25 November 2014

Immigration, ‘Brexit’ and ‘Sexit’


Britain is in the midst of two political earthquakes. The spectacular rise in support for UKIP and the SNP each have the potential to unhinge British politics to a degree not seen for a century. Whether this happens depends upon how the established political parties respond. Neither denial nor panic has worked. They could do better.

The surge in support for UKIP and SNP has a common root: concern about the loss of social cohesion. For UKIP supporters, social fragmentation has been driven by immigration, while for SNP supporters it has been driven by the shift in English Conservative ideology from One Nation to Thatcherism. But the continuing decline in cohesion has an implication of which both are rightly fearful. Both groups of supporters are disproportionately people on benefits, and a decline in cohesion spells diminished generosity. New, as yet unpublished, research by my Oxford colleague Sergi Pardos, using the standard techniques of experimental psychology, finds that immigration reduces taxpayer willingness to pay for benefits. It particularly undermines willingness to pay for targeted benefits, the only feasible way of protecting the needy from coming fiscal austerity.

As to what to do about it, the SNP has the better story. By exiting from the UK, (‘Sexit’) it would at a stroke massively increase cohesion, and so the protection of benefits recipients would have a stronger support base. UKIP’s story is that in order to control immigration, thereby preventing further social fragmentation, we must exit the EU (‘Brexit’). Even superficially, the benefit-cost ratio looks far worse. Nevertheless, it could attract enough votes to be disruptive.

Sexit has been averted, but at a price: the SNP may gain and retain the balance of power in parliament. How much power will this give the SNP? In the 19th Century, Irish Nationalists injected a bloc of 80 MPs into the two-party system. Yet it had little power because alliance with it proved to be toxic with English voters. A hug from the SNP may be as damaging for the hugged as was that of the Irish Nationalists.

Brexit must be averted because its consequences would be severe. Following British withdrawal, the European Commission would have an overwhelming interest in inflicting maximal damage on the British economy pour décourager les autres. Were Britain to prosper outside the EU, while those within continued to stagnate under German hegemony, uncontrollable centripetal forces would be generated. Our protection is our veto, which is why De Gaulle wanted us out.

UKIP’s narrative provides only three potential counter-strategies. Two accept that the EU precludes the control of immigration. The first argues that it doesn’t matter because immigration is beneficial. This cuts no ice. Shorn of advocacy, the economic effects of immigration are minimal. On new evidence, cumulatively, rapid immigration has increased wages by around 0.5 percent, offset by a slightly larger fiscal cost. People’s primary concern is the social effects: rising diversity brings greater variety, appreciated by the affluent young, and reduced cohesion, feared by many others.

The second argues that Brexit would be catastrophic. This has the advantage of being true, but is untellable. ‘We can’t quit the club because our friends would hurt us’, is not a viable political message. UKIP would turn it into ‘with friends like that, we’re better out’. Businesses could convey the message, but are likely to keep their heads down, as they did in Scotland: ‘If you quit Europe, we’ll quit Britain’ does not inspire client loyalty. Nor are they trusted: after the banking scandals and corporate tax avoidance, what’s good for business carries less punch.

This leaves only one option: to refute the UKIP premise that EU membership is incompatible with controls. Fortunately, this is true, but to be credible after so many missed immigration targets, it will require fast and decisive action.

Immigration from non-EU countries is unaffected by EU rules. We are not in Schengen and so can achieve a target for total immigration simply by subtracting EU immigration from it and making this the target for non-EU migration.

As to EU immigration, we have scope to reduce it through policies that are compatible with the rules. ‘Free movement’ was introduced as a piece of symbolism for the dream of a proto-state, not as a practical, negotiated policy, and this generates opportunities to be seized as well as red lines to be avoided. Why are immigrants queuing at Calais when they could go anywhere in Schengen, including Germany and Norway which have low unemployment and higher wages? It can’t be because of EU rules.

Partly it is because of our welfare system (both benefits and tax credits). Elsewhere, entitlements are commonly based on past contributions rather than residence. Rather than demanding exemptions from European rules, we could use the penchant for Euro-symbolism to our advantage. A smart move would be to propose that the Commission sets a pan-European floor rate for social benefits. Necessarily, in view of the fiscal crises besetting its poorest member states, these would need to be set at very modest levels. We could then legitimately adopt these rates for payments to immigrants from the EU.

Partly it is because of Britain’s easy-hire, easy-fire, low-training, employment culture. The ‘great jobs machine’ has its limitations. We could enforce our employment laws more effectively and enhance youth training schemes.

Partly, it may be a consequence of our multicultural policies. If you move to Norway you are required to learn Norwegian; if you move to Ireland, your children will be required to learn Gaelic; but in England you can choose to remain in your comfort zone.

As to temporary controls, we could propose designs that minimize affront to the symbols. For example, we could link brakes to periods of severe macroeconomic misalignment. The Commission aims for economic convergence. If, instead, it presides over divergence, it must bear some responsibility. It is reasonable for states affected by the consequences of this divergence to take mitigating actions to deal with the fallout.

Paul Collier is Professor of Economics and Public Policy at the Blavatnik School of Government, Oxford University, and a Director of the International Growth Centre. He is the author of Exodus: Immigration and Multiculturalism in the 21st Century.