Policy options for future migration from the European Economic Area: Interim report Contents

3Existing applicable controls

38.In this chapter we consider the controls on the migration of EEA nationals that are already available to the Government, which could be applied immediately during the transition period, and in the future partnership with the European Union regardless of the framework that the trade relationship might take. The controls would allow the Government to address concerns over the impact of migration without or in advance of any change in the terms of trade between the UK and the European Union.

39.The UK Government’s current approach to the migration of EEA nationals is governed by EU rules on freedom of movement as set out in Article 45 of the Treaty on the Functioning of the European Union (TFEU) and in the Citizens’ Rights Directive, 2004/38/EC (also known as the free movement directive). The free movement of workers is a fundamental principle of the EU; the European Commission views it as the right most closely associated with EU citizenship. Freedom of movement works in parallel with the other three basic freedoms of the single market: freedom of goods, capital and services. Article 45 stipulates that EU citizens are entitled to:

look for a job in another EU country
work there without needing a work permit
reside there for that purpose
stay there even after employment has finished
enjoy equal treatment with nationals in access to employment and working conditions.

40.Although the Treaty allows a Member State to refuse an EU national the right of entry or residence on the grounds of public policy, public security or public health, such measures must be based on the personal conduct of the individual concerned, which must represent a sufficiently serious and present threat to the fundamental interests of the state. Professor Catherine Barnard points out that recent case law suggests that Member States can impose residency requirements as a precondition to entitlement to benefits, “provided those residence requirements are justified and proportionate, and states can impose checks to verify this”.44

Registration and sanction

41.Some controls over EU immigration within the free movement rules are available to the UK Government.45 In implementing the Citizens’ Rights Directive the UK Government chose not to use powers to register EU nationals after three months. Many Member States have put in place a registration process. Belgium, for example, requires all foreigners (including other EU citizens) to register any long-term stay of more than 90 days at the town or city hall of the municipality where they reside, and to carry a residence permit valid during their stay. It also withdraws residency permits from EEA nationals whom it deems to be an ‘excessive burden’ on its social security system. Professor Catherine Barnard pointed out that registration allows Member States to have a much better sense of who is in their country, their age profile and the public service needs of the people in their country.46 The UK Government does not know how many EU nationals are in the UK, as it does not exercise such powers to register and has not carried out comprehensive exit checks.

42.After three months an EU nationals’ right to remain in their host state becomes conditional. As Steve Peers, Professor of EU and Human Rights at the University of Essex, notes:

the EU citizen must either: be a worker or self-employed person; have sufficient resources ‘not to become a burden on the social assistance system’; be a post-secondary student who makes a declaration concerning such sufficient resources; or be a family member of an EU citizen satisfying one of the first three conditions.47

Not only can Member States seek to ensure that the above conditions are satisfied before granting an application for registration but the right to residency can be withdrawn if circumstances later change: due to unemployment if they are not permanent residents, lack ‘sufficient resources’, or have become an unreasonable burden on the social assistance system. The UK Government does not enforce controls over self-sufficiency as a matter of routine but they are enforced in some other Member States.48

43.Enforcement of free movement rules can therefore give Member States increased control and can lead to the expulsion of EU citizens due to unemployment or dependency but, as Professor Steve Peers points out, expulsion “is subject to tight substantive constraints, procedural rights for the persons concerned, and a case-by-case analysis”.49 Expulsion would also not ordinarily lead to a ban on re-entry.

44.Guy Verhofstadt told us that there were a number of possibilities provided by the existing EU legislation and that “it is not that everybody can walk in or walk out of a country”.50 Sir Ivan Rogers confirmed that “we could have done much more domestically on registration schemes and things that would have made access to our labour market more difficult for foreigners without any constraint from Europe and without being deliberately discriminatory”.51 Guy Verhofstadt explained that,

A number of conditions can be put in place, as Belgium does, for example. One conclusion might be that in the past Britain has never used 100% this room for manoeuvre inside the EU legislation but, okay, that is a discussion of the past. It is not a discussion for the future. I repeat that my impression has always been that Britain has never used 100% the possibilities of the room for manoeuvre in the EU legislation on labour mobility, which has been used by other countries that have made a number of requests, who have a number of requirements, who have put a number of conditions. That never existed in the past in Britain.52

45.Existing applicable controls, such as a registration scheme, combined with comprehensive and accurate exit checks, would give the Government information about migration from the EEA and would put in place a process of formalising employment and residency in the UK. Such a process need not be burdensome, but it would be a requirement upon citizens from elsewhere in the EEA wanting to live and work in the UK. Linking the right to residency to self-sufficiency—which would need to be defined but which the Government appears to suggest is its preferred way forward—would keep the focus on those coming to work, and is already an accepted EU principle, which could be further enforced.

Labour market reforms

46.Irrespective of the UK’s relationship with the EU there are steps the UK Government could take around labour market controls and enforcement that might address some concerns over the impact of migration on jobs, wages or terms and conditions. In our report Immigration policy: basis for building consensus we received evidence of concerns that some employers in low-skilled sectors of the economy exploit migrant workers, breaching minimum wage and employment legislation, thereby undercutting the rights and wages of UK labour.53 The MAC has previously found very limited evidence of wage undercutting overall in the UK as a result of immigration but is revisiting this area as part of its current review of the impact of EEA migration, due to be published in September. We have also heard evidence of individual employers using recruitment from abroad, and particularly through agencies, to avoid increasing wages, improving terms and conditions or increasing training.

47.We received evidence covering a range of different policies, centring on enforcement, labour rights and specific measures to curb the impact of agency work, that might constitute effective controls to address concerns about EEA migration. According to Professor Meardi from the University of Warwick there are a number of labour market policies that the UK could consider “that might address many of the concerns of leave voters with declining living standards and increased economic security”.54 He explained to us that Norway and Switzerland have proportionately some of the highest numbers of foreign born residents and also have some of the strictest labour regulations. In preparing for the introduction of free movement both countries took steps to adapt labour laws to the risk of ‘social dumping’—the use by employers of cheaper labour from outside of the country.

Deterrence and enforcement

48.Professor Meardi told us that the introduction of a resident labour market permit in Switzerland had helped to reduce public concern about immigration; and that ID cards indicating workers’ employment status had helped prevent bogus self-employment in Norway. He also explained that Switzerland had much more extensive controls and checks on working conditions than the UK with around 10% of companies inspected annually to ensure wages and labour conditions matched the collective agreement compared to 0.2% inspected for the national minimum wage in the UK.55

49.Focus on Labour Exploitation point out that in the UK there is currently a heavy reliance on individual workers having to enforce their rights through employment tribunals.56 Sir David Metcalf, Director of Labour Enforcement told us he believed that “the chances of an employer being inspected are too low and, if found to be non-compliant, the penalties are too low”.57 He called for penalties to be increased significantly to provide a stronger deterrent effect and for state enforcement of holiday pay. He has also called for the Gangmasters and Labour Abuse Authority’s licensing scheme to be extended to high-risk sectors beyond horticulture and food processing—something we also addressed in our previous report Immigration policy: basis for building consensus. Sir David noted that when he was Chair of the MAC, they found that the tension between the UK’s flexible labour market and possible exploitation of migrants and British low-skilled workers needed to be addressed. He told us that free movement of low-skilled migrants posed a greater risk to enforcement than high-skilled migration.58

50.Sir David also advocated the introduction of joint liability in supply chains “to ensure that brand names at the head of the chain bear some responsibility for non-compliance among their suppliers”.59 In the Labour Market Enforcement Strategy 2018/19, he suggested that one method to ensure compliance throughout supply chains might be the public naming of both the brand name and supplier where non-compliance is found.60

Worker rights

51.Sir David recommended that “a statement of rights should be made mandatory for all workers from within week one of employment commencing” and that “the Government should develop a template for the written statement of employment to ensure transparency in information provided, and to reduce the burden on business”. He submitted that the right to a payslip should be extended to all workers, and that “for hourly paid workers, there should be mandatory inclusion of total hours worked and hourly rate of pay on payslips”.61

Collective agreements

52.The TUC recommended that the UK pursue steps on collective bargaining similar to those in evidence in Norway and Switzerland as well as EU Member States such as Germany, Belgium and Luxembourg.62 It raised concerns that at present, “in sectors where there is a low proportion of workers covered by collective agreements, EEA migrants, as well as non-EEA migrants and UK workers on precarious contracts, are at risk of being used to undercut other workers” and reports that 810,000 workers are now employed on zero hours contracts.63 The TUC also notes that the Single Market includes many regulations that protect workers’ rights and that they could be at risk should the UK chose to leave it.

Regulation of employment agencies and intermediaries

53.The Employment Agency Standard Inspectorate (EAS) is made up of 12 full-time staff and 9 inspectors. It conducted 142 inspections last year, less than 1% of the 18,000 employment agencies it covers.64 In his Labour Market Enforcement Strategy 2018/19, Sir David Metcalf recommended significant reforms to the operation of the EAS, including an increase in resources and an expansion of its remit. Recommendations include powers over intermediaries as well as employment agencies, greater powers to impose civil penalties on non-compliant agencies as an alternative to prosecution, and powers and resources to enforce compliance with the Agency Worker Regulations 2010 (including the Swedish Derogation, which allows agencies to exempt agency workers from the right to equal pay under the AWR). Sir David also recommended that “the Swedish Derogation should either be properly enforced or abolished”, as the loophole is frequently abused by recruitment agencies who encourage workers to sign up to the Swedish Derogation but do not provide them with pay between assignments.65

54.Stephen Clarke, Senior Economic Analyst, Resolution Foundation, suggested that addressing concerns around zero hours contracts, the Swedish derogation and bogus self-employment and increasing enforcement would improve the situation in the UK labour market and might have some benefits in people’s perceptions of migration, but “ultimately should be done because we think it is a good thing for workers in this country”.66 Phoebe Griffith from the IPPR told us that taking regulatory steps to improve the situation in the UK labour market:

[ … ] could have a substantive effect on people’s perceptions. What people have reacted to is the fact that they have felt that the impacts of migration have been left to chance and that there has been quite a hands-off approach when instances such as labour market abuse have taken place. My view would be that you are looking at concrete solutions.67

55.Other witnesses expressed concern about the potential impact on businesses of stricter labour market controls. Dr Rolfe pointed out that:

If you tackle zero-hours contracts and flexible working, you are then in danger of inflicting damage on industries which really do rely on the use of those contracts. That is quite a difficult choice to make.68

However, as Professor Meardi has argued:

The fact that even in the more liberal Canada, co-ordinated responses have occurred in some industries (especially food processing) makes experimentation in the UK worth considering. It is also important to note that many Norwegian and Swiss labour market regulations have been introduced by centre-right or broad coalition governments, and that in most cases they were supported, at least conditionally by employer organisations.69

56.The Government should not just look to immigration rules as it seeks to address public concerns over immigration. Regulation of the labour market, further measures to prevent exploitation, and increased funding for enforcement would benefit both domestic and migrant workers, subject to practical arrangements with business. That other countries inside the EU and in EFTA have far more regulated labour markets than the UK demonstrates that a close economic relationship with the EU is not a barrier for improving terms and conditions of workers in the UK. The Government should seek to improve labour market conditions as part of a holistic approach to addressing public concerns over the impact of immigration, irrespective of what the future relationship with the EU might look like. Plans to do so should be announced in or alongside the forthcoming White Paper on Immigration.

44 Professor Catherine Barnard and Sarah Fraser Butlin, Fair movement of people: equal treatment (part two), 20 June 2018

45 Bruegel, Questionable immigration claims in the Brexit White Paper, 8 February 2017

46 Q6

47 Professor Steve Peers, Can unemployed EU citizens be expelled and banned from re-entry?, 27 March 2014

48 Controversial initiatives such as Operation Nexus (in which the police may report to Immigration Enforcement EU nationals they come into contact with) has seen the number of people expelled from the country increase.

49 Professor Steve Peers, Can unemployed EU citizens be expelled and banned from re-entry?, 27 March 2014

50 Q247

51 Q211

52 Q247 and Q248

53 Home Affairs Committee, Second Report of Session 2017–19, Immigration policy: basis for building consensus, HC 500, para 98

54 Professor Guglielmo Meardi, What does migration control mean? The link between migration and labour market regulations in Norway, Switzerland and Canada, October 2017

55 Q156

56 Written evidence submitted by Focus on Labour Exploitation [PBM0032]

57 Written evidence submitted by Sir David Metcalf [PBM0036]

58 Written evidence submitted by Sir David Metcalf [PBM0036]

59 Written evidence submitted by Sir David Metcalf [PBM0036]

60 HM Government, Labour Market Enforcement Strategy 2018/19, May 2018