Lens Blog

New analysis, based on OBR forecasts, from Global Future casts fresh light on the cost of hitting the Government’s net migration target. The analysis details the enormous fiscal impact of a net reduction in those coming to the UK. It shows:

• The reduction in immigration since Brexit has already cost the public finances £1bn
• Going forward that reduction will permanently cost the UK £1.35bn per year, every year – even if the rate recovers
• That’s the equivalent of more than 23,000 nurses or 18,000 doctors
• If we reduced net migration to meet the government’s target – under 100,000 a year – it would cost the public finances an additional £12bn a year by 2023 – 60% of the addition £20bn promised for the NHS
• This comes at a time when we are already seeing major shortages in key sectors such as our NHS, and new British Social Attitudes Survey data shows the public believe immigration has been good for the UK economy and our culture

Responding to the figures, Global Future Director, Peter Starkings said,
“Cutting immigration hits our public finances hard. The British people may decide that they are happy to pay a bit more tax or see lower investment in our NHS and other public services in return for a reduction in immigration, but that’s a debate we have simply never had.

What we do know is that the public think immigration has been good for our economy and our culture, and when offered the choice, they routinely choose economic stability over reducing immigration.

As the government draws up its plans for a post-Brexit immigration policy, they must be honest about the trade-offs at the heart of this debate. This analysis, based on OBR forecasts, shows that lower immigration means lower public investment, higher borrowing, or higher taxes – and meeting the government’s self-defeating target to reduce net migration to tens of thousands a year would blow a giant multi-billion pound hole in the public finances.

At a time when crucial sectors like our health service are reporting staffing shortages, government should think very carefully about what a restrictive immigration system will do to our country.”

Background

The reduction in immigration since Brexit has already cost the public finances £1bn

The OBR assumes a net reduction of immigration of 10,000 costs the public finances at around £150m a year
We can see this from the net fiscal impact of various migration scenarios modelled in 2016.
See here
(This calculation is explained in more detail in the annex at the bottom of the release)

Net migration from the EU has fallen by 90,000 since the Brexit vote
Net migration in the year to June 2016: 336,000
Net migration in the year to September 2017: 244,000
See here

Therefore, the existing reduction of 90,000 in the 1.5 years for which data exists since the Brexit vote equates to just over £1bn (at an average of 45,000 reduction over a year and a half, so: 4.5 x 1.5 x 150m = £1.01bn)

Going forward – that will cost the UK £1.35bn a year, every year

A reduction of 90,000 in net migration over the last 18 months corresponds to an annual hit to the public finances of £1.35bn each year (9 x 150m) in the public finances.

That’s the equivalent to more than 23,000 nurses, 21,000 midwifes, or 18,000 GPs

That annual hit to the public finances equates to the following number of health workers:

• 23,000 Nurses at an average of £43,000
• 21,000 midwifes at an average of £47,000
• 18,000 GPs at an average of £56,000

See here

If net migration fell to meet the government target it would cost the UK economy an additional £2bn a year in the first year (2018), £4bn a year in the second, and £12bn a year by the 6th year (2023), the first year of the government’s promised additional £20bn for the NHS

Net migration of 99,999 is a reduction of net migration of approximately 150,000 a year from today’s figure (244,000).
See here

In the first year that would cost the exchequer £2bn per year. (£135m X 15)
Each additional year would incur that £2bn from the reduced net migration from year one, plus an additional £2bn for each year the target is met as the losses accumulate.
So by 2023 meeting the target for each year from 2018 would cost the exchequer £12bn in 2023 alone – 60% of the additional £20bn promised for the NHS.
See here

All this comes at a time when our health service, amongst other sectors is suffering from staff shortages

According to NHS Providers, there are ‘shortfalls of accident and emergency consultants across all regions of the country and, outside of London, shortfalls in psychiatry. Notable shortfalls are also found in acute care, pathology, cancer services, ophthalmology, and within the small specialties taken as a whole’.
See here

Across the NHS in England, official figures show that one in 11 posts were unfilled in February, equivalent to almost 100,000 vacancies.
See here

The public think immigration has been good for our economy and our culture

Those who think that migrants have had a good impact on Britain’s economy outnumber those with a negative view by 47:17
Those who think migrants have been good for our culture outnumber those with a negative view by 44:23.
See here

Polling consistently shows that the British public choose economic stability over cutting immigration

“62% unwilling to forego a single pound to reduce migration.”
See here

“If forced to choose which deal they would like to leave the EU both Leavers (narrowly), and the public at large (by a significant distance), chose to remain in the Single Market (the so-called Norway option) above options which would allow the UK to end Freedom of Movement.”
See here

Annex: The net fiscal impact of immigration

In March 2016 the OBR reviewed the fiscal impact of three migration scenarios – high, low and a central scenario.

OBR forecast of fiscal aggregates under alternative net migration scenarios

See here

The OBR took the scenarios from the ONS, which estimated a disparity between the high and low scenario of 80,000 in the first year, and 160,000 for each subsequent year.
See here

So, knowing the estimated fiscal impact – in the OBR’s Table 3, and the differential in net migration we can work backwards to devise a basic ‘ready reckoner’ – a ballpark fiscal impact for changes in net migration. After converting the calendar year figures used by the ONS, into the fiscal year used by the OBR, we see a relatively steady unit cost of approximately £150m for every reduction of 10,000.