Nigel Farage likes to claim that he is speaking for the
ordinary citizen and has argued strongly against immigration, suggesting that the
studies which show the benefits of immigration to be flawed because they fail
to account for the cost of in-work benefits such as tax credits. But right-wing politicians are not the only ones to be concerned about free movement within the EU: One of Jeremy Corbyn’s key union supporters, Unite’s Len McCluskey,
suggested this week that Labour should also take a tough line on free movement of workers. But the evidence clearly shows that both are ignoring the economic benefits of free movement to the UK and their opposition to
immigration is based on a false premise.
Three months ago HMRC published data which showed the revenue and expenditure contribution of EU citizens to the UK’s tax and benefit system for fiscal 2016-17 which paints a very different picture to many of the claims made during the EU referendum campaign. The figures show that EU and EEA citizens received around £3.2 billion in child benefit and tax credits. But they paid in £21.3 billion, meaning that they made a net contribution to the UK Exchequer of £18.1 billion. Although this figure does not include all tax and revenue streams, it is a safe bet that this these figures are a fair reflection of the overall fiscal contribution of EU citizens. To put it into context, a figure of £18.1bn is more than the current budget surplus for FY 2016-17 (£17.4bn). Without the fiscal contribution of EU and EEA nationals, the current balance on public finances would have been in deficit.
Citizens of all EU countries made a positive exchequer contribution, with the largest net sums being paid by French (£2.9bn) and Irish (£2.2bn) nationals, with the Poles chipping in a net £2.1bn. On a per capita basis, the biggest contributors were Danish nationals, who paid an average of £25,090 followed by the French (£24,090, chart). The average European per capita contribution was £7,260 with the overall figure being depressed by the relatively low contributions made by central and eastern European nationals. The figures tell us two things: Most obviously European nationals come to the UK to work, not claim benefit as has often been claimed in the recent past. Second, the distribution of per capita contributions highlights the fact that western European nationals tend to be highly skilled and are therefore high earners whilst those from newer EU member states tend to be lower paid.
Three months ago HMRC published data which showed the revenue and expenditure contribution of EU citizens to the UK’s tax and benefit system for fiscal 2016-17 which paints a very different picture to many of the claims made during the EU referendum campaign. The figures show that EU and EEA citizens received around £3.2 billion in child benefit and tax credits. But they paid in £21.3 billion, meaning that they made a net contribution to the UK Exchequer of £18.1 billion. Although this figure does not include all tax and revenue streams, it is a safe bet that this these figures are a fair reflection of the overall fiscal contribution of EU citizens. To put it into context, a figure of £18.1bn is more than the current budget surplus for FY 2016-17 (£17.4bn). Without the fiscal contribution of EU and EEA nationals, the current balance on public finances would have been in deficit.
Citizens of all EU countries made a positive exchequer contribution, with the largest net sums being paid by French (£2.9bn) and Irish (£2.2bn) nationals, with the Poles chipping in a net £2.1bn. On a per capita basis, the biggest contributors were Danish nationals, who paid an average of £25,090 followed by the French (£24,090, chart). The average European per capita contribution was £7,260 with the overall figure being depressed by the relatively low contributions made by central and eastern European nationals. The figures tell us two things: Most obviously European nationals come to the UK to work, not claim benefit as has often been claimed in the recent past. Second, the distribution of per capita contributions highlights the fact that western European nationals tend to be highly skilled and are therefore high earners whilst those from newer EU member states tend to be lower paid.
Even before the end of free movement, the UK is no longer an attractive destination
For all the fact that EU nationals make a significant contribution to the UK economy, there is clear evidence that fewer of them are entering the UK than was the case three years ago. Although the UK immigration data are subject to significant methodological flaws, they are all we have at present and they show that in the year to March 2019, a net 226k foreign nationals entered the UK compared to 311k in the year to June 2016. The net inflow of EU nationals has slowed to 59k versus 189k in the year prior to the referendum, with net outflows of EU8 citizens as many of the huge wave of migrants from Poland begin to return home. But the real kicker is that in the year to March, a net 219k non-EU nationals entered the UK compared to 171k in the year to June 2016. Recall that this is the part of immigration that the UK government can actually control, so if the electorate really does have a problem with immigration they are going to be mighty dumbfounded by the government’s current policy.
It has long been recognised that there are substantial costs associated with pulling up the drawbridge and the government appears to have quietly dropped its unrealistic pledge to reduce the net number of immigrants below 100k. But it might be too late: Large sections of the UK public sector rely on foreign labour input and there has been a 70% fall in the number of EU citizens coming to the UK to work. In the absence of a sudden surge in Brits willing and able to take on the tasks, these positions will have to be recruited from outside the EU, which may explain why the numbers arriving from outside the EU have increased.
Moreover, one of the flaws with the data is that it includes those coming to the UK to study and who make a net overall contribution to university coffers. Prior to the EU referendum roughly one-sixth of the net immigration figures was attributable to students – there has been a reduction of around 20k in new student numbers over the past three years with anecdotal evidence suggesting that many have been put off by the more hostile climate. This is certainly not a desirable outcome for universities which are seeking to expand their footprint in an increasingly competitive global education market.
Whatever one’s views on immigration, it is clear that a policy of restricting the flow of EU citizens into the UK will have economic consequences. This may only be evident initially at the margin. But it remains one of the potential underrated consequences, whose full effects will only become evident in the fullness of time.
For all the fact that EU nationals make a significant contribution to the UK economy, there is clear evidence that fewer of them are entering the UK than was the case three years ago. Although the UK immigration data are subject to significant methodological flaws, they are all we have at present and they show that in the year to March 2019, a net 226k foreign nationals entered the UK compared to 311k in the year to June 2016. The net inflow of EU nationals has slowed to 59k versus 189k in the year prior to the referendum, with net outflows of EU8 citizens as many of the huge wave of migrants from Poland begin to return home. But the real kicker is that in the year to March, a net 219k non-EU nationals entered the UK compared to 171k in the year to June 2016. Recall that this is the part of immigration that the UK government can actually control, so if the electorate really does have a problem with immigration they are going to be mighty dumbfounded by the government’s current policy.
It has long been recognised that there are substantial costs associated with pulling up the drawbridge and the government appears to have quietly dropped its unrealistic pledge to reduce the net number of immigrants below 100k. But it might be too late: Large sections of the UK public sector rely on foreign labour input and there has been a 70% fall in the number of EU citizens coming to the UK to work. In the absence of a sudden surge in Brits willing and able to take on the tasks, these positions will have to be recruited from outside the EU, which may explain why the numbers arriving from outside the EU have increased.
Moreover, one of the flaws with the data is that it includes those coming to the UK to study and who make a net overall contribution to university coffers. Prior to the EU referendum roughly one-sixth of the net immigration figures was attributable to students – there has been a reduction of around 20k in new student numbers over the past three years with anecdotal evidence suggesting that many have been put off by the more hostile climate. This is certainly not a desirable outcome for universities which are seeking to expand their footprint in an increasingly competitive global education market.
Whatever one’s views on immigration, it is clear that a policy of restricting the flow of EU citizens into the UK will have economic consequences. This may only be evident initially at the margin. But it remains one of the potential underrated consequences, whose full effects will only become evident in the fullness of time.
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