Yesterday David Cameron gave a big speech on immigration. My usual response to big speeches on immigration is ‘here we go again’. I don’t know if it’s the same everywhere, but we seem pretty much unable to hold a serious conversation about immigration – ie one that’s based on facts rather than tabloid insinuations.
Cameron’s speech is apparently in response to “the genuine concerns of hard working people”, although it may have as much to do with Lynton Crosby and his election strategies. There’s nothing particularly controversial in the government’s plans, but the reasons for them are still warped towards the aforementioned tabloids. There is a concern, says the Prime Minister, that “some people might be able to come and take advantage of our generosity without making a proper contribution to our country.”
He specifically singles out Romania and Bulgaria, whose citizens will have the right to move to Britain next year. Cameron wants to make sure that people are only allowed in because “they want to contribute to our country not because they are drawn by the attractiveness of our benefits system or by the opportunity to use our public services.”
As Romanian recruitment agency Tjobs.ro swiftly protested, Romanians don’t come to Britain either to contribute to Britain or to draw benefits. They come here to work. Most take three to six month contracts, and 90% of them then go home again having earned far more in that time than they could have done at home. They also point out that far from sponging off the NHS, most Romanians go home for medical treatment because it’s cheaper.
The idea that people migrate to Britain for the primary purpose of sponging off the welfare state is daft. But if you don’t read the tabloids, you may read a paper that errs in the other direction. There’s no shortage of headlines and front pages declaring the net benefits to the economy from migration, how they work harder and pay more tax.
The truth, as usual, is somewhere in between. The Migration Observatory in Oxford recently put together something of a literature review, as a briefing on the fiscal impacts of immigration. It should be required reading for politicians about to give major speeches on the topic, as well as newspaper editors.
What the Observatory suggests is that it’s far more complicated to work out the fiscal effects of immigration than you might expect. There are lots of variables, and results are mixed. Nobody had thought to try and objectively work out whether immigration was a good or bad thing for the economy until 2002. Since then there have been at least four different attempts and they’ve all found different things:
- A Home Office study concluded that in 1999-2000 immigrants contributed more in taxes (£31.2 bn) than they used in services (£28.8bn), and thus added roughly £2.5 billion to the economy. That’s a study you’ll often hear quoted.
- However, the Institute for Public Policy Research (IPPR) re-ran the Home Office model in 2005 with five years’ worth of data rather than just the one, and got a different result. In 2003-2004, immigration represented a net loss of 0.4 bn.
- The third big attempt to make sense of the problem comes from Migration Watch, the go-to think tank for anti-immigration sound bites. They declared that immigration was a net loss to Britain of £1 bn in 1999-2000, and £5 bn in 2003-3004.
- Finally, an academic study (Rowthorn, 2008) found that in 2003-2004, immigration was a net benefit of £0.6 billion.
There are several lessons to learn from these divergent results. First, whether immigration is an economic benefit or loss can change from year to year. It depends on the state of public spending, what the economy is doing, and immigration trends – where people are coming from and what skills they bring.
Secondly, even just looking at a single year’s data, it’s not easy to tell where immigration begins and ends and you have to make some judgement calls. What do you do with children of immigrant families, for example? When some think tanks calculate the impact of immigration, they count children born in Britain as British, as they legally would be. When Migration Watch measured it, they counted all children as immigrants too, including children born to mixed couples. Children don’t pay taxes, so the perceived loss to Britain naturally shot up.
Finally, it should be apparent that this weighing of benefit and loss has to be seen in context. It’s all very well to say that immigrants cost us money, but do they cost more money than the average Briton? The IPPR included this in their study, adding a a ratio of tax contribution to service consumption. In 1999-2000, when immigration was positive, it was 1.06. The average Briton was also making a positive contribution, but only just – 1.01. Three years later when immigration was a net loss, the migrant contribution to consumption ratio was 0.99 – but the average Briton was a bigger drain on public spending at 0.88.
We’ll be hearing lots more about immigration over the next couple of years, and it will probably be an election issue. We should be prepared to ask more questions, put things in context, and resist easy answers.