Lower migration and the tax gap: raise taxes or ease restrictions?

[Mouldemort]

James Cleverly introduced some serious restrictions on immigration, which Labour have upheld. Mahmood is going to introduce further restrictions. This has had the effect of reducing immigration substantially and forecast immigration (yes, even taking account the new method of counting.)

Immigrants, especially new immigrants, are disproportionate contributors to the UK's tax take, because they tend to be high earners and have no recourse to public funds. The low earners (who have mainly been blocked) are the bedrock of social care. The decrease in immigration has been more that the Chancellor planned for, so that leaves a substantial tax gap - at least £4bn and possibly £6.5bn annually.

Note this is from the Times, not a bastion of leftist thought.

So the question is, what do we do about this? Are you willing to pay higher taxes to pay for the shortfall? Should we lift restrictions on immigration to keep taxes lower?

Rejoining the single market or at least the customs union might help, but the same people who oppose higher taxes also oppose immigration and a closer connection the the EU

"Falling migration numbers could cost the chancellor as much as £7bn in fiscal headroom as he writes his first budget, The Times has been told. Government insiders believe that John Healey, who already faced an uphill battle to balance the books next month, is likely to have an even bigger challenge after immigration significantly undershot projections from the Office for Budget Responsibility (OBR). The Institute for Fiscal Studies think tank estimated last month that the success of Shabana Mahmood’s reforms, which have seen net migration cut to the low hundreds of thousands, could cost Healey some £4bn. Labour sources familiar with the budget process, however, said that the figure was now closer to £6.5bn. The OBR’s migration forecasts have been consistently higher than real numbers in recent years. Treasury officials, who have long expected Mahmood’s reforms to cause a hit to headroom, described the number as “pure speculation” but did not deny that Healey would have to contend with a larger funding gap than expected because of falling migration"

"At the same time, the OBR also observed that a ‘low migration’ scenario would – even after taking account of reduced pressures on public spending – push up borrowing by about £14 billion per year in 2028-29, considerably more than the cost of a 2p cut in National Insurance contributions, and raise the debt to GDP ratio – the government’s key fiscal target – by about 2.5%, or about £75 billion"

"In the short term, the biggest impact will be on social care, already struggling with workforce pressures and years of underfunding. Over the last two years, only a very large influx of migrant workers – 70,000 new starters in the last year – has saved the sector from an even deeper crisis. If the fall in visas issued is sustained, and there is not a large infusion of taxpayer funds, prospects are bleak."

https://www.thetimes.com/uk/politics/article/falling-migration-john-healey-headroom-zsw9rdcnr

https://ukandeu.ac.uk/immigration-is-falling-but-the-economic-cost-may-be-high/

But it's a zero sum game, using the same money going round in circles, with no actual economic growth. Even worse is that some of the money spent goes abroad being spent on imported foods, imported tat from China, imported white goods, imported clothes, so the full "value" doesn't even stay in the country. And a not insignificant chunk is spent in the black economy so there's not even tax revenue earned from such spending on things like illegally sold duty free booze and cigarettes, drugs and other contraband, etc.

Yes, it needed radical overhaul, which is what it got with privatisation. Unfortunately, as with lots of the privatisations, there wasn't the proper scrutiny, control and oversight, with the regulators being unfit for purpose and inadequate safeguards re value for money etc. Just like hospitals and schools PFI. Just like HS2. We have exactly the same problems with privatisation and nationalisation, i.e. useless politicians and civil servants in overall control/management/supervision who couldn't run a piss up in a brewery. It's why the re-nationalised train operating firms are no better - same staff, same management, same unions, just been "Tupe'd" over and continuing to do the same as previously. It's why nothing will ever change.

Where are 1.2 million jobs coming from? I work in retail and we’ve been told that the usual Christmas temps that we take on won’t be happening this year. A lot of my staff are classed as being on benefits because their wages are topped up with UC, the national insurance hike has made the situation worse because when a full timer has left they now take on three people on low hours so they don’t have to pay the national insurance.

It's not my graph. It's world data. And you can interact with it. Tick countries, sort ascending or descending etc.

Select the country you would like the UK to emulate, level of service etc. Then set the graph to compare.

From that site for example, Sweden is 26.1% of GDP on welfare, UK is 23%.

The USA is 19.8%. So do you want the UK to be more like Sweden, or more like the USA. Sweden is up; the USA is down.

I do want to be like Sweden.
Now go and read about Swedish welfare system. It's nothing like we have here. Their entire model is based on universal labour market participation and universal, not means tested, access to social services.

ETA: back to OP's question - Sweden has very low immigration and they are doing just fine.

For disclosure - we need to encourage high skilled immigration, degree educated, entrepreneurs etc. We need to ensure our benefits recipients take jobs currently filled by low skilled immigrants.
If you lived in e.g. Sudan and had an opportunity to come to UK as a carer worker, why wouldn't you jump on it? Five years of wiping bums, then get ILR, bring you 8 kids and partner here, get depressed and go on benefits for life. You would be mad not to. I'm not blaming people who do this, they are correct, but the system is wrong.

I thought the problem was that Railtrack remained in state control.

Repeal all of Rachel Reeves's tax rises eg ENI. And the workers day one rights. Measures that are anti jobs. That would be a good start.

Although apparently there are nearly 800,000 job vacancies at the moment.

It’s not working in every single way possible.

Tax is down, the only thing growing is the welfare bill.
Businesses are not hiring.
Gilts are up, borrowing costs are up.

I think that nearly all parties have accepted that immigration needs to be reduced because it has become an electorally toxic issue that will lose them votes if they don't make the right noises about it. I don't think that's quite the same as saying that the argument about the economic impact of immigration has been won? I would say the the argument hasn't really been properly debated precisely because it is such a toxic issue - none of the parties are brave enough to have that debate.

As to immigration only benefitting big business, what's your evidence for that exactly?

And who ended up paying for the railway infrastructure in the end ? The taxpayer. Because of train crashes.

I am totally for guv bringing all these franchises back in. But it will take years, decades, to see any real saving. Because the contracts the franchises signed still have to be honoured, or there will be penalty clauses. It will be decades before the fleet can be standardized again. If you ride on a Hitachi train maintained in a Hitachi maintenance shed, that contact will have to stay. We lost the economy of scale.

It was one of the main reasons for people voting Brexit. Certainly in the north.

Sorry, what's the relevance of this point?

Big business importing cheap labour that undercut British workers.

@MrsBennetsPoorNervesAreBack ’As to immigration only benefitting big business, what's your evidence for that exactly?’

Take Bricklayers for example. Thousands of EE bricklayers immigrated to the UK.
This immediately put a lid on any pay rises, and indeed wages went down. Building companies had no need to train people up, because they had unlimited cheap fully trained bricklayers available.
Profit for the building companies went up.
This scenario crosses all building, engineering, IT, driving, cooks etc.

OK. So you mean that lots of people voted for Brexit because they believed that only big business benefits from immigration. But I presume you realise that this isn't actually evidence?

Do you have any evidence to back up your claim?

@MrsBennetsPoorNervesAreBack

Less immigration at any cost would reflect my point of view fairly accurately. However, I don’t think there would be a cost because I think we vastly underestimate the true fiscal impact of immigration

But if we did have a shortfall, my tax rise of choice would be to tax inheritances as income, which would raise tens of billions. Would be hard to get past the electorate though, I admit.

Cost cutting I would go for the civil service. Too many managers, not enough admin. The ratio has become skewed.

My experience of friends and family applying for jobs over the last couple of years is you have to apply for 30 or 40 jobs just to get a minimum wage position with minimal hours. We don’t need more people competing for these jobs.

Well, I understand that that's the theory. But it assumes that employers will suck up the higher costs and reduce profits accordingly. I'm not sure that the evidence supports this?

From what I've observed, most companies are passing on the higher costs to the consumer through higher prices. And frankly, having higher wages isn't that helpful if everything costs more.

You mentioned Sweden first. I just mentioned it replying to you.

Quote " ETA: back to OP's question - Sweden has very low immigration and they are doing just fine."

Lets look at the data. Pick 2025.

Total immigration to Sweden 90 k
Population of Sweden 10.64 million

Population divide by immigration Sweeden = 118

UK immigration 705k
Population of UK 68.75 million.

Population divide by immigration UK = 97.5.

Sweeden is lower in migrants per capita than UK in 2025 yes. But it's not massive. Lets guesstimate it at 15%. And I just done a snapshot, 2015. Not the whole picture.

It's not 40% or 60%.

Are the services 15% different ?

I won't include links sorry, because too many to quickly find that data.

It was brought back into state control remember. Because of horrific crashes due to poor maintenance. The private companies would not spend.

Thank you for responding.

FWIW, I agree with you that inheritance should be taxed more. But inheritance tax is curiously unpopular for a tax that currently only affects around 4-5% of estates, so you're probably right that it won't happen. I would quite happily tax any and all inheritance as the people inheriting haven't "earned" any of it. But that's probably for another thread.

If you have credible evidence on the "true fiscal impact" of immigration, I would be interested in seeing it.

There may be 800,000 vacancies but how many will offer a decent enough wage that doesn’t need to be topped up with UC and how many are full time hours? The welfare bill will never go down as long as people are not being paid well enough or given enough hours.

I think the public have already "decided", that the loss to the treasury should be met with a scaling back of expenditure by the state. All political parties are now vying to outdo each other in the extremity of this position...so it's obviously polling well.
The argument now seems to be where the cuts are made and who will suffer most... pensioners, the unemployed, young people etc.
I think it's pointless trying to explain Keynesian economics at this point, the public are baying for 'blood'.

You are probably right, but perhaps before "deciding", the public should at least be persuaded to consider the implications of their "decisions"?

After all, the public "decided" to leave the EU, and the majority of the electorate now recognise that this was a bad decision.

I wish we had politicians who were brave enough to front up about the likely consequences of the decisions that people are making.

We all had to take low paying work when we were young and inexperienced.

It will be out of anyone's hands soon enough when the country goes bankrupt due to out of control spending by the state.

I see Mahmood is backtracking on her immigration reforms now due to pressure from Rayner. Labour are remarkably out of touch with public opinion (according to all polls).