His hardline approach was in sharp contrast to the previous enlargement of the EU in 2004 when Britain took a liberal approach to admitting workers from countries such as Poland and Lithuania.
Mr Reid told the Commons that Romanians and Bulgarians would be welcomed if they had sought-after skills or were students. But others would only be allowed to work in the agricultural and food processing sectors and their numbers would be capped at fewer than 20,000 a year.
The Home Office decision effectively bars Romanians and Bulgarians from jobs in the building trade, nursing and catering, although newcomers will be free to work if they declare themselves to be self-employed. Romanians and Bulgarians caught working illegally in Britain after 1 January will be fined up to £1,000 and employers who flout the rules will also face heavy fines.
Mr Reid said: "Employers will need to convince the Government there is a genuine labour shortage and such schemes would be limited by quota. We look forward to welcoming Romanian and Bulgarian workers here, provided that they comply with our rules and obey the law."
Migrationwatch, which campaigns against mass migration, hailed the move as "a turning point".
But the decision has caused divisions within Government, with the Foreign Office privately arguing it sent out a negative message about Britain's attitude to EU enlargement.
The Labour MP Mike Gapes, chairman of the Foreign Affairs Select Committee, said there was "frustration and anger" in Romania and Bulgaria.
"It's unfortunate that a tabloid-led campaign has led to a perception that hundreds of thousands of people are going to flood in here from Romania and Bulgaria," he told BBC Radio 4. "I don't believe that was going to be the case and I hope within time we can get a more rational debate."
The Bulgarian government threatened tit-for-tat restrictions on Britons following the announcement. Dimitar Tsanchev, a Foreign Ministry spokesman, said: "We will discuss the possibility to impose reciprocal restrictions on Britain, as well as on other EU member states that restrict the free movement of labour. We think that such a decision will put us on an unequal footing with the 10 member states that joined in 2004."
A spokesman for the Romanian embassy said the restrictions did not "correspond with our expectations" but acknowledged they would allow more Romanians to come to Britain.
Catherine Drew, of the Institute of Public Policy Research think-tank, said: "By restricting labour market access to a group of people who are entitled to enter the UK as EU citizens, you might simply push them into the illegal workstream."
The Liberal Democrat home affairs spokesman Nick Clegg warned that low-skilled incomers could be driven into the black economy and the hands of exploitative gangmasters. "This complex scheme is asking a lot in terms of enforcement from an Immigration and Nationality Directorate which Mr Reid has branded unfit for purpose," he said.
David Davis, the shadow Home Secretary, accused Mr Reid of "cosmetic posturing" and leaving important questions unanswered.
Business for New Europe, whose members include chief executives and chairmen of Britain's blue chip companies, said it was important the Government stuck to the principle of freedom of movement. "We regret that additional restrictions have been placed on workers from Bulgaria and Romania in relation to the UK labour market, and look forward to them gaining full access to our labour markets as soon as possible," it said in a statement.
Jack Dromey, deputy general secretary of the T&G union, said: "This sends out a message that says it is OK to discriminate against workers from Bulgaria and Romania, which may make these workers very attractive to unscrupulous employers who want scared, compliant labour who don't complain when they are not paid the minimum wage and won't call the authorities when they are forced to work in unsafe situations."
In his statement to MPs, Mr Reid said there had been some "transitional impacts" from the last round of EU expansion. "A small number of schools have seen a significant increase in admissions," he said. "Some local authorities have reported problems of overcrowding in private housing. There have been cost pressures on English language training. Therefore, the Department of Communities and Local Government will audit local areas and work to meet isolated and specific pressures."
The Department for Education and Skills will also provide £400,000 to support schools with limited experience of teaching English to migrant pupils. All new arrangements will be reviewed within 12 months.
Latest figures show that 427,000 people arrived in Britain from Poland and the seven other ex-Communist states which joined the EU in May 2004, but the figure may be 600,000, including self-employed.
A European policy divide
* Britain is the first large member of the EU to set out its approach towards immigration from the two new member states.
* Ireland followed Britain's lead yesterday and imposed identical restrictions on Romanian and Bulgarian workers.
* Finland is adopting a more 'open-doors' approach.
* Sweden has said it will probably not introduce any restrictions.
* Four recent members from the former Soviet bloc - Poland, Slovakia, Estonia and Latvia - will allow access to their labour markets. Nations such as the Czech Republic and Lithuania are expected to take the same position.
* No decision has been taken by Italy and Spain, where most Romanians and Bulgarians are likely to go. On previous form they will impose tough restrictions.
* France, Belgium and the Netherlands are refusing to make their position public.
* So is Germany, but its decision looks inevitable - it is already extending its restrictions on workers from countries such as Poland until 2009.
* In the previous EU expansion when 10 countries joined the block, in May 2004, only Britain, Ireland and Sweden took a liberal approach to migrant workers.
Comments