This article first appeared in The Edge Financial Daily, on January 13, 2016.

LAST week Britain’s David Cameron made a rare visit — for a Western leader — to Hungary’s pariah-like Prime Minister Viktor Orban. Cameron cannot be picky: He needs all the friends he can get to secure agreement for the “fundamental” change to the European Union (EU) he has promised Britons so they can vote to stay in the bloc in a referendum.

Reaching a deal next month as planned now appears to hinge on Cameron’s demand for a four-year delay before new EU arrivals can claim welfare benefits in the United Kingdom. He has already conceded that he will have to compromise: Outright discrimination against EU citizens will not be accepted by Poland, or even Hungary — no matter how cloyingly helpful Orban sought to appear last Friday. So Cameron will have to reform Britain at the same time he reforms the EU. That is an idea worth exploring more.

There are many reasons why host nations are disturbed by immigration and, in the UK, one of these is a sense of unfairness. It seems unfair that foreigners should be able to come to the UK to claim benefits without having paid tax there first; unfair that low-skilled British workers should face competition from illegal immigrants willing to work under the table; unfair that schools and hospitals should suddenly be overwhelmed, extending waiting times and class sizes for locals.

I am with the Financial Times’ Martin Wolf in thinking that the whole renegotiation is a charade. But why not use it as an occasion to fix some of these very real UK problems, which are not even just about intra-EU migration?

The way Britain’s welfare system is structured is indeed uniquely accommodating for immigrants. It is the only nation in the western EU (to which 98% of intra-EU migrants go) that does not require people to pay into social security insurance funds, or simply work, for a given period of time before they can claim unemployment and associated housing benefits. It hands out child benefit in cash. It offers tax credits to top up the incomes of low-paid workers. And none of this is conditioned on prior work.

The net result is that Britain’s working poor receive a top-up of 82% of their earned income from the government, one of the highest levels in the EU. That makes Britain one of the best places in the bloc to be poor and working.

Reportedly, a compromise is being discussed in the EU under which everyone in the UK would have to be resident four years as an adult to receive benefits.
Why not? Cameron has been talking since 2012 about removing the right to unemployment and housing benefits from 16- to 24-year-olds, so youngsters do not start out their careers on welfare, but have to “earn or learn”.

Indeed, why not go further and create a partially insurance-based system a little more like those on the continent, so that taxpayers feel a greater connection between what they put in and their own potential good? That might also help with labour mobility, making people more willing to risk change.

Cameron could reintroduce an ID card for non-EU passport holders, which employers must have on record, ready for inspection, for those they hire. Properly used, that could give an important sense that control and fairness are being introduced to the system.

One could say the same of housing, schools and hospitals. Much resentment of immigrants comes from the perception that they are squeezing locals out of scarce housing and school places, and extending waiting times for medical treatment.

The root of these problems, however, goes way beyond the impact of immigration, says Charlie Cadywould of the Demos think tank. He spent the last six months researching why local communities are so resistant to the new housing construction the country so obviously needs.

“I found that this idea that it was outsiders who would be getting the new homes was very powerful. That ‘we’ suffer the costs and inconvenience of new construction, and ‘they’ benefit. What is interesting is that people did not often speak in terms of immigrants, but outsiders — including from the other side of a big town,” Cadywould observes.

The solution to these problems clearly cannot be found just by reforming the EU. Fixing them requires finally doing what is needed to unblock the UK’s planning system and devolve control over schools and hospitals so that local authorities with better knowledge of population growth patterns can plan for expansion — something at which the present centrally directed system fails abysmally.

The reason these things are not happening, or at best slowly and partially, is that they are difficult. And even if achieved, they would not provide the political frisson of forcing the EU to mend its ways, which is what Cameron wants to help him win the referendum to keep Britain in Europe. Indeed, the irony of changing the UK for its own benefit is that some measures would make it look more like its continental EU neighbours. — Bloomberg View