Jose Manuel Barroso warns David Cameron against making 'historic mistake' over immigration reforms

Outgoing European Commission president says 'arbitrary cap' on the numbers of EU migrants to the UK would breach the 'fundamental principle' of the free movement of labour

Jose Manuel Barroso said the UK does not have a 'huge problem' with immigration (PA)

David Cameron is in danger of isolating Britain on the world stage by picking fights with other EU states over immigration, the President of the European Commission Jose Manuel Barroso has warned.

He said the government is at risk of making a "historic mistake" if the UK continues to alienate its “natural allies” in eastern Europe with provocative talk about immigration as it battles for reform of the EU.

The Prime Minister has promised to reform the UK's relationship with the EU ahead of an in/out referendum by the end of 2017 if he remains in office after the general election.

At the same time - with the Conservatives under pressure from Ukip to reclaim Britain's border controls - reports have suggested he is considering an annual cap on the number of national insurance numbers that could be issued to low-skilled migrants from within the EU.

He said that if Britain failed to resolve its differences with the EU and chose to leave, there would be a high price to pay, with "important global companies" relocating their operations from the City to Frankfurt or Paris.

David Cameron hit back at Mr Barroso as he vowed to “fix” the immigration problem worrying the British people.

Speaking during a visit to the Ford plant at Dagenham, the Prime Minister said: "What we need in Britain is a renegotiation of our relationship with the EU and a referendum where the British people decide whether to stay in this reformed organisation or do we leave it.

"Now that's what I will pursue, that's what I will deliver and at the heart of that renegotiation we need to address people's concerns about immigration. I'm very clear about who the boss is, about who I answer to and it is the British people. They want this issue fixed, they're not being unreasonable about it. I will fix it."

Mr Barroso is retiring this month after ten years as the head of the Brussels bureaucracy. His speech today is blunter than any previous warning he has delivered in the UK about the tone of political debate in this country. One of his regrets on leaving office, he warned, is that there are too few British officials working in Brussels, helping to shape EU policy, because “constant criticism and a pending existentialist debate do not make us the most attractive employer for young British graduates.”

He cited the example of the Scottish referendum to show that unless those who believe in continued membership of the EU start to make a positive case soon, they could be in a fright like the panic that overtook Scotland’s Better Together campaign in the final ten days.

He said: “My experience is that you can never win a debate from the defensive. We saw in Scotland that you actually need to go out and make the positive case. In the same way, if you support continued membership of the EU you need to say what Europe stands for and why it is in the British interest to be part of it,”

He added “Even the largest, proudest European nation cannot hope to shape globalisation – or even retain marginal relevance - by itself. It is an illusion to believe that space for dialogue can be created if the tone and substance of the arguments you put forward question the very principle at stake and offend fellow Member States. It would be an historic mistake if on these issues Britain were to continue to alienate its natural allies in Central and Eastern Europe, when you were one of the strongest advocates for their accession.

He also denied that there is “a permanent tension between the UK interest and the European interest”, claiming that unity serves the interest of all 28 EU states, despite their differences.

Mr Barroso’s comments were welcomed by the employers’ organisation the CBI, which strongly opposes leaving the EU.

Its deputy director general, Katja Hall, said: “We’re living in a globalised world and being inside a reformed EU is the best way for the UK to secure its economic future and maximise its voice internationally.

“The single market anchors our trade and investment at home, and is the launch-pad for us to break into new growth markets outside Europe.”

She added: “Businesses recognise that free movement of workers within the EU is a sensitive issue but are clear that it is an essential part of the single market. It boosts the attraction of investing in the UK, creates jobs and offers firms here real benefits in working with our biggest trading partners.”