EU freedom of movement – the balance of taxation and social spending

A major issue within the UK at present is the Freedom of Movement within the EU and the fact that a lot of the current movement is into the UK (at present about 200,000 per annum). The policy principle has been reaffirmed in Brussels and more recently by Chancellor Merkel. UKIP seizes on these statements and the EC seems blissfully unaware of how much they are fostering UKIP at present (the demand for a 2bn euro backdated payment from the EC was another contribution to swelling UKIP’s support!). Now I don’t support UKIP in any way but I thought that a couple of anecdotes would illustrate why the freedom of movement issue is gaining ground in the UK.

Like many high streets in the UK we have a number of Big Issue sellers who have regular pitches which I think everyone is comfortable with. But over the last twelve months we have had for periods of time, professional beggars from new entrant countries – some question whether this is what freedom of movement intended? So what does free movement provide? To quote from the EC website the rights of residence for more than three months are:

“The right of residence for more than three months remains subject to certain conditions. Applicants must:

  • either be engaged in economic activity (on an employed or self-employed basis);
  • or have sufficient resources and sickness insurance to ensure that they do not become a burden on the social services of the host Member State during their stay. The Member States may not specify a minimum amount which they deem sufficient, but they must take account of personal circumstances;
  • or be following vocational training as a student and have sufficient resources and sickness insurance to ensure that they do not become a burden on the social services of the host Member State during their stay;
  • or be a family member of a Union citizen who falls into one of the above categories.”

This is fairly clear, that the primary driver for freedom of movement is to allow engagement in economic activity, or more generally to be able to support oneself through work or have the resources to support oneself and not become a burden on the state.

Clearly begging doesn’t come within this definition (unless you regard it as a trade!). But there is evidence that the issue of becoming a burden on the state is significant. This report form the BBC indicates this isn’t just a British issue:

“Last year the mayors of 16 large German cities wrote to the government asking for help with unemployed migrants flooding into their regions from Eastern Europe. Places like Cologne, Dortmund and Hanover have struggled to cope. ”

Now there is another tax aspect to this area which seems little focused on. If we accept that economic working migrants are ok, then those migrants will in part be families with the demands that families pose on education, health and social security. In London, and elsewhere, we are seeing this in state schools where up to a quarter of pupils are EU migrants. But in the UK, those migrants don’t pay tax on all their income because they benefit from non domicile status. So a migrant gains all the benefits of UK social spending while only paying tax on their UK employment income and probably not paying tax anywhere on their investment income. This doesn’t seem the correct balance and is something the government should review.

There are two further points on freedom of movement of a more strategic nature.

Chancellor Merkel supports the principle, but lets think strategically. If the UK leaves the EU over an issue like this, which country is likely to be the main destination for those economic migrants currently coming to the UK – I’d hazard a guess Germany.

Finally the IPCC has published its latest report on Climate Change (of which more in a later blog). It always surprises me that Northern European governments are not worried that over time, freedom of movement will lead to migration from Southern Europe to the North due to climate change. This is one of those aspects of climate change which is difficult to quantify but does have a reasonably high likelihood of occurrence. Of course the UK is one of those countries but so are the Nordics.

 

 

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