UK’s EU bind not quite a blind alley

December 14, 2015

The author is a Reuters Breakingviews guest columnist. The opinions expressed are his own.

David Cameron has boxed himself in with one of his demands for renegotiating Britain’s relationship with the European Union. If the UK prime minister doesn’t find a way of extricating himself from this position, Britain may quit the bloc.

Cameron’s bind is entirely of his own making. A year ago, he decided he needed to slow the flow of EU citizens to the UK. Net migration was 180,000 in the year to June.

The premier initially wanted to put a cap on migrant numbers, but he nixed that idea after he realised that other EU leaders would block it. Free movement of people is one of the Union’s core principles.

Instead, Cameron decided to stop EU migrants receiving “in-work” benefits until they had lived in Britain for four years. These payments are made to low-paid workers to top up their salaries. Cameron argued that the benefits were a big attraction to people from the rest of the EU and made removing them the central demand of his renegotiation of Britain’s relationship with the bloc.

This demand is not economically justified. Not only are EU migrants good for the UK economy, there isn’t much evidence that cutting in-work benefits would deter many people from going there to work.

But Cameron felt that the migration issue had become so hot domestically that he had to have some policy to address it. The snag is that the policy he chose is discriminatory – and non-discrimination between citizens of different countries is an important EU principle, even if not quite as sacrosanct as free movement of people.

In order to make the policy legal, the EU’s treaty would have to be changed – an elaborate process that requires the consent of all 28 countries.

Hence, the suggestion in some UK newspapers in early December that Cameron would campaign to take Britain out of the EU if other leaders didn’t immediately agree a new treaty legalising his demand. A referendum on whether Britain should stay in the EU will probably be held next year but, at any rate, has to take place by the end of 2017.

Other leaders don’t want Britain to quit the EU for a host of economic and strategic reasons. The timing could hardly be worse given that the Union is buffeted by multiple crises – from the influx of refugees and jihadi violence to the growth of right-wing populism and lingering problems in the euro zone.

Despite this, other EU countries cannot bend over backwards to accommodate Cameron. Some, such as Poland, about 850,000 of whose citizens live in the UK, don’t want to sign a deal that would involve discrimination against their own people. Others are reluctant to set a precedent that any leader can get a special deal by threatening to quit the club.

The UK premier’s initial idea was to bring things to a head at a summit being held in Brussels on Dec. 17 and 18. Fortunately, Cameron changed his mind after he was persuaded that he wouldn’t get his way. Although the issue will be discussed this week, he is now targeting a final deal at the next summit, in February.

A delay gives the chance for a compromise. There are three main options.

From Cameron’s perspective, the best hope is that the other leaders agree now to let him ban EU citizens from receiving in-work benefits when the bloc’s treaty is next revised. Although that could be many years away, he could claim he had got what he asked for.

The second option would be for Cameron to impose the ban on in-work benefits in a non-discriminatory fashion – for example, by denying them to Britons who hadn’t worked or lived in the UK for four years as well as newly-arrived EU citizens. The problem is that would hurt British youngsters or expats returning home, depending on the exact rules.

It is hard for Cameron to agree such a proposal because his government was forced into an embarrassing U-turn on reducing tax credits received by low-paid Brits in November. But after a couple more months, maybe he could swallow this pill.

The final idea would be to abandon the ill-considered in-work benefits plan and instead get some other concessions from the EU. Cameron is already close to securing a deal on economically more important issues such as protecting the UK from being marginalised by euro zone countries.

Maybe the premier could also get an “emergency brake” to control the inflow of migrants if there was a really big surge in numbers. The snag is this wouldn’t reduce the current flow. What’s more, he has made such a big deal out of in-work benefits that he will be hard-pressed to back down.

But Cameron has to find some solution. Otherwise, he may indeed be forced to campaign to quit the EU – something it still seems he really doesn’t want.

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