health care, is rising. The proportion of people of working age is falling. If we reduce the number of immigrants the proportion of pensioners may increase faster as the average age of immigrants and refugees is lower, most of them being of working age (26) – (27).

There are other possible ways to counteract this – for instance in France the 35-hour week and benefit incentives for having two or more children have given it a higher than average birth rate of 2 per woman (28).

But then population increase of any kind – whether due to people born here having children, or due to immigration, is just as harmful to the environment and quality of life.

So there are benefits and costs to either increasing or reducing population, though at some point we have to face up to the need to reduce the entire world’s population and the amount of pollution created per person.

The Real Scandal?

The biggest scandal (in my opinion) surrounding people coming from outside the EU to all countries in the EU is that the EU and its member governments (including the UK) are sending so many refugees back to countries which are clearly not safe, like Turkey, which has been sending Syrian refugees back to the civil war in Syria for years and is not really even a democracy any more (the President has stripped opposition MPs of their immunity from prosecution in preparation for jailing some of them). On top of that the Turkish government has restarted a civil war inside Turkey with its own Kurdish minority, and the UN has had to cut off food aid to many refugees in Turkey, Lebanon and Jordan as governments in the EU and other wealthy countries haven’t donated enough money to fund it.

Cuts to welfare and public sector jobs ballooning out of control in Britain

The housing benefit cap and public sector sackings are unfair, un-necessary and risk increasing our national debt, unemployment and homelessness

George Osborne claims welfare spending had to be cut because it has “ballooned” and this is presumably his justification for cutting housing benefit, despite the fact that homelessness charities such as Shelter Scotland say this will increase homelessness.

Welfare spending has certainly increased over the years, but so has spending on everything else, because the economy has over-all grown a great deal over the decades and there’s also been inflation.

The website ukpublicspending.co.uk has compiled tables based on figures released by the government from 2009 on, covering the entire period from 1950 to the present.

These show annual public spending, annual GDP (the output of the economy) and how much was spent on each area of public spending.

Welfare spending as a proportion of public spending fell from 20% in 1997 to 15% by from 2005 to 2009. Compared to the 1970s and 1980s it’s actually fallen significantly from levels of 20 to 30% of annual government spending.Since there has been a recession since the 2008 credit crisis the fact that welfare spending didn't increase in 2009 suggests that, if anything, people made unemployed by the recession are not getting the benefits they need, further depressing demand in the economy and hampering a recovery.

The government’s budget is supposed to be about spreading the cost of cuts fairly, according to ability to bear them. That makes it hard to understand why housing benefit should be capped.

There is certainly waste in the housing benefit budget, but that has been created by Conservative and New Labour governments’ selling off of council housing without building or buying nearly as much new public housing. This has resulted, in a significant minority of cases, to the government paying large amounts out to private landlords, which is the fault of government, not of people who can’t afford to buy or rent their own housing. It could be solved by a mixture of buying and building more council housing and regulating private sector rent levels, rather than capping housing benefit and throwing people onto the street as a result.

Are large scale public sector job cuts necessary and are they wise?

That’s apart from the fact that public sector job cuts on this scale aren’t necessary and aren't wise. What determines the future of government revenues is mostly the performance of the economy, not whether the government is in debt. While it’s not advisable for governments to take on debts that don’t help the economy or prevent severe poverty or suffering for large numbers of people, they can operate with considerable levels of debt. (Look at the US for instance, with decades of a bloated and ever increasing defence budget leading to a vast national debt).

As many economists (and Labour MPs) have warned, sacking large numbers of public sector employees to reduce the budget deficit may actually increase it in the long run by reducing tax revenues, increasing unemployment benefit payments, reducing demand in the economy (i.e sacked public sector workers will buy less goods and services as they won’t be able to afford what they need) and making private sector employees unemployed as the reduced demand means reduced sales for private firms.

The Conservatives claim that large and immediate budget cuts are necessary in order to avoid a crisis like Greece’s, where a rise in interest rates demanded by creditors, combined with speculation by currency traders selling the euro, left the Greek government unable to pay the interest on its debts and the euro falling. Only a bail-out package from other EU members prevented this crisis spreading to the rest of the euro-zone countries.

However Britain’s debt is only 53% of it’s GDP, compared to Greece’s debt of over 110% of it’s GDP, so Greece’s public debt relative to the output of its economy is more than twice as big as Britain’s relative to it’s economy. France and Germany both have government debts of over 70% of their GDP, while Italy's, like Greece's is over 110 of it's GDP.

Osborne's claim in his budget statement that we have the highest deficit in the EU in absolute terms may be true, because we are the largest economy among those with a government deficit, but as a percentage of GDP it's not true.

This is distinct from the annual deficits – the amount being added each year to the debt due to the gap between tax revenues and public spending, – at a bit over 13.6% of GDP in Greece’s case and 11.5% in the case of the UK – i.e the debt of the UK and Greece grew at a similar rate relative to the size of their economies over the last year. However Britain came out of recession this quarter for the first time since the financial crisis of 2008. Governments routinely rack up debts during recessions and by doing so get their economies out of recession, resulting in growth, increased revenues and so the ability to pay off some or all of their debt.

What’s more, while there has certainly been a lot of wasteful spending and we did have a considerable public debt before the credit crisis, Britain’s debt is only as large as it is because of the financial crisis which was caused by a combination of deregulation of the financial sector on both sides of the Atlantic by both ‘left’ and ‘right’ wing governments in the UK and liberals and conservatives in the US.

A ‘third way’ plan by the Clinton administration to make banks and other lending companies give mortgages to people who couldn’t afford to re-pay them also played a role. This was an alternative to building more public housing, which was seen as unacceptably anti-market or socialist.

The British government bailed out the banks for hundreds of billions, took on their debts and suffered reduced tax revenues due to the recession caused by the financial crisis. While they were partly to blame for deregulating banking there was no criticism of deregulation of banking from the Conservative party in the 1990s – they supported it right up the financial crisis.

Osborne plans to cut spending further and faster than any country in the last 50 years; and to do so by sacking 500,000 public sector employees and freezing the pay of the rest, while continuing to fund a pointless war and vast taxpayer subsidies for private arms companies, PFI consortia and privatised rail firms . This looks more like the ideological opposition to public services than hard-headed realism

Other ways to reduce our debts

Of course if it’s possible we should gradually eliminate our annual deficit and start reducing our total amount of debt and annual interest payments on it. It certainly doesn’t make sense to be paying interest on debt for decades if it’s avoidable; and we don't want a continuing deficit leading to ever larger debts and interest payments on them.

However there are lots of ways we could do that without hurting the poorest or in fact anyone but the very richest.

Bringing our troops home from Afghanistan would save a lot of money and a lot of lives. Scrapping or renegotiating private finance initiatives or ‘public private partnerships’ would reduce massive annual costs that aren’t even put on the books, due to an accounting fiddle. Ending public subsidies to privatised rail companies would save even more. If they really are investing in the railways, let them do it from the profits from their fares, which have risen at well above the rate of inflation. Ending export credit guarantees for arms companies like British aerospace would also save money, as would ending military aid to governments which are either dictatorships or whose governments and militaries are involved in the drug trades and death squads (e.g Colombia).

Building more council housing would also reduce the government’s annual housing benefit costs, as maintaining a council house is much cheaper than the rents paid to many private landlords.

Cracking down on tax evasion and tax avoidance by international co-operation with the EU and the OECD to close down tax havens (and even cracking down ourselves on the Channel Islands and the Bahamas) would bring in far more revenues than cracking down on benefit fraud ever has.

Given all that putting caps – and very low caps – on housing benefit, seems downright mean, unfair; like the increase in VAT which is paid at the same rate by everyone, whatever their income.

There are a few fair and progressive elements in the budget – like raising the level of income at which people pay any income tax at all, taking 900,000 of the lowest earners out of tax; and making big cuts in the corporation tax paid by small firms. Unfortunately the housing benefit cap and the VAT rise more than cancel them out.

We’re also developing another problem – that maintaining an environment that humans can survive in reasonably well is not possible in an economic system which demands maximum profit in the short term from every company – and constant, infinite economic growth.