Scotland needs EU Freedom of Movement

Immigration was a key subject in the EU referendum, whether you voted Leave or Remain. Therefore it is vital that we have a proper understanding of how migration within the EU affects us
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Colin Imrie, an independent policy analyst who has worked on EU policy for the European Commission, the Foreign and Commonwealth Office and the Scottish Government, has just published a paper discussing how freedom of movement benefits Scotland. This paper “Freedom of movement: why it’s central to the Brexit negotiations” is available from the University of Strathclyde website. Here, he touches on the issues raised in the longer paper, of which an abridged version is published below.

16th January 2017

Immigration was a key subject in the EU referendum, whether you voted Leave or Remain. Therefore it is vital that we have a proper understanding of how migration within the EU affects us before the UK government embarks on the process of disentangling us from the world’s richest and most successful economic bloc.

Leaving aside all other considerations in relation to the subject, immigration in EU terms means freedom of movement, the ability for EU citizens (and those of a few other countries such as Norway and Switzerland) to move and work around Europe.

In my recent paper, which seeks to throw light onto a much discussed but often misunderstood issue, one of my aims was to point out how central this was to the economic success of the EU and the single market. Freedom of movement is not an ideological imperative designed to create an amorphous, homogenous EU population from east to west and north to south, nor is it a removable, a bolt-on onto the EU’s principles. Rather, it is absolutely fundamental to the efficient workings of the single market; if capital can choose to go wherever it wants, then people need to be able to follow the ensuing demand for labour. And of course that is a key point here – EU migration has, on the whole, filled gaps where local labour has been unable to supply the requisite numbers.

Given the almost toxic discussion of immigration in the wider UK, why is it that it did not feature so prominently in the referendum debate up here? That’s because, by and large, Scotland’s political leaders have been honest with the population in explaining why we should welcome new blood into our country, the economic benefits that this brings and have eschewed the easy scapegoating of immigrants for our problems. For the first time in living memory EU migrants to Scotland helped increase our population significantly in the first decade of the 21st century and we need this flow to continue in future years.

And the reason they are honest might be helped by the fact that the factors underpinning the need for continued freedom of movement are straightforward: first, as mentioned before, we have to fill the numbers in vital industries such as digital technology, food processing and energy as well as in our public services, second, we need to continue to replenish our rapidly ageing population and make sure that we can maintain our workforce in the years to come, and third, now that Scotland has its own income tax powers, we need more workers to pay more tax so that we can maintain our public services. And all of this alongside the enormous benefits for Scots of being able to work wherever and whenever they want across Europe.

In short, freedom of movement is vital to Scotland’s continued economic success and without it we will undoubtedly be poorer.

 

Freedom of Movement

There are both economic and legal underpinnings to freedom of movement. In economic terms, the factors of production should be mobile across a single market. When firms are better able to compete and capital can flow freely to where it is most efficiently used, people need to be able to move to where the jobs are.

Most EU citizens living in another EU country complement the native workforce by finding jobs in sectors where there is excess labour demand. The impact on public finances overall is positive, since the average EU “mover” tends to be of working age and in employment, compared to the average native. EU “movers” are however, over-represented in low-wage sectors and therefore on average earn lower wages than natives, despite often being over-qualified.

The possibility of moving abroad has helped to ease high unemployment rates in some of the new member states. This is helpful in the short term but may lead to a problem in the long term if the most motivated and qualified workers stay abroad for long. It is for this reason that a crucial flanking policy of the single market is financial transfers to the poorer countries, primarily through cohesion policy and now increasingly through investment vehicles such as the Juncker Investment Plan, in order to allow them to invest in skills and jobs for the future.

The legal right of free movement is enjoyed by all nationals of countries which participate in the single market, i.e. all EU Member States, the European Economic Area (EEA) states and Switzerland. All nationals of EU Member States are also European Citizens possessing the rights of free movement and residence in the EU. All EU citizens (and EEA nationals) can enjoy free movement and residence unconditionally across the EEA for a period of up to 3 months.

To enjoy residence in another Member State beyond three months, the individual must be a national of a Member State (nationality is a matter for Member State’s own law), and be either a worker, a self-employed person, an economically self-sufficient person with health insurance cover such as retired people or a student with health insurance cover and sufficient resources to support themselves, or a jobseeker who has a genuine chance of being engaged (with some limits to equal treatment in terms of access to social assistance until they become employed).

The right of free movement includes the right to be accompanied by family and the right to equal treatment or the freedom from discrimination on the grounds of nationality. This means that EU citizens and their family members living in another Member State enjoy the same treatment as nationals of the host Member State. An important right for EU citizens and their family members is the right to permanent residence in any other EU country. The status of permanent residence follows five years of lawful residence in the host Member State.

Finally EU citizens also have political rights to vote and stand in local and European Parliamentary elections. So far, the UK remains an outlier in extending these rights to regional (devolved) assemblies and Parliaments, which of course led to EU citizens registered to vote in Scotland in Scottish elections, having the right to vote in the Scottish Independence Referendum in 2014 (but not of course, under the UK parliamentary franchise, in the 2016 EU referendum).

The way the June 2016 referendum result was interpreted by the main UK parties and by Theresa May on assuming Conservative leadership, made it clear that there was a strong belief that voters were demanding controls on EU migration into the UK. In her address to the Conservative Party Conference on 5 October 2016 the Prime Minister made it clear that she would include controls on EU freedom of movement in her proposals under Article 50, along with parallel measures to “take back control” including reinstating the sovereignty of British courts.

In pledging Labour’s support for the Government’s triggering of Article 50 (subject to a plan being prepared and presented to Parliament), Labour Brexit spokesman Keir Starmer made it clear that Labour’s key single market objective was tariff free access to the single market – a long way short of guaranteeing the four freedoms and associated social, cohesion and environmental legislation and policy.

In Scotland the referendum debate was less focused on immigration than was the case in England and Wales. Following the referendum First Minister Nicola Sturgeon made guaranteeing the position of EU nationals in Scotland a key plank of her campaign to keep Scotland as close as possible to Europe to respect the 62% Scottish vote to remain in the EU.

There are serious questions to be asked about whether this difference in the political debate accurately reflects public attitudes on migration in Scotland compared with other parts of the UK. In his commentary on British Social Attitudes 2014 Professor John Curtice noted that the difference tended to be a matter of a few percentage points and that on most immigration issues Scottish attitudes tend to mirror UK views as a whole, with the largest category (43% compared with 52% in England) in favour of more restrictions. These public attitudes have not in recent years however, had a significant influence on the political debate in Scotland, which remains firmly in favour of more migration.

 

Scottish Government Proposals

The Scottish Government’s proposals “Scotland’s Place in Europe” published on 20 December, set out the importance of continued European Single Market membership for Scotland. They start from the premise this is the best outcome for the UK as a whole, but then explain the Scottish Government’s strategy for ensuring Scotland can remain a member of the European Single Market even if the UK Government chooses a different outcome.

If the UK decides not to apply freedom of movement on the current model, the Scottish Government argues that immigration powers should be devolved to Scotland to allow Scotland to operate a full single market model on the lines of an EEA member. There will be close scrutiny of these proposals at UK level. In doing so, the UK Government should consider how restrictions on EU freedom of movement could impact significantly on Scotland’s public services and wider economy.

The first consideration is the importance of EU nationals to key sectors of the Scottish economy. EU migrants form some 30% of employees in sectors such as food and drink, digital industries and hospitality, play a key role in health and social care and are an important source of highly-skilled labour for industries such as energy – they played a key role in enabling high growth in the sector when oil prices were high in 2009-14. The advantage of EU labour is its ability to move quickly without the requirement for the heavy bureaucratic processes involved in getting a visa. It will be possible to some extent to substitute for this as domestic labour is trained up, a key priority for the Scottish Government – but it will act to reduce growth opportunities and limit productivity gains.

Removing free movement for EU students and researchers will impact particularly severely on Scotland’s higher education sector given the high number (16%) of academic staff from the EU. Charging fees to EU students, which would be allowed once EU law no longer applies, may bring in badly needed income, but this could be offset by the loss of access to EU research grants. Scottish research bodies could also lose their leading role in many collaborative EU projects, and the benefits of student mobility and enhanced learning experiences gained through ERASMUS could diminish.

Second, freedom of movement is of crucial importance to Scotland’s demographic challenges and future economic growth. The Scottish Economic Strategy puts a strong emphasis on growth in the working age population in underpinning sustainable economic growth. Population growth increases the labour force and with it, the total amount the economy can produce and also increases demand for goods and services, creating business and employment opportunities.

The Government Economic Strategy (2007) included a target to match average European population growth over the period from 2007 to 2017 and migration has a significant role to play in helping to ensure that this target and other performance indicators are met. The accession of Poland, Lithuania, Hungary, Estonia, Latvia, Czech Republic, Slovakia and Slovenia to the EU in 2004 resulted in an increase in migration to Scotland, with particularly large in-migration from Poland. The 2011 census showed a 4.6 % increase in the Scottish population, with a 225% increase in the number of EU-born nationals living in Scotland in 2011. In economic growth terms this approach has paid dividends; between 2010 and 2035, the Scottish population is projected to increase by 10.2% above the EU average and significantly faster than many other European countries. Within this, the working age population is also projected to increase. Any restrictions on such migration will impact on Scotland’s ability to grow its workforce and consequently on economic growth, with the likelihood that the improvements shown in Scottish economic growth in the early years of the 21st century and in the provision of public services such as health and social care going into reverse. There could be particularly serious implications for Scotland’s ability to deal with demographic challenges as its population ages.

Third, any restrictions on freedom of movement could have major implications for future tax raising and inclusive growth objectives in Scotland. The “Fiscal Framework”, agreed after difficult negotiations between the UK and Scottish Governments in early 2016, sets out key rules on how the fiscal arrangements will operate, including such Barnett formula transfers as will continue after the Scottish Parliament implements the additional tax and social security powers transferred under the Scotland Act 2016 on 30 November 2016. In particular the question of how Scotland’s relatively slower population growth is dealt with was a point of dispute that was only solved by putting off the final decision until after the next major spending review in 2021. The expectation following the Chancellor’s Autumn Statement on 23 November that lower than expected tax take across the UK by the early 2020s will lead to increasing austerity in the 2021 review, can only increase the possibility that, if income tax take falls in Scotland due to a slowdown in population growth, then the risk of the UK failing to compensate in full the Scottish Parliament will grow, with consequences for Scottish Government’s ambitions to deliver high quality public services and inclusive growth.

 

Conclusion

Freedom of movement is an integral part of the single market because it has a strong economic purpose and because it helps enforce rights available to EU citizens throughout the territory of the EU. It is an essential component of the EU’s most favourable trade deals with third countries and applies fully to relationships with the European Economic Area and Switzerland. While it seems that there is a strong consensus in England that a key consequence of the June 2016 referendum vote must be some restriction on freedom of movement of EU citizens, whatever the consequences this will have for the UK’s future trading relationship with the EU, no such consensus exists in Scotland, where there is strong political support for freedom of movement.

Freedom of movement has played an especially important role in Scotland in the 21st century in enabling the Scottish economy to grow faster than the historic trend, and there are real concerns that if restrictions are placed in future on freedom of movement of EU citizens this could impact on key sectors in the Scottish economy, reduce population growth and its associated impacts on economic growth, and have a major negative impact on the capacity of the Scottish Parliament to increase tax take under its new income tax powers. The Scottish Government have asked the UK to include special provisions to ensure Scotland can continue to apply Single Market Rules in its proposals to leave the EU under Article 50, but it remains to be seen what the UK will decide to do.