Public spending never "has" to be slashed, there's always some fucking excuse.
In any case, I seriously doubt that the tiny amount of tax revenue that would be generated by a few hundred foreign manual labourers is going to have a signifigant impact on a situation where public spending has supposedly been slashed to the point where rubbish is piling up in the streets.
I don't know what you mean by 'always some fucking excuse', but believe you me, the state of the UK government books at present and future predictions over tax receipts and public spending liabilities is seriously unstable. At the height of the recent boom, government was still overspending by over 40 billion a year and the majority of receipts comes from income tax, NI and VAT -- nigh on 61 percent.
These are classic areas where recession hits receipts. With the waves of redundancies we have seen in just the last six months (in only the open chords of this depression) and the increased pressure on social protection budgets from that, public spending will have to reduce and taxes will have to rise -- and I suspect we will see the need to cut public spending by significant amounts by Q1 2010.
You can't spend what you aint got.
It's not just about tax revenue from Italian labourers, but the cost to the State of unemployed nationals. If a private UK firm employs a national, he/she pays tax to the exchequer. If a private UK firm employs a non-national, he/she may still pay UK tax, but the state then has to pay for social protection for the national who is now unemployed.
In essence, if that non-national is paid below going rates, the State bears the burden of the drive for increased profit from that UK firm.
The answer to this would be to use EU structures to redistribute labour revenue and liability across member states at the same level as national government distributes across UK regions, and reduce national government receipts to only, say, VAT, property, sales and sin -- ie. more of a US federal model, complete with centrally fixed IRs and central economic policy (as they already have in the Euro zone).
But the political consequences of such a move might be *ahem* rather explosive. And, already, there are problematic consequences of central IRs and membership of the Euro within the Euro zone. Germany is refusing to play ball, and centrally-fixed IRs haven't been too good for some EU countries. The Greek riots are partially an outcome of economic stress due to the adoption of euro in Greece. There will be issues in Spain (because it can't devalue anymore and has had its credit rating downgraded) and Ireland before long. Already, there are labour and liability issue in Italy (which is pretty fked cos, I believe, Italy sold its NI stream to investors - a nice opportunity to default there).
In Bloom, you might not like it, I might not like it, but at the end of the day, it is always about protecting wealth, that is what changes people politically -- for a corporation, for an SME, for an individual, for a government. People are kind and ethical and nice in times of plenty; in times of famine, they can turn into something else entirely.