Why is EU free movement so important?

Why does free movement of people - one of the founding principles of the European Union - look set to become so important in the debate about whether Britain should remain in the EU?

Free movement of people - alongside free movement of goods, services and capital - is one of the four founding principles of the European Union. It gives all citizens of EU countries the right to travel, live and work wherever they wish within the EU.

But in response to public concerns in Britain about the impact of immigration on jobs and local services, David Cameron has said he wants to permanently reduce the number of European immigrants coming to Britain. He has promised to make this a key issue in his attempts to negotiate a new deal for Britain ahead of a referendum on our membership of the EU.

Where did the idea of free movement of people come from? The precursor to the EU was formed as European leaders came together in the wake of the Second World War, wanting to prevent another catastrophic war. The idea was that allowing people to move across the continent - from countries where there were no jobs to countries where there were labour shortages - would not only boost European growth, but would help prevent war by getting people to mix more across borders.

"The founding fathers of the European Community wanted it to be a construct that also had a political integration and for that you needed people to move because the minute people crossed boundaries and borders, you had deeper integration… So it was both a social as well as an economic aim.

"If you wish to create a structure which would stop Germany and France ever going to war again, which was at the heart of the original principle," says Gisela Stuart, the Bavarian-born Labour MP for Birmingham Egbaston, "you did require a movement of the people in that area which would simply mean brother would never take up arms against brother again. And that has been achieved."

But over time, the idea of Europe as an economic union evolved into a more political project.

"The big shift came in the early 1990s, [with] the Treaty of Maastricht, explains Floris de Witte, a Belgian political scientist at the London School of Economics. "It was a big treaty that changed the nature of the EU from really an economically-oriented project towards a more politically-oriented project. And one of the manifestations of that was that we had something called European Citizenship.

"Before that, European rights were only for people that were economically active, that moved across borders in order to work or to provide a service in economic terms. After that it became much more of a political concept whereby every European citizen had certain rights to free movement.

"It allows individuals essentially to really figure out what is most important for them. If the most important thing in my life is to have sun all day, I now have the right to move to Spain or to Greece. If the most important thing in my life is saunas, I can go to Finland."

In 2004, the EU expanded eastwards. For people who had lived behind the Iron Curtain for decades, this right to choose where to live and work would have felt like a remarkable liberation.

Many EU countries predicted that would be a big movement of people from east to west after expansion, and introduced transitional controls to limit this movement.

But the Labour government in Britain chose not to introduce temporary controls. As a result, migration to Britain from the rest of Europe significantly increased, with most of the extra numbers coming from Eastern Europe.

"There were some areas that before EU enlargement really didn't have a lot of migration at all and that have now become significant destinations," says Madeleine Sumption, director of the Oxford Migration Observatory.

"Boston in Lincolnshire, for example, at the time of the 2001 census had about three per cent of its population born abroad and within 10 years had seen a large increase in immigration, up to about 15 per cent of the population."

It was this new wave of migration after 2004 that generated a sense of public unease about impacts on jobs and services. Nigel Farage, the leader of UKIP, has seized on these public concerns, arguing that high levels of migration from the rest of Europe have effectively been imposed on Britain by the European Union. He's used it to bring to life the idea too much power has been transferred to Brussels.

Under pressure from the popular support UKIP were attracting in the run up to May's election, David Cameron promised a referendum on Britain's EU membership if he won, and to put freedom of movement at the heart of his negotiations for a new deal between Britain and Europe.

If Switzerland's experience is anything to go by, this is unlikely to go down well with European leaders. Switzerland is not a member of the EU but has signed up to its founding principles.

Last year, the Swiss voted in a referendum to introduce quotas for EU migrants. The response from Europe has been hardline: the Swiss cannot introduce quotas without losing its agreements with the EU in other areas.

Perhaps this is why Cameron isn't proposing quotas. Instead, he's focusing on making the UK a less attractive place to come. Back when the EU's founding fathers established freedom of movement, they also gave people the same rights to welfare benefits as citizens of their host country - in order to incentivize people to move to countries with labour shortages.

Cameron's proposal is to limit the right of European migrants to claim UK benefits like in-work tax credits.

Pawel Swidlicki, a migration specialist at the Open Europe think-tank, believes that the benefit system "enables people to work for a lower wage than they would otherwise be prepared to work for because they know that their income can be topped up by quite generous in work benefits.

"So removing this would actually remove the perverse incentive where it's worth their while to come over to the UK from other EU member states - in some cases actually taking a pay cut."

Cameron has argued Britain's benefits system makes the UK particularly attractive because, unlike most benefits systems on the continent, rights to benefits are based on someone's needs, not contribution over time.

But fewer than one-in-five migrants from Eastern European countries claim in-work benefits. So some have questioned whether this will have much of an impact at all.

"It's got nowhere near the real issue," argues David Davis, the Conservative MP for Haltemprice and Howden.

"The real driver of people, let's say coming from Bulgaria to Britain, is the massive difference in average wages. Their average wage is less than a third of our minimum wage. If I were a Bulgarian or a Romanian or a Pole, I'd be in London right now.

"But that's not about benefits. Benefits makes it a little bit more attractive, but really the basic minimum wage drags people here from across the whole continent."

This debate is a high-stakes one for Britain, with Cameron making his support for the UK remaining in the EU conditional on being able to get some kind of deal in this area.

But it's not only Britain's demands that will be causing a headache for European leaders. The fundamental question at the heart of Cameron's proposals is really one of who gets to decide: the European collective or the nation state? There are growing echoes of this debate across the rest of Europe, particularly in the wake of the eurozone crisis.

"When we see, in France, the Front National calling for the end of the Schengen Agreement and for returning immigrants to the countries, this is - even if it's from the right - at the end of the day the same populist, nationalist reaction that we see in Greece from the far-left when they claim that they've lost sovereignty," says Jose Ignacio Torreblanca, head of office at the European Council on Foreign Relations in Madrid.

"It's a new axis of politics that it's forming across Europe… not a left-right one… a sovereignty axis."

So the European response to the debate we're having here in Britain on freedom of movement could turn out to be a litmus test - that not only determines Britain's future in Europe, but which also has implications for the future of the European project itself.

Analysis - Free Movement: Britain's Burning EU Debate is in BBC Radio 4 at 21:30 BST on 26 July 2015 and also available on BBC iPlayer.