UK / EU - Hybrid freedom of movement system with cap based on average salary

 

Much of the discussion about how a post Brexit UK / EU migration system will work has been polarised between maintaining the current system of freedom of movement in return for access to the single market or imposing limits via some mechanism like a points based system. The latter based upon the hope that as a major trading partner the UK will be given preferential access to the single market by the EU compared to other non-member countries.

The reality is that neither of these will be acceptable to the different parties involved. Several leaders of other EU member states and various EU officials have made clear that freedom of movement is a fundamental principle of the single market. From a UK perspective given voters desire for ‘something to be done about immigration’ some form of restriction is expected. There are also practical considerations for business and even the ability of the Border Agency, given its current performance to actually take on and manage this additional administrative burden effectively.

In 2004 the European Union was enlarged with the accession of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. At the time transitional restrictions for workers from these new countries were put in place by many countries (Freedom of movement for workers in the European Union). Similar restrictions were also applied to Bulgaria and Romania when they join the European Union on 1 January 2007.

Access to the single market but with restrictions to labour movement has been tried and tested before, when countries have joined, why not when a country leaves?

The hybrid system of freedom of movement with restrictions outlined below is a variation of the transitional arrangements applied when new members joined the EU in 2004 & 2007, however, it is less restrictive in that movement from countries which are subject to restrictions will still occur. The proposal is based upon the premise that where countries are economically balanced then migration will also tend to be balanced and where there is a greater variance then the pull of economic migration will be more one sided.

The example below uses the most recently available data from the ONS from 2014 (ONS Data inflow employment by country of birth nationality 2014) for work related migration including those who accompany / join, other forms of migration like students are excluded from the calculation and it is assumed that existing freedom of movement would apply to those who fall within these categories. The net pay data used is from 2016 (Average salary in European Union member countries 2016) however it will not reflect exchange rate movements.

Issues of compliance and enforcement of immigration rules, which the Border Agency, HMRC and the DWP will have to deliver by working far more closely than they have done to date are not considered here.

Hybrid freedom of movement system rules

1)

The system will apply to new migration from whatever Brexit cut-off date is agreed.

2)

Only established citizens of their host EU countries will be eligible i.e they must have had citizenship for a minimum of 10 years or be dependants of established citizens.

3)

Restrictions will be triggered where a countries average salary rate is below 50% of the UK average salary rate.

4)

The actual difference between a countries average salary rate and the UK average salary rate will be applied against the benchmark number of migrants who came to the UK from the ONS data in 2014 for that country. For example total work related migration from Poland in 2014 was 29,500, the average net salary in 2016 was 34% of that in the UK. A reduction of 66% is then applied to the 29,500 migration count giving a reduction of 19,470 and leaving an annual limit or cap of 10,030.

5)

As average salaries in countries subject to restrictions converge over time towards that of the UK the reduction applied will fall.

6)

Once the difference in average salary is above the 50% threshold restrictions will be removed and freedom of movement will follow.

7)

For bilateral reasons the UK Government may decide to amend the cap or remove it entirely for example by waiving restrictions applied to Portugal.

These rules will ensure that freedom of movement with 15 European countries will be unchanged upon Brexit. Migration from the remaining EU countries will be subject to a cap, however, the cap will rise as their economies converge with that of the UK and migration will still occur albeit on a reduced level.

The proposed system will deliver a reduction in work related migration of over 76,000 in its first year as per the table below.

 

Country Population (M) Net Monthly Pay (Euro) Work Related Migration Accompany / Join Total Migration Pay as % of UK Pay Cap % Based on % Difference to UK Pay Work Related Cap Applied Work Related Reduction using cap % Accompany / Join  Cap Applied Work Related Reduction Accompany / Join  Cap % Applied Total Migration  Cap Applied Total Reduction Cap Applied
   
Luxembourg 0.5 3,149 900 0 900 149  
Denmark 5.6 3,100 300 0 300 147  
Sweden 9.5 2,560 900 600 1,500 121  
Finland 5.4 2,335 100 400 500 111  
Germany 80.6 2,225 6,300 1,300 7,600 105  
France 66 2,180 16,700 1,700 18,400 103  
Netherlands 16.8 2,158 2,600 1,600 4,200 102  
Ireland 4.6 2,129 2,600 300 2,900 101  
Austria 8.5 2,124 100 200 300 101  
United Kingdom 64.1 2,113 0 0 0 100              
Belgium 11.2 2,091 1,400 0 1,400 99  
Italy 59.8 2,033 11,600 900 12,500 96  
Spain 46.7 1,754 14,300 2,300 16,600 83  
Cyprus 1.1 1,574 0 800 800 74  
Slovenia 2 1,092 400 0 400 52  
Greece 11 1,069 2,200 600 2,800 51  
Malta 0.4 1,021 300 0 300 48 52 144 156 0 0 144 156
Portugal 10.4 1,001 11,100 1,300 12,400 47 53 5,217 5,883 611 689 5,828 6,572
Estonia 1.3 903 200 100 300 43 57 86 114 43 57 129 171
Czech Republic 10.5 793 2,400 0 2,400 38 62 912 1,488 0 0 912 1,488
Croatia 4.2 742 700 0 700 35 65 245 455 0 0 245 455
Poland 38.5 723 22,600 6,900 29,500 34 66 7,684 14,916 2,346 4,554 10,030 19,470
Slovakia 5.4 708 5,600 800 6,400 34 66 1,904 3,696 272 528 2,176 4,224
Latvia 2 664 3,200 2,000 5,200 31 69 992 2,208 620 1,380 1,612 3,588
Lithuania 2.9 585 7,400 400 7,800 28 72 2,072 5,328 112 288 2,184 5,616
Hungary 9.8 570 6,500 400 6,900 27 73 1,755 4,745 108 292 1,863 5,037
Romania 19.9 463 29,400 2,500 31,900 22 78 6,468 22,932 550 1,950 7,018 24,882
Bulgaria 7.2 382 5,400 100 5,500 18 82 972 4,428 18 82 990 4,510
   
Total all countries 155,200 25,200 180,400 28,451 66,349 4,680 9,820 33,131 76,169
   
Total countries not subject to cap 60,400 10,700 71,100  
Total countries subject to cap 94,800 14,500 109,300  
   
Total reductions from cap 66,349 9,820 76,169  
   
Total all countries after cap applied 88,851 15,380 104,231