EU Brexit 2016: What's At Stake If Europe Allows The UK To Slash In-Work Benefits For Migrants?

British Prime Minister David Cameron recently won a deal from European Union negotiators he contended will give the U.K. “special status” in the bloc of 28 countries. Cameron and his allies expressed the hope the package of reforms will be enough to woo the British public into voting to stay in the EU in a high-stakes referendum on the question set for June 23.

The agreement struck in Brussels last week covers a range of issues, including facilitating regulatory exemptions for the U.K.’s sprawling financial sector, extending protections for the British pound and providing for rules that make it easier for national governments to block EU regulations. One of the deal’s most contentious elements is the proposed reduction of so-called in-work benefits for foreign migrants, a promise contained in Cameron’s Conservative Party manifesto last year.

Under the proposal, which the European Parliament would need to ratify before it takes effect, EU member states would be authorized to request the permission of the European Commission to apply an exceptional so-called emergency brake to job-related benefits for newly arrived workers from other EU member states. The brake would apply for the first four years of a foreign worker’s presence in the host country, gradually easing up over that stretch, and remain in effect for no longer than a total of seven years.

What would the proposal mean for the U.K. and the rest of the EU? There are three key questions.

1. Would it reduce immigration and save money? The plan is based in part on growing calls in Britain to stem immigration. Figures compiled by the country’s top statistics agency show net migration to the U.K. reached a record 336,000 during the 12-month period between June 2014 and June 2015, up 82,000 over the previous period. Net migration from the EU, much of it from Eastern Europe, showed a hike during that same stretch of 42,000, rising to 180,000. Cutting back on the lavishness of the British state toward foreign workers would help to curb immigration, the logic goes.

Research suggests otherwise. Wage and unemployment differentials, in addition to geographical proximity and social networks, tend to drive migration, not the relative generosity of welfare systems. In other words, a Polish worker likely makes the decision to come to the U.K. because he or she already has family members there and average wages are about three times higher than at home, not because of the expected tax breaks on income.

Critics have raised concerns that the proposed rule would actually lead to a spike in migration to the U.K. in the period before the brake takes effect, although little evidence backs up those fears.

Speaking with the British press, U.K. Secretary of State for Work and Pensions Iain Duncan Smith said he didn’t believe the proposed reform would have much impact overall. Smith, who backs the so-called Brexit, the British exit of the EU, said the U.K. would instead have preferred the ability to halt immigration altogether. “We originally wanted to have a brake on migration, not just on benefits, and the EU point-blank refused to discuss it,” he said.

The Cameron government itself has not released data on how much European migrants cost or benefit Britain overall. When asked this month by an opposition member of Parliament to provide an estimate of “the annual benefits paid to EU migrants in the U.K.” and their tax contributions, the commercial secretary to the treasury, Jim O’Neill, aka Lord O’Neill of Gatley, said he could not provide a reply.

At the moment, Britain appears to be the only major EU country interested in taking advantage of the proposal. In theory, though, other European nations could apply for emergency brakes as well.

2. Is it even possible to implement? The proposal faces some daunting legal and political obstacles because the free movement of EU nationals and nondiscrimination are pillars of the continent’s economic and political union.

In a blog post Sunday, Steve Peers, a professor in EU law at the University of Essex, said it was a “long shot” for the proposal to survive challenges at the European Court of Justice.

“While the Court of Justice has been willing to accept certain limits to free-movement rights on the grounds of protecting health systems, this would have a much more far-reaching impact on nondiscrimination for workers,” Peers wrote. “It’s certainly conceivable that by analogy from the court’s obvious willingness to keep EU monetary union afloat, along with its endorsement of restrictions for nonworkers in recent years, it might accept that these plans to do not violate the treaties. But as EU law currently stands, that is probably a long shot.”

The proposal also needs to get through European Parliament, by no means an easy step. In a speech last Thursday, European Parliament President Martin Schulz signaled his apparent opposition to the proposal, promising to “fight against discrimination between EU citizens.”

According to Schulz, “This safeguard mechanism would mean that two workers, both EU nationals, both playing the same taxes, doing the same work, would for a certain time not be paid the same.”

If the proposal does make its way past the European Parliament, it would proceed to the Council of Ministers. Under the voting rules, it risks being blocked by states in Eastern Europe, especially in the event a major country such as France abstained, as noted by the Telegraph in the U.K.

3. What does the proposal mean for the rest of the Europe? It’s not just the benefit reduction scheme that’s rankling believers in the EU. They worry the overall package of concessions to Cameron will foster a two-tiered entity, striking at the core of the union’s mission. Britain has already opted out of the euro currency area and the continent’s passport-free travel zone.

“How can the EU pursue ever-closer union when one of its most important EU members enjoys a permanent exemption?” Wolfgang Munchau wrote in the Financial Times Monday. “If you divide a union, you end up with disunion. You cannot have it both ways.”

Of course, if the British public votes to leave the EU in June, then the reform package falls into the dustbin of history. Since last September, polls have shown a slight majority of U.K. citizens back remaining in the EU. A poll released by Ipsos MORI last week found 51 percent of Britons support staying, while 36 percent support leaving.