28 Nov 2014

Cameron back from the brink on Europe and immigration

There was relief in the Foreign Office among EU country ambassadors as they gathered there to watch the TV kindly provided by Europe Minister David Lidington. Their leaders had been lobbying No. 10 for months to pull back from talk of a temporary cap or emergency brake on EU immigration into the UK. But for months that talk had carried on.

In fact, the emergency brake was still in drafts of the PM’s speech until the middle of this week. David Cameron would’ve risked a mighty bust-up with Europe and headlines warning that his renegotiation looked in danger of failing.

Instead, the EU ambassadors have been, as he might say, purring. Some say negotiating what appear to be discriminatory benefits changes for EU citizens will be extremely difficult. But they also say that’s a sight better, from their perspective, than a proposal that would’ve been non-negotiable.

The sigh of relief from EU ambassadors was matched by some in No. 10 and elsewhere in Whitehall. There had been profound concern that the PM was being a bit reckless, and he appears to have been pulled back by a concerted effort from the Treasury, senior officials, big business and pressure groups like Open Europe.

One of the dangers from David Cameron’s perspective is that EU partners might think he’s a bit of a pussycat in negotiations – talks tough, then folds before battle.

Mr Cameron’s allies say what actually happened was that the emergency brake looked less and less like a tool that would be guaranteed to do the job. Politically (presumably after focus-grouping it), it looked like it wasn’t a game-changer as it was so difficult to understand. And among business, already shelling out big sums to conduct their own polling on whether the UK might pull out of Europe, there was real concern – conveyed to the Treasury – that things were getting out of hand.

Britain's Prime Minister Cameron delivers a speech at JCB World Headquarters in Rocester, central England

At the JCB factory in Staffordshire where he made the speech, David Cameron was pretty emphatic that his benefit changes would definitely require a change to the EU treaties. That was a bit of a surprise to EU ambassadors who heard Europe Minister David Lidington say it wasn’t clear whether it would or not. Was David Cameron trying to get a negotiating ploy in place? Threaten EU countries with a new treaty nearly all of them dread because ratification is so hard to get, then trade the treaty demand for something else in the talks?

At one point David Cameron defiantly challenged Europe: “To those who claim change is impossible, I respond with the one word, the most powerful word in the English language. ‘Why?'” It sounded like a leftover from the draft speech that threatened bigger change. No-one said an emphatic no to David Cameron’s proposed benefit changes. They said these can be discussed.

What’s the actual impact of the in-work credit withdrawal? Toilers in these statistical fields bemoan the quality of data they have to work with, but both sides of the argument appear to be quite close to each other. At NIESR, Jonathan Portes, one-time chief economist at the DWP, says that only one in 10 of EU migrants qualifies for the withdrawal – i.e. is in the first few years of working in the UK and claiming tax credits. He says the total number potentially affected by the disincentives outlined today is around 50,000.

Open Europe, who pioneered an approach now (to varying degrees) adopted by Labour and the Tories, says the proportion of EU migrants affected is 17 per cent or so, and could amount to around 100,000 who are potentially disincentivised over a few years.

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