A study entitled “The Fiscal Effects of Immigration to the UK” has just been published by University College London. It argues that recent immigrants are less of a burden on the state than British natives, and indeed have made a more positive financial contribution to the UK than the average local. Welcome news, especially given the hostility to immigrants in certain sectors of the media and British society.
However, this is a fiendishly complex subject and inevitably the headline changes dramatically if different factors are included in the calculation.
For example, most recent immigrants are of working age, and therefore are more likely to be in employment than all our retired natives. If these immigrants remain in Britain as they age then the state will have to bear considerable future health and pension costs. The study celebrates the taxes immigrants pay now without considering the later benefits they will justifiably claim if they settle here permanently.
A crude but common complaint against immigrants is that they “steal British jobs”. Often they are better skilled or more diligent than their native rivals, and employers benefit accordingly, contributing to the UK economy through increased corporation tax, more competitive exports, or cheaper goods and services. If this economic gain from high performance immigrant labour were factored in to the calculation, the net contribution of immigrants would look even rosier. But the fact remains that many of the jobs filled by immigrants would otherwise have gone to British natives who must instead depend on the state. The cost of their unemployment benefits and the loss of their income tax ought to be weighed against the tax contribution of the immigrants who have replaced them.
We should also consider what different workers do with their wages. Recent immigrants are very likely to send remittances abroad, taking earnings out of the British economy. The British workers they’ve replaced would have returned a greater proportion of their discretionary expenditure to British businesses (if only the local pub). There is a multiplier effect whereby for every extra pound spent in the UK economy fractions of that pound will be spent and re-spent, with taxes paid to the state each time; similarly, a pound lost to the economy reduces total economic activity by considerably more than one pound. Even if she never claims a penny of state welfare, a Pole who (quite reasonably) sends half of her income to her family in Poland is diminishing UK economic activity (and therefore UK tax receipts) if that income would otherwise have gone to a native worker.
This is a highly charged subject, and I should stress that I’m all for immigration into the UK. We benefit beyond measure culturally, intellectually and creatively from all the energetic, skilled and enterprising people who devote their best years to this wet, grey island. But putting immigrants on a set of financial weighing scales to prove their value is dangerous. Too many different truths can be claimed by selectively including or omitting the various complicating factors discussed above. Make the case for immigration on a purely fiscal basis, and you may well find your opponents come up with a more compelling calculation that tells a very different story.
- Immigrants ‘make net contribution’ (bbc.co.uk)
- How migrants from outside Europe leave a £100billion hole in the public purse: Amount taken in benefits and services is 14% higher than money put back (dailymail.co.uk)
- Is immigration really a blessing or a curse? (telegraph.co.uk)