The Economic Impact of UK Immigration: Distinguishing Fact from Fiction

What is the True Fiscal Impact of Immigration in the UK?

 

In the UK, immigration is frequently characterised as a detriment to the economy. From the repeated assertion that free movement drives down wages, to newspapers proclaiming the harm that migrants inflict on public services, the discourse is awash with the notion that immigration equals economic demise.

 

But are any of these claims rooted in fact? Although they are widely circulated, this is not necessarily a testament to their veracity. Immigration is a hugely salient political issue, and such associations may stem from a calculated attempt to depict immigration in a negative light, rather than from robust and accurate data. The only way to establish truth is to take a close, objective look at the evidence.

 

Calculating fiscal impact

 

Understanding immigration’s fiscal impact hinges on calculating the difference between what migrants contribute to the public purse through taxation, and what they take from it through benefits and public services. This process is inherently complex- researchers reach very different conclusions regarding the exact revenues and expenditures to take into account.

 

Income tax, National Insurance and VAT on purchases are always included within migrants’ fiscal contributions, but on occasion, so too are shares of taxes paid by UK businesses. Similarly, fiscal costs always include services such as NHS care and education, but at times encompass government spending on defence. The ability for researchers to be selective in this regard yields very different findings, thus providing scope for migrants to be portrayed in a more negative or positive light depending on stance.

 

Further to this, a lack of accessible data means that assumptions are a necessary part of the calculation process, such as when deciding on the exact share of taxes paid by UK businesses to attribute to migrants. This too leads to considerable variation within findings, enabling commentators to focus on those that most closely match their point of view.

 

Researchers must also make a number of other critical decisions, such as whether to examine migrants’ fiscal impact in absolute terms or relative to the UK-born population. An absolute approach- which involves looking solely at migrants’ cost and contributions without reference to the wider populace- is hindered because it omits the wider context. While migrants may represent a fiscal cost in a particular year, the UK-born may represent an either bigger cost, thus rendering the findings substantially less negative than they first appear.

 

A similar truth holds for static versus dynamic analysis. Static analysis involves a comparison of migrants’ costs and contributions in a given year, the advantages being that hard data is available and assumptions about the future are unnecessary. However, it suffers the drawback of providing a snapshot of migrants’ fiscal impact rather than encapsulating their entire lifecycle. In contrast, dynamic analysis does look at the entire lifecycle, but is hampered by a reliance on assumptions.

 

The complexity involved with calculating migrants’ fiscal impact goes some way towards explaining the prevalence of negative narratives, as findings can be shaped and presented to suit a particular agenda. It is now important to assess whether such narratives are backed up by hard evidence.

 

Establishing the truth

 

Despite the varying conclusions that researchers draw, two points are consistently agreed upon. First, that EEA migrants contribute more than non-EEA migrants, and second, that more recent migrants contribute more than migrants overall.

 

A 2018 Oxford Economics study found that in the 2016/17 financial year, EEA migrants made a net fiscal contribution of £4.7bn, whereas non-EEA migrants and the UK-born population represented fiscal costs of £9bn and £41.4bn respectively. Focusing solely on these figures, it is wholly inaccurate to depict all immigration as economically harmful.

 

But by picking and choosing which elements of the data to focus on, a negative picture can be created. The £9bn cost incurred by non-EEA migrants could be seized upon and viewed in absolute terms, thus deleting the critical context of the even greater loss incurred by the native population. It is less that the cliché about immigration and high fiscal costs is based on false statistics, and more that it stems from the manipulation of data and selective research.

 

The role of selective research is illustrated by a 2016 Migration Watch study of the 2014/15 financial year. Its findings reveal that both EEA and non-EEA migrants represented a net fiscal cost- £1.2bn and £15.6bn respectively. Although it analyses a different year to the Oxford Economics study, this alone does not explain the marked difference in findings. What does are the different assumptions made by the researchers, such as the proportion of taxes paid by businesses to attribute to migrants.

 

The second point of agreement- that recent migrants contribute more than migrants overall- also sheds light on how results can be manipulated to suit particular narratives. The aforementioned Migration Watch study found that in 2014/15, EEA migrants represented a net fiscal cost of £1.1bn, whereas recent EEA migrants broke even. Choosing to present the first figure as representative of migration’s fiscal impact will inevitably create a negative picture, but as the full research shows, this does not tell the entire story.

 

Reflecting on the available evidence, immigration’s long-standing association with economic demise does not have a statistical basis. In almost every instance, migrants are found to contribute more to the public purse than the UK-born population. However, as the numbers can be shaped and presented in accordance with stance, negative stereotypes can be created. For truth to prevail, evidence must be presented in an objective and comprehensive manner.

 

Cameron Boyle is a political correspondent for the Immigration Advice Service, an organisation of immigration lawyers that help undocumented migrants to regulate their status.

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