EU's migrant rules prove the referendum case

So Scotland is to get an independence referendum to be held in 2014.  For people like me, who want a referendum on Britain's (England's?) place in Europe, the wait goes.

But the case for EU withdrawal or radical renegotiation is growing by the day.

Take last week's news that the EU is trying to force the UK government to pay benefits, including pensions, to any EU citizen who applies for them.  The EU wants to stop Britain applying its "habitual resident test" to ensure that foreign claimants are genuinely settled in the UK and have paid taxes here.

I think you would be hard-pressed to find more than 2% of the British electorate who would support paying benefits out to foreigners who haven't contributed anything to the country beforehand.  But our democratically-elected government is being forced to do so by the European Commissioner for Social Affairs, an unelected Hungarian who we have no influence over whatsoever.

And this is not some minor irritant.  Control of public spending, given the size of the deficit and the challenge of funding growing numbers of retirees, is crucial if the UK economy is to survive never mind thrive.

The EU would argue that they are sticking up for the rights of immigrants but the best way to ensure that is to have clear, fair and properly enforced rules to reassure the host country's citizens that they are not being taken advantage of.

A group of Tory MPs recently proposed a scheme where UK immigrants would earn their rights to benefits, housing and healthcare over time by working and paying taxes.  They might have added that the immigrant would lose these rights (and ultimately their right to reside in Britain) if they committed any crime.

This might seem tough but it would transform the immigration debate overnight.  The suspicion that immigrant communities are a drain would lift.  Now the very word "immigrant" suggests a burden and a problem but perceptions can quickly change with some clear rules.

Immigration should be a massive plus for Britain.  Not just the cultural vibrancy it brings but hard economic benefits - an improved dependency (worker to non-worker) ratio, a better workforce for our companies and lots of imported skills, capital and connections.

A scheme where residency rights for all immigrants, both EU and non-EU, were dependent on contributing to the system and staying on the right side of the law would ensure that immigration delivers these gains and regains popular trust.

But the EU wants us to go in the opposite direction which will further undermine perceptions of immigrants and make mugs out of honest taxpayers.  I wish it was a Referendum on Europe we were getting ready for in 2014.

The People's Pledge - EU Referendum Campaign



From the website:  Service for Spanish autonomos

Spain slams the door on Romanian immigrants

In a surprise move last week the EU said it would allow Spain to restrict the number of job-seeking immigrants from Romania. This is the first time any EU country has sought to keep out workers from another EU country since Europe introduced an open borders policy. This is hardly "Fortress Spain" - the nearly 900,000 Romanians already in the country will be unaffected and the restrictions will last only until 2012. Is Spain right to take this step? Should Britain follow?

The justification given for the move is that the number of Romanians "was distorting the labour market". Spain's unemployment rate is now 21% and its job market cannot supply enough jobs for locals never mind the 5 million foreigners in the country legally plus who knows how many illegally. Already 30% of the Romanians in Spain are unemployed.

Sounds like an open and shut case but there is more to it. During the boom years immigrants were welcomed with open arms by the construction and agricultural sectors particularly when they were doing jobs Spanish nationals were turning their noses up at. They were not exactly "stealing" Spanish jobs. Also there is more than a hint of scapegoating about the move. Spanish unemployment has always been high because of a dysfunctional system which discourages legal job creation and because of the disastrous consequences of joining the euro, not because immigrants came to make an honest living during the boom.

While I think it is a classic case of “too little too late” I think Spain is right to seek to limit the inflow of Romanian jobseekers. By all accounts the benefit system is very sketchy and ungenerous in Romania and wages for those in work very low. That explains why so many are prepared to travel throughout Europe in search of a better deal but it is hardly fair to local jobseekers in countries where jobs are scarce anyway. And Spain has no right to send back any surplus migrant workers so as their economy has soured they have been left with hundreds of thousands of foreigners on benefits at a time when they are under massive pressure to reduce state spending.

As for Britain similar questions have been asked for years about how this free movement of labour through the EU is supposed to work when some countries have much more generous welfare systems and more open labour markets than others. The result for the UK has been that almost all jobs created in the last decade have gone to foreigners, mainly Eastern Europeans, and there has been a massive strain on public services and housing.

But the answer isn’t to blame immigrants or necessarily to place limits on their numbers particularly when they are often taking up jobs that locals will not do. Root and branch reform of the benefits system should come first, particularly the areas that are most abused and reduce the willingness of people to work, like housing benefit and incapacity benefits.

From our website: Spanish non resident tax

When will the Spanish pensions system collapse?

You might notice my deliberate and provocative use of the word "when" in the title rather than "might" or "if". I have just been doing an article for my website about Spanish pensions ("Spanish Pension Benefits") and was shocked by some of the figures I found during my research.

The article talks about how much someone in Spain can expect to get by way of a state pension, the answer being somewhere between 340€ a month up to nearly 3.000€ a month if you have made the maximum contributions. The majority will I guess be retiring on something between the minimum and double that, and bear in mind that in Spain you get 14 monthly payments (double at Christmas and Summer holiday time which is a nice system I think.

Not overly generous then but as everyone knows there is a pensions timebomb ticking in every developed country due to population ageing. Spain's ageing profile was what really surprised me and it is this and not the generosity of the payments that will sink the system. These are some UN figures comparing the ratio of working age Spaniards with oldies in 2050 with the ratio at the turn of the century:

2000

Spain Working age (15-65) 27 million

Spain retirement age (65+) 7 million

Spain ratio - 4 workers to every pensioner

2050

Spain Working age (15-65) 16 million

Spain retirement age (65+) 12 million

Spain ratio - 1.4 workers to every pensioner

(source UN Ageing Report

http://www.un.org/esa/population/publications/worldageing19502050/)

So, Spain has an 11% public sector deficit now ( ie is borrowing to pay current pensions) and that is barely 10 years into this dramatic demographic shift. It seems inconceivable that Spain will be able to finance state pensions with 11 million fewer workers and 5 million more pensioners. It just can't happen. So what will happen?

A big shift towards encouraging rather than deterring immigration? That may partially happen but the problem is rich countries tend to attract the poor and unskilled who may not exactly be an unmitigated economic boon.

Cuts in benefits and later higher retirement ages? For sure and these are being talked about at the moment with a report from 100 economists suggesting reforms along these lines (http://www.valenciaplaza.com/ver/10894/El-modelo-sueco-y-los-100-economistas.html) but the reforms seem quite timid, with a rise of only 2 years in the retirement age and an increase of 5 years in the number of years' contributions required to get the maximum pension (it is now 35). Hardly enough to rescue the system you would have thought.

Essentially the government is making promises it cannot keep and cannot renege on explicitly for fear of a political backlash. The outcome will eventually be a default on its pensions promises by stealth - pensioners will get the nominal pension they have paid for but the government will borrow and print the money to pay for it so inflation erodes its effective value. At some point in the next couple of decades 70s style inflation will wipe out much of the real value of state pensions.

Other recent articles: Spanish non resident tax