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Brexit and Europe

Sharing the social costs of immigration between home and host country would offer the UK a face-saving way to reverse the Brexit decision while demonstrating the EU can reform, German economist Professor Hans-Werner Sinn tells a lecture at Cambridge Judge Business School.

Brexit and Europe
Hans-Werner Sinn
Professor Hans-Werner Sinn

Immigration to the UK was a major issue in the June 2016 Brexit referendum, with many “Leave” supporters citing the cost of providing social services to new arrivals from other European Union countries as an unfair burden on Britain and its local communities.

Depending on how Parliament votes on Brexit during the week of 11 March, both Britain and the EU should consider new rules to share the social costs of such migrants between the country of origin and the host country, renowned German economist Professor Hans-Werner Sinn said in a lecture at Cambridge Judge Business School on 4 March.

Such a plan would be “an offer Britain cannot reject”, while also serving the EU’s long-term interest given that the issue of immigration will play out over many more decades, said Professor Sinn, former president of the Ifo Institute think tank and Professor Emeritus at the University of Munich.

Currently, the EU has three competing goals – free migration, the welfare state and the “inclusion principle” – but those three don’t fit together, so the inclusion principle must be weakened through a new benefits-sharing system between home and host country, said Professor Sinn, who was introduced at the lecture by Cambridge Judge Dean Christoph Loch.

Specifically, Professor Sinn proposed a division between “earned benefits” such as pensions associated with a work contract in the new host country, and other “inherited” benefits not associated with a new work contract such as welfare benefits; under his plan, the latter costs would remain the responsibility of a migrant’s home (original) country for a period of time.

“Why should Spain pay just because the current welfare recipient moves to Spain?” he asked. “We have a deficiency” in the EU’s current rules that cannot survive long term.

As for the UK, if Brexit is not ratified by Parliament next week, Professor Sinn suggests that the EU make Britain a new offer based on his cost-sharing system, to provide a face-saving chance to reverse the Brexit decision. “We have the opportunity to appeal to the EU about this deficiency, and also to show Britain that we’re not only asking Britain to change, but for the EU to change as well so it’s more attractive for Britain.”

If Brexit is ratified and completed, Professor Sinn proposes that the current EU voting rules on a “blocking minority” be rewritten. The rules now say that countries comprising 35 per cent of the EU population can vote to block certain measures – and this 35 per cent threshold reflects the current “power balance” between northern or “free trader” nations such as Britain, Germany and the Netherlands at 39 per cent of the EU population, and “Mediterranean” countries including France, Italy and Spain at 38 per cent of the EU population. With Britain gone from the EU, that balance shifts to 30 per cent for the northern nations and 43 per cent for the Mediterranean grouping.

In the event of Brexit, Professor Sinn also proposes “no punishment” for the UK – as “the EU is not a prison, and the UK will remain our neighbours.”