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EU Successes: The Single Market
28 May, 2017

May wants to sacrifice future British prosperity for a vague commitment to slash EU immigrant numbers

Contribution of immigrants to UK economy

I was tempted to say that Theresa May has got her knickers in a twist, but that is not very polite when talking of a Prime Minister. A more acceptable expression – and perhaps a more accurate one – would be to say that she has tied herself in knots over Britain’s membership of the EU single market and the issue of freedom of movement within Europe.

Her troubles began when, in her ambition to be Prime Minister, she dropped her “remain” credentials and started to chant her mantra of “Brexit means Brexit”. Then they got worse when, much to most people’s surprise, she translated this into a vision of a super-hard Brexit, announcing her decision to withdraw Britain unilaterally from the EU single market, before even entering into negotiations. Although she and others claimed that this responds to the “will of the people”, it is far from clear that most of those who voted “leave” in last year’s EU referendum knew that this would mean getting out of the single market, given that several campaign leaders said that it wouldn’t.

The creation and steady improvement of the single market is the EU’s greatest achievement. It has been one of the main drivers of economic growth in the region. It has been good for Britain.  It remains the best possible free trade deal that Britain can hope for. To leave the single market would almost certainly mean eventually engaging with the 27 EU remaining members in a less attractive trade regime that could make a big dent in UK trade with Europe and damage the British economy. It would also exclude Britain from having a voice in defining the future shape of the single market in an increasingly digital environment from which the UK is well positioned to benefit. Moreover, we must not forget in our inward-looking selfishness that May’s decision to leave the single market and then to try to create analogous trading conditions under a different name is not only risky but will involve a long-drawn-out process that itself will cause large-scale collateral damage not just to Britain but to all EU countries by prolonging uncertainties and amplifying tensions.

Those that advocate that Britain should opt out of the single market, which accounts for well over 40% of its exports, claim that this will give us the freedom to open new trade deals with other countries. May’s own visits to Turkey, the Middle East and India, however, must have taught her how illusory these markets will be, confirming her own stated position before the referendum that “If we do leave the EU, we risk going backwards when it comes to trade.” She has presumably also learnt that even free trade deals with other countries seem bound to be tied to immigration privileges and to the creation of arbitration bodies.

May’s main motive for getting out of the single market seemed to be that it would enable her to claim that this would allow her to restrict the freedom of movement of European citizens and thereby stem the flow of EU migrants into Britain. She also saw it as a means of enabling Britain to withdraw from the European Court of Justice whose authority she resents (just as she resents the sovereignty of the British parliament) but which assures fair play amongst the single market’s members.

In her election manifesto, May has re-iterated her goal to bring total annual immigration from all sources down to the “tens of thousands”, but she has neither set a date for achieving this nor explained how she will do it. Hence her goal is merely an electoral aspiration, on which, through her own years as Home Secretary, she knows full-well she cannot deliver –  a “pie in the sky” sop to Tory right wing and UKIP voters who want to stop immigration! She has also turned down her colleagues’ advice to exclude foreign students from the immigrant count, although they represent a valuable home-based “export”, contributing to the British economy through tuition fees and meeting their living costs.

This means that we have now arrived at an absurd situation in which May, though claiming to be a champion of free trade, has committed our country to opt out of the best free trade deal in the world so as to allow her to make a notional election pledge to drastically cut immigration, knowing that she cannot be held accountable for the results. And, if she should actually succeed in quickly bringing immigration numbers down by about two thirds in just a few years, this would imply a double blow to the economy and to British living standards. Not only would our trade have shrunk but there would also be critical labour shortages, now filled by immigrants, in key sectors including the NHS, care for the elderly, farming and food, and the universities. If you add to this the implied need for a managed border in Ireland and the risk of Scotland exiting from the UK, the wisdom of leaving the single market in the hope of cutting net EU immigration must be seriously questioned.

This is not to say that Britain does not need new and non-ambiguous migration management policies. These can exploit the room that exists for creating strategies for reducing immigration from Europe and elsewhere – if this is the “will of the people” – while still remaining within the single market. This means exploring options not only for reducing the attractiveness of Britain as a destination for European migrants but also, most importantly, working with EU institutions to trim the “push” factors that drive migration.

One approach to cutting immigration is for Britain to massively upgrade its educational system so as to generate the skills and aptitudes required to fill jobs that are increasingly taken up by migrants. This need has been addressed, but in a very cursory way, in the Conservative manifesto. Much more must be done on this front.

EU’s freedom of movement legislation aims to ensure equitable treatment of EU immigrants and nationals in destination countries. There is, however, still room for adjusting the pace at which citizens of other EU countries secure access to the full range of welfare benefits, especially for unemployed migrants, and acquire residence rights. Right now, however, any tightening up of migration management is virtually impossible because of the UK’s failure in 2011 to introduce identification cards. The country has no systematic means of even knowing how many immigrants there are or whether they qualify for residence. The creation of some form of obligatory registration system for all people living in the UK, perhaps based on an expansion of the national insurance system, would be an essential first step towards the orderly management of migrants’ access to benefits and services.

Recent events, however, have shown that rates of migration may be more strongly affected by factors other than work opportunities and access to benefits. Shamefully, the rise in hate crimes and other signals of xenophobia related to the EU referendum process, seems to have become a deterrent to immigration. The prolonged uncertainties surrounding the residence rights of EU citizens in UK also appear to be inducing families to return home.  In addition, it looks as though the devaluation of the pound deters inward migration because of the substantial reduction in the value of remittances when converted into local currencies. As new figures emerge, it seems certain that they will show the Brexit process itself has induced a big drop in net EU immigration over the past year.

However, if Britain continues to maintain a strong economy and low rates of unemployment, it will remain a magnet for migrants from around the world. Experience suggests that stopping free movement by closing borders will simply increase the numbers of illegal immigrants. Instead, a much more effective way of slowing immigration would be to reduce the pressures to migrate by improving livelihood opportunities in the main source countries (Poland, Ireland, Portugal, Romania and Italy). Britain, if it was to remain in the single market, could make a strong case for the EU to insist that all major migrant source countries introduce adequate minimum wages, move towards greater parity in welfare programmes including unemployment allowances and other forms of social protection, expand free access to education and health services, and free up their labour markets.

It would be nice to think that Theresa May would have done a cost-benefit assessment of different options for Britain’s future relations with Europe before she embarks – if she remains Prime Minister – on Brexit negotiations. Even without such an analysis, it seems obvious that by far the most advantageous Brexit for Britain would be no Brexit. It is downright crazy for any British government to sacrifice Britain’s membership of the single market and face massive EU exit fees, simply to justify its Prime Minister’s whimsical target for reducing EU immigration and to allow her to claim that she is reflecting the “will of the people”.

If May has any guts, she would now act on her own convictions that she stated a year or so ago. “Fundamentally”, she said “this is about our future and it is about our future prosperity as a country and, as I have made very clear, it’s absolutely in our interest, it’s absolutely in the interest of our country that we remain in the European Union.”

This would imply that she should immediately request Mr. Barnier for an informal discussion – ahead of the start of formal negotiations – on the options for Britain to receive the Commission’s support for measures aimed at reducing migration “push” factors in the main migrant source countries. If the Commission accepts the need to foster a more level playing field on migration, this would set the scene for reducing net immigration without Britain having to leave the single market or the EU.

This article was first published on the “Future of Our Children” campaign website. Re-posted with permission.