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The President of the European Commission used a speech in London to acknowledge that rules imposed by Brussels had been abused.
But he sparked fury among Tory MPs by insisting the EU will not allow curbs on migration, even if it means an open-door to unskilled workers.
“We remain absolutely firm on the principle of free movement rights,” he said.
Tory MP David Nuttall reacted with anger. He said: “This speech confirms everything we have long suspected – the architects of the European Union have a grand plan to create a vast superstate with no borders inside it.
“They want to take away our sovereignty and any control of our borders.
“As a small country geographically, we simply do not have the space to allow unlimited and uncontrolled immigration of European citizens.
“It is no surprise that increasing numbers of people in Britain want the country to leave the EU so we can regain control over our borders.”
Speaking at the London School of Economics, Mr Barroso attempted to set out the case for freedom of movement throughout the EU.
“I know that feelings run high on this issue,” he said.
“I am very much aware that freedom of movement may put unintended strains on local communities and services – and in some cases there has been abuse.”
Mr Barroso argued that migrants contributed more to the UK economy than they received in benefits.
Those who move to take up work tend to put more into the tax system than they take out in benefits
Jose Manuel Barroso
The Brussels bureaucrat also rejected calls for curbs on low-skilled migrants in spite of fears they could fuel unemployment by pricing low-paid native workers out of jobs.
“There must be no first and second-class citizens in Europe, where only the highly skilled are able to move and work freely while the low skilled are not,” he said.
In a swipe at the millions of British expatriates living abroad, he added: “We need to be clear about the figures as well – there are as many UK citizens in other EU countries as there are Europeans living and working in the UK.”
He went on to say it was up to national governments to tackle benefit tourists and that they could claim cash from the European Social Funds to launch crackdowns on cheats.
Mr Barroso insisted: “We have clarified anti-abuse rules, for instance on sham marriages. We are tough on abuse. At the same time, we remain absolutely firm on the principle of free movement rights.”
The Eurocrat warned that Britain and other member nations could not expect to benefit from EU trade without accepting open borders.
“You cannot have a single market without free movement of European citizens,” he added.