Nick Clegg will call this week for much tighter controls on immigration from new EU states, as people have lost faith in the government's assurances following the arrival of 60,000 Bulgarians and Romanians.

In a significant change of tone, the Liberal Democrat leader and deputy prime minister said immigrants from new EU countries should not be allowed to move to other member states by registering as self-employed during the transitional period of up to seven years when restrictions are in place. He will also suggest giving member states the right to "put the brakes on" immigration from new EU countries beyond the transitional controls "if people begin arriving in numbers too big for our society to absorb successfully".

"Is it any wonder, when people have been repeatedly told one thing only to then see another, that so many have lost faith in government's ability to manage the flow of migrants from new EU states?" he will say.

Clegg's intervention means all the major parties are now competing to show that they would bring down immigration from the EU. Last week, David Cameron unveiled measures to cut the amount of time new EU immigrants can claim benefits from six to three months, which Labour and Ukip said did not go far enough.

In a speech on Tuesday, Rachel Reeves, the shadow work and pensions secretary, will suggest Labour is prepared to look at stopping EU immigrants from claiming benefits unless they have first made national insurance contributions.

She told the Sun on Sunday: "It isn't right that somebody who has worked hard all their lives and has contributed to the system is entitled to only the same as somebody who has just come to this country, so we need to look at that. It shouldn't be that you can draw on the system without having contributed." Her comments come after Ed Balls, the shadow chancellor, said he believed the EU should "toughen up" the current rules and look at "fair movement not free movement".

Ahead of Reeve's speech, a new pamphlet by the Fabian Society argues that Labour needs to set out clear reforms for the EU on immigration and in other areas to counter rising Euroscepticism and win back ground from Ukip.

The report, written by Mark Leonard, the co-founder and director of the European Council on Foreign Relations, argues that Labour should push for EU governments to issue social insurance cards, look at restricting some benefits for EU migrants for at least a year and make language lessons compulsory for new arrivals.

It also suggests Ed Miliband should embark on a "European masochism strategy" by spending a week talking about the EU reforms that Labour would like to see. This could feature a "four ports tour" in which he travelledto Thurrock, Dover, Southampton and Grimsby, linking "the plight of blue collar workers who have been at the sharp end of globalisation and migration, but whose future is linked to trade".

"Ukip could pose a bigger threat to Labour than the Tories by making it seem like part of the status quo and harvesting discontent with the government," Leonard said. "But there is still time to turn things around. Ed Miliband needs to engage with Europe personally to transform the way he is seen – from being a supporter of the status quo to setting to a radical reform agenda."

In a further development this week, Boris Johnson, the London mayor, is preparing to endorse a report by his economic adviser Gerard Lyons, which will say leaving the EU is a viable option for Britain if the bloc does not agree reforms.

"The best economic scenario for Britain over the next 20 years is to be in a significantly reformed European Union," Lyons told the Sunday Telegraph. "But if, as an alternative, the UK leaves the EU on good terms, while adopting sensible outward-looking trading policies, that comes a very close second."

As politicians debate the issue of the EU and immigration, the National Institute Economic Review will this week warn about the consequences of reducing the number of workers from non-EU states.

"While free movement of labour within the European Union remains an important and unrestricted source of migration flows, recent policy changes have made it significantly more difficult for skilled and highly-skilled workers, students and family members from outside the EU to migrate to the UK," it will say.

Anna Rosso, a research fellow at the National Institute of Economic and Social Research and editor of the review's special issue on immigration, said: "The result has been a reduction in the pool of talent available to businesses in the UK. The long-term consequences are likely to be damaging."