A furious row has broken out at the heart of the coalition Government over the right of European Union nationals to work in the UK, with Deputy Prime Minister Nick Clegg branding proposals floated in a leaked Home Office document "illegal and undeliverable".
Reports over the weekend suggested that Home Secretary Theresa May wants to introduce a cap on EU migration, possibly at 75,000 a year, with professionals and high-skilled migrants from wealthy countries such as Germany, Austria or the Netherlands allowed in only if they had a job offer and lower-skilled workers permitted to settle only if they were employed in posts where there was an identified shortage.
Mrs May said that r eform of the right to free movement should form part of any negotiations on new arrangements for the UK's membership of the European Union.
And she revealed that she has already been discussing the issue "for some time" with counterparts in other EU states who are also concerned about issues such as "benefit tourism" and movements of workers between countries with wide disparities in incomes.
The Home Office paper is understood to have been drawn up as part of the Government's "balance of competences" review of how EU rules impact on the UK. Liberal Democrat sources said that the publication of a "balanced" cross-governmental assessment of the freedom of movement issue had been delayed by resistance from the Home Office, only for a "very selective, one-eyed version" of the argument to find its way into the Sunday Times.
Mr Clegg made clear he had no doubt that Mrs May's department was to blame for the leak, telling a Wesminster press conference: "My advice to the Home Office is to spend less time leaking policies that are illegal and undeliverable and spend more time delivering on the policies we have agreed as a coalition - notably the reinstatement of exit checks.
"I remain very frustrated that the Home Office has still not delivered something which I personally insisted should be in the Coalition Agreement, which is a reinstatement of the checks which allow us to know not only who's coming into this country but who's leaving as well."
Speaking to BBC Radio 4's Today programme, Mrs May declined to comment on the leaked report.
But she said: " This is something I've been talking about with my opposite numbers - interior ministers in other countries within the European Union - for some time now.
"There is a growing concern not just here in the UK, but elsewhere too, about the abuse of free movement, about the way in which people can move freely across Europe, sometimes for access to benefits."
The UK is already tightening up rules on migrants' access to benefits, as Romanian and Bulgarian nationals gain new rights to live and work in Britain from next month.
But Mrs May made clear that she and Prime Minister David Cameron want further reforms to control the access of nationals of any future EU entrants.
"What the Prime Minister has said and what I have said is that in looking at reform of the EU we need to look at this whole question of the arrangements for new countries that come in - the so-called accession countries," she said.
"At the moment, you can restrict free movement rights for seven years. What both the PM and I have said is we need to look at this and think about whether that should be longer, whether it should be more flexible, whether we should look at restricting free movement rights until a country's national income, GDP, is at a certain level, so we are not looking at the great disparities we sometimes see across the EU.
" What I'm saying is that as we look ahead to the whole issue of reform of the European Union, I think we do need to look at this question of free movement.
"This isn't something that is just being raised in the UK. There are a number of countries who are concerned at various levels about this issue of free movement, particularly obviously about abuse of free movement.
"The whole issue of free movement has changed over the years. At the original start of the EU, it was about free movement of workers. It's now been expanded by treaties and by the courts in terms of their interpretation of it.
"So I think it is right that we look at the question of abuse and we look at the accession of new countries and say what makes sense for member countries within the EU in terms of the future and in terms of what this free movement right is."
Mr Clegg said the leaked proposals to "pull up the drawbridge" on migration from other EU states would be a "disaster" for British business
"If we pulled up the drawbridge now and said to German lawyers or Finnish engineers or Dutch accountants that they can't come to work here, it would be a disaster for our economy," he said.
"We are an open economy. The City of London would grind to a halt overnight. It would be very, very bad for British business and for the health of the British economy.
"It would be very unwelcome to the two million or so Brits who live and work abroad, who I don't think would thank the Conservative Party for entering a tit-for-tat race to the bottom where everybody in the EU starts pulling up the drawbridge."
The goal of reintroducing exit checks to provide a reliable record of who has departed via Britain's ports and airports was included in the 2010 coalition agreement with Conservatives at Mr Clegg's insistence.
But the Deputy Prime Minister revealed in July this year that he was frustrated by the Home Office's failure to put the plan into action, and said he had asked Lib Dem minister David Laws to work "day in, day out" to chase its progress.
Today, he said: "I remain very frustrated that the Home Office has still not delivered something which I personally insisted should be in the Coalition Agreement, which is a reinstatement of the checks which allow us to know not only who's coming into this country but who's leaving as well."
Mr Clegg said he was hoping Mrs May would be able to announce progress "in the coming period", adding: "I think she and her team are now properly committed to getting something done. I wish we had started earlier on some of that work, but better late than never."
Lib Dem sources said they now expect an announcement on the checks in the first few months of 2014.
Labour leader Ed Miliband said: "What we need is proper measures to take action to prevent a race to the bottom between workers coming here and local workers.
"That's why Labour has put out very specific proposals, for example clamping down on firms who don't pay the minimum wage, stopping recruitment agencies just hiring from overseas.
"What we need is real proposals, real measures to reassure people on immigration, and not leaks and half-baked proposals from the Government."
Asked whether David Cameron agreed that a cap on overall EU immigration would be "illegal and undeliverable", the Prime Minister's official spokesman said: "There are clear free movement laws. We have to operate within those."
He added: "As the Prime Minister has said, do we need to look at free movement? Yes, because, as he said, there shouldn't be a freedom to move to claim (welfare benefits)."
Shadow home secretary Yvette Cooper said that the "phoney war" between Mr Clegg and Mrs May had no bearing on the removal of transitional controls on migrants from Romania and Bulgaria, who will gain full rights to live and work in the UK from January 1.
"Theresa May and Nick Clegg are having a row with each other to distract from the fact that they haven't put measures in place to manage the lifting of transitional controls in January," said Ms Cooper.
"Eight months ago, Labour called on the Government to tackle the unfair practices and loopholes that allow for exploitation and employment of migrant workers on the cheap, which undercuts local workers. They have not taken action on the minimum wage, agencies or training to prevent local workers being undercut by exploitation of migrant workers
"We also called for a sensible tightening of benefit rules to ensure that, as with the majority of migrants from the EU, people who come here are working hard and contributing to Britain. But those won't be in place for January.
"Labour have argued for some time that longer-term EU reforms are needed and there should be a sensible debate on how to do that whilst supporting trade and the economy. But Theresa May is failing to do that and is just engaged in hints and winks rather than workable, practical policies.
"While Theresa May and Nick Clegg argue among themselves, they are failing to put forward practical solutions to meet people's concerns."
A ddressing the Home Affairs Select Committee later in the day, the Home Secretary said she was not proposing to introduce a cap now but was talking about the possibility of reform in the future.
But Mrs May refused to be drawn on the Deputy Prime Minister's criticism of her department, refusing to comment on reports of leaked documents and adding: "I'm going to address the issue rather than an individual."
She told the committee: "The opportunity that is ahead of us to reform the EU, we should take that opportunity to look at free movement, there are concerns across Europe from a number of other countries about free movement and particularly about the abuse of free movement.
"It is right to say we should look at the accession treaties for new countries coming into Europe and within that we should look at the question as to whether we should have greater flexibility rather than just a period of time for transitional controls.
"Maybe controls should be in place until the national income of a country has reached a certain percentage of the country's national income or indeed if migration reaches a certain level whether there's a possibility in those circumstances to introduce a cap."
In relation to proposals to introduce a cap, committee chair Keith Vaz MP asked: "Do you accept that now, as oppose to what would happen in two years' time, a cap on EU migration would be unlawful under the treaties?"
The Home Secretary replied: "Well I'm not proposing to introduce such a cap now. What I'm talking about is the possibility of reform in the future."
Mr Vaz then suggested Mrs May was reluctant to say it would be illegal now, as Mr Clegg has said.
She replied: "He has, as I understand it, made a statement on the basis of if we were going to do this now, this is what the situation would be. What I'm saying is, I'm not proposing to do it now. We're talking about potential reforms of accession treaties for the future."