Tax credits for UK immigrants latest cause of Eurosceptic ire

Gordon Brown is usually described as the architect of Britain's system of tax credits, which distributes welfare to millions of the lower paid. In fact, it was introduced in the early 1970s by that most free-market of politicians, Keith Joseph – the man who put the Thatcherism into Margaret Thatcher.

During Brown’s time as chancellor of the exchequer, however, tax credits were vastly expanded. Between 1999 and 2007, when he left that post for his term in No 10 Downing Street, he presided over £75 billion worth of payments.

Today, however, the system is blamed for encouraging British businesses to get used to a low-pay regime. More importantly, for now, it is seen as a UK magnet for the EU’s poorly paid workers.

Few immigrants have come to claim jobless benefits – just 60,000, for example, claim the dole, even if the average Ukip voter believes the number stands at 500,000. However, the Eurosceptic-leaning Open Europe think tank yesterday argued that EU migrants, by which it means eastern Europeans and the wave from Spain, Portugal and Italy that has arrived in the past 18 months, are more likely than their British peers to claim in-work benefits.

Looking at the payments that would apply to a single parent with two children, UK nationals and EU migrants earning £227.50 (€287) a week pay £30.99 (€39.12) in tax, but get £330.52 (€417.30) in tax benefits, bringing them up to £527.03 per week.

By contrast, a Spaniard earning the average wage at home gets just £9.45 (€11.93) extra from in-work benefits, leaving them £160 (€202) worse off than they would be if they came to the UK. For a Pole in similar circumstances, the gap would be nearly £260 (€328) a week.

Conservative wishes

Britain's prime minister, David Cameron, is expected shortly to confirm that the UK wants to restrict in-work benefits to migrants for several years. Some Conservative ranks want this restriction to stretch to five years or more. Unlike most continental countries, Britain's system does not require a history of payments before entitlement to in-work benefits. This means one-sided changes would be discriminatory under EU law.

Following the Rochester and Strood byelection victory by Ukip, both the Conservative and Labour leaderships have been trying to outdo each other in their promises to deal with immigration. However, such promises can never go far enough this side of a UK exit from the EU to satisfy many of Cameron's people, as was shown yesterday by former Northern Ireland secretary Owen Paterson.

Paterson, one of the most Eurosceptic voices among the Conservatives, was sacked in June from the from his cabinet role at environment secretary, a dismissal that still deeply rankles.

Demand for exit from EU

Yesterday he demanded that Cameron invoke Article 50 of the Lisbon Treaty, which would give notice of the UK’s formal intention to quit the EU and leave two years for negotiations. Such a forced deadline would concentrate minds and ensure there is a meaningful renegotiation to put before British voters in a membership referendum in 2017, he says.

Legally, however, the plan is confused, since Article 50 negotiations, which have never been tried, are intended to pave the way for departure, not for revised membership of the club.

"The referendum can allow the British people to make an informed choice, as between leaving the political project of the European Union, whilst enjoying the advantages of the single market," Paterson argued.

Despite the confusion, he is closer to the zeitgeist than Cameron, who has begun in recent days to soften rash previous promises that immigration would be cut to 100,000 a year.

Principle is mixed here with personal advantage. The role of leader of the Conservative "out" camp is up for grabs. Paterson wants it. So, too, does former defence secretary Liam Fox and one-time leadership challenger David Davis.

Fox is deeply unpopular among fellow MPs, even more than he realises, while Davis has become for many a cartoon act, “popping up on everything like a retired general playing over maps with a glass of whisky in hand”, as one of them says.