Just for you jonsky
It's a old one but if you can find one that contradicts it please post it .
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HOME / PUBLICATIONS / BRIEFINGS /
The Fiscal Impact of Immigration in the UK
30 MAR 2022
The Office for Budget Responsibility forecasts that higher net migration reduces pressure on government debt over time.
M
migrants is more positive than the impact of migrants overall. Table 1 summarises the results of the most recent studies on the net fiscal impact of migrants in the UK.
A study by Oxford Economics (2018), commissioned by the Migration Advisory Committee, estimated the net fiscal contribution of EEA migrants in the financial year (FY) 2016/17 at £4.7bn, compared to a net cost of £9bn for non-EEA migrants. During this period, the UK was running a budget deficit, so the UK-born were also estimated to have made a negative net fiscal contribution (of -£41.4bn). By contrast, using a similar methodology but slightly different assumptions, Migration Watch UK (2016) found that in FY2014/15 both EEA and non-EEA migrants represented a net fiscal cost (of £1.2bn and £15.6bn respectively). A large part of the difference between these studies arises from the choice of how much of the taxes paid by businesses to attribute to migrants.
Oxford Economics (2018) found that the negative net fiscal contribution of non-EEA migrants was primarily due to higher spending on the education of children, since non-EEA migrants are currently more likely to have dependent children than the UK-born. They were also estimated to receive more in family benefits and tax credits. Separate calculations in the same study that looked at the whole life cycle of non-EEA migrants and excluded the cost of children did not find a negative impact for this group (see below).
Table 1
Different estimates of the fiscal effects of immigration to the UK, in £ billions (with annual average)
All migrants and UK born Recent migrants only
EEA Non-EEA UK born EEA Non-EEA
Oxford Economics (2018)
FY 2016/17 (1 year) +£4.7b -£9.0b -£41.4b
Migration Watch (2016)
FY 2014/15 (1 year) -£1.1b -£15.6b -£87.8b £0.0 -£6.2b
Dustmann and Frattini (2014)
1995-2011 (17 years) +£4.4b
(+£259m pa) -£118b
(-£6.9b pa) -£591b
(-£34.8b pa)
2001-2011 (12 years) -£617b
(-£51.4b pa) +£20.2b
(+£1.68b pa) +£5.2b
(+£0.43b pa)
2001-2011 (A10) (12 years) +£4.9b
(+£0.41b pa)
2001-2011 (Rest of EEA) (12 years) +£15.3b
(+£1.28b pa)
Rowthorn (2014)
2001-2011 (12 years) -£0.3b
(-£25m pa) -£29.7b
(-£2.48b pa)
Migration Watch (2014)
1995-2011 (17 years) -£13.6b
(-£0.8b pa) -£134.9b
(-£7.94b pa) -£565b
(-£33.2b pa)
2001-2011 (12 years) -£13.4b
(-£1.12b pa) -£116.8b
(-£9.73b pa) -£586b
(-£48.8b pa) -£0.25b
(-£20.8m pa) -£27.17b
(-£2.26b pa)
Dustmann and Frattini (2013)
1995-2011 (17 years) +£8.8b
(+£0.52b pa) -£104.1b
(-£6.12b pa) -£605b
(-£50.4b pa)
2001-2011 (12 years) -£605b
(-£50.4b pa) -£86.8b
(-£7.23b pa) -£624b
(-£52b pa) +£22.1b
(+£1.84b pa) +£2.9b
(+£242m pa)
Source: Migration Observatory analysis of various studies (see References for citations).
Similarly, studies have consistently found that recent migrants have a more positive fiscal impact than those who have been here for longer. For example, Dustmann and Frattini (2014) estimated that EEA migrants who had arrived since 2000 had a positive net fiscal contribution of just over £20bn in the 11-year period 2001 to 2011 inclusive, compared to a net impact of £4.4bn for all migrants between 1995 and 2011. The Migration Watch (2016) estimates are also less negative for recent migrants than for migrants overall; they estimated that non-EEA migrants had a net fiscal cost of £15.6bn in 2014/15, but that this cost was £6.2bn for recent non-EEA migrants. There will be multiple reasons for this, including changes over time in the characteristics of new arrivals, and that after a few years of residence people are more likely to have children.
The net fiscal effects of immigration depend on migrants’ characteristics, such as their age, skills, and earnings
Whether migrants are employed and how much they earn has an important impact on their estimated net fiscal contribution. The OECD (2021) compared estimates of net contributions to the tax and benefits system across 25 OECD countries over a 13-year period from 2006 to 2018. It found that the age of migrants (specifically, being of prime working age, i.e., 25–54) was the single most important factor explaining differences in their net fiscal contributions compared to the native-born population. A key reason for this is that migrants in this age group are most likely to be working. The skill level of migrants was also found likely to be one of the main determinants of their fiscal impact in the short run. High-skilled migrants working in highly paid jobs can be expected to pay more taxes, on average, than low-skilled migrants in low-wage jobs, although in the UK some migrant groups are characterised by considerable skills mismatch where they work below their actual skill level (ONS 2016).
Migrants’ use of public services and benefits also depends to a large extent on their age and household situation. In a series of stylised calculations for different illustrative households types, Oxford Economics (2018) found that a single 20-year old with no children only needed to earn just over £10,000 per year in order to ‘break even’ from a fiscal perspective, while a couple with two dependent children—who incur much greater expenditure on health and education—would not become net fiscal contributors until they earned around £45,000.
As noted earlier, the fact that non-EEA migrants are more likely to have dependent children is a key reason that non-EEA migrants are estimated to have a negative net fiscal impact in the short run. The same Oxford Economics study estimated that over the course of their whole lifecycle, the average non-EEA migrant arriving in 2016 would make a positive net fiscal contribution (of £28,000, net present value). However, their children’s education is not included in this latter figure, because under this lifecycle method the cost of education is attributed to the child and expected to be offset by tax on their earnings when they enter the labour market.
The most recent Government data show that EEA nationals pay more in income taxes and national insurance contributions than they receive in tax credits and child benefit – but that is not the full picture
In the past few years, the government has published data derived from Her Majesty’s Revenue and Customs (HMRC, the government body responsible for collecting taxes and paying certain benefits) and the Department for Work and Pensions (DWP) of amounts paid and received by foreign nationals. For example, HMRC data show that in FY2018/19 (the most recent year for which there are data), EEA and Swiss citizens paid £22.4bn more in income tax and National Insurance contributions than they took out in tax credits and child benefit (HMRC, 2022). Non-EEA (and non-Swiss) citizens paid £20bn more in income tax and National Insurance than they received in tax credits and child benefit.
Figure 1
These figures are not at all comparable with the studies discussed above because they simply compare some amounts received by HMRC in direct tax with amounts paid out by HMRC in cash benefits. This calculation takes no account of people paying other taxes like VAT and council tax, nor that they also receive other benefits like Universal Credit and Jobseekers’ Allowance (JSA), and also use public services. However, the data do provide more detailed information showing broadly that taxpayers from EU-15 countries paid more than the average taxpayer, while those from the newer Member States paid less.
The Office for Budget Responsibility forecasts that higher net migration reduces pressure on government debt over time
The Office for Budget Responsibility forecasts fiscal aggregates—such as net government borrowing and debt as a percentage of GDP—under alternative scenarios of net migration.
OBR (2018), for example, based its main fiscal projections on the assumption that net migration will average 165,000 per year in coming years. However, it estimated that net immigration of 245,000 (the ‘high-migration’ scenario) would mean that by 2067-68, the primary budget deficit (i.e. excluding interest payments on debt) would be 0.8% of GDP lower, and net debt would be 30% lower.
One of the key drivers behind these results is that incoming migrants are more likely to be of working age than the population in general and therefore more likely to be working and contributing to public finances. These forecasts extend to 50 years in the future. In earlier analysis, the OBR (2013) noted that over an even longer time horizon than 50 years, these migrants would also retire and add to age-related spending pressures. It concluded that “higher migration could be seen as delaying some of the fiscal challenges of an ageing population rather than a way of resolving them permanently”.
