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/

Theres a balance to be had. Unfortunately it's too far one way at the moment.

Well, if that's how you choose to frame the question, then you would probably get the responses that you're looking for.

If, on the other hand, you frame it as amending the policy to ensure that adequate staffing in our social care sector is sustained, or ensuring that the system remains fair for those migrants who work incredibly hard to care for our elderly and disabled citizens, then you might find that you get rather different answers.

Time will tell whether it has an impact on the polling.

We also still have a decent sized seasonal requirement for agricultural workers. I have spoken with people who have tried to recruit through job centres, and it’s well nigh impossible. Whereas some Eastern Europeans were happy live here to work but to spend the winter with their families at home. Brexit buggered that up.

Not quite.

The 48% figure is being misrepresented. It does not mean that immigrants make up 48% of the people living in London’s social housing.

The Census found that 47.6% of socially rented households had a household reference person who was born abroad. That classifies each household according to one adult, even if their partner and children were born in Britain.
When everyone living in London’s social housing is counted, only about 29% were born overseas: approximately 525,000 people, compared with more than 1.3 million UK-born residents. Many of those born overseas are also British citizens or have lived here for decades.

What the 2021 census shows is that, on a person-by-person basis, foreign-born Londoners were proportionately less likely to live in social housing than UK-born Londoners.

There were plenty of serious fatal rail crashes before Railtrack was formed whilst the infrastructure was nationalised under BR.

Very much trained. The Filipino & Indian nurses I work with had to jump through hoops to come and work in our nhs. I always ask them why choose here out of all the countries in the world and they have said coming to the UK has always been their dream.
Thank goodness for them.

This.

I cannot understand why we import fruit pickers and pay unemployment benefits at the same time.
Why 18yo is allowed to claim when we need low skilled foreigners to do certain jobs
AIBU to encourage my 18-year-old daughter to claim Universal Credit? | Mumsnet

@Mouldemort I find these arguments bizarre and frankly disingenuous

There’s not that many people suggesting that we cut immigration for staffing essential services or for those who are contributing a good amount in tax.

also, the OBR isn’t counting things like additional cost in infrastructure and social housing.

I’m not suggesting these people don’t exist, of course they do. But I genuinely think it’s a minority who are just saying “end immigration”.

People are talking about reductions. They are not saying that heart surgeons and care workers must be turned away on principle.

@MrsBennetsPoorNervesAreBack ”Well, I understand that that's the theory.”

No. That’s the facts. You can see it today with Indian IT data analysts/engineers coming in on £42k a year, a salary that good IT analysts were getting 20 years ago. Therefore creating a ceiling on salaries.

I understand you will dismiss my post, as you have your blinkered opinion and you won’t be swayed from it.

You are missing the point completely. Someone will always have to do the minimum/low wage jobs. We know from lockdown that the bulk of essential workers were low paid such as care workers, retail staff, cleaners, bin men etc. Whoever works these jobs will always get wages topped up with UC because they are not valued enough until shit hits the fan and another pandemic occurs. It doesn’t matter if they are young or old the benefits system is going to be funding the people who work these jobs and we need them for society to function. You can’t cut the welfare bill when people are paid poorly, it’s not about “we’ve all had to take low paid work when we were young and inexperienced” because there’s constantly going to be someone in the position of not earning enough to solely survive without government support so the bill will never go down. Maybe you live under a rock and don’t realise how many people get wages topped up or you are just ignorant?

Actually, I realised after posting this that my figures are also slightly misleading, as the total number of social housing residents includes children, who are perhaps more likely to be UK born even if their parents are immigrants.

However, even after the figures are adjusted to exclude children, foreign-born adult Londoners are still proportionately less likely to live in social housing than UK-born adult Londoners. And it clearly isn't true that "most" social housing is given to immigrants as previously claimed.

The care home idea is ridiculous. Nobody wants to be cared for by somebody who is forced to be there to tick a box. That would be an appalling situation.

I imagine a lot of people aren’t physically able to do fruit picking.

the term NEET, like most political terms, is actually pretty useless.

I think 30% of them aren’t claiming benefits at all in which case, none of my business.

It also includes people who are too ill to work.

But the more I look at all the terminology that’s used in the media, the more I realise it’s utterly useless. Hence why I don’t really look at the media.

With so many sets of figures available to us directly from the source, it’s much easier to look at that kind of information.

That’s means targeting pensioners which isn’t popular

There may be a specific industries where this effect is felt, but at a national level, I have not seen any evidence to back up this argument. Companies typically pass on higher costs to consumers, and so wage increases don't necessarily increase in higher purchasing power.

As for the Indian software engineer example, I think this is a pretty poor example to use in an argument about immigration because. For that kind of role, salaries are likely to be affected at least as much by the potential to outsource to cheap overseas labour as by Indian immigrants to the UK. And arguably those Indian immigrants would at least be spending that money in the UK economy and paying UK taxes etc, whereas outsourcing would result in those costs being invested elsewhere.

I did say this is what you would do.
Dismiss lived experience out of hand, and keep going with your disproved theories while asking everyone for evidence.

@bannabead But nothing is popular! Thats why populist politicians do nothing. They need pensioner votes. They need benefit claimant votes. They frighten everyone else by saying taxes must be raised because we are unsafe and the NHS is overwhelmed. They do nothing much about anything. There’s some waffle on the edges of policy but the big decisions to live within our means are not tackled because they lose votes and attract criticism. Political leaders now want to be loved and Burnham is yet another who craves admiration. We never get anywhere as a result.

@MrsBennetsPoorNervesAreBack

I don’t have any data I can show you because I’m talking about costs that are caused by immigration, but aren’t attributed to it. For example:

Just in the last 5 years we have increased the population by millions. Scarce housing has got scarcer. Rents have gone up enormously, so more people claim UC, or claim more.

13 million extra people need a lot of extra infrastructure. You only have to see many of the threads on here to realise successive governments have often just not bothered to build it, which has costs in itself. When it is built, it is not attributed to the costs of immigration, although it is only needed because of it.

Tens of billions of pounds leaving the UK as remittances.

They aren't disproved theories though.

Yes, there is evidence that reducing immigration might have a small impact on wage growth. But there is also evidence that wage growth typically leaves leads to inflation. I have seen no credible evidence to back up the idea that reducing immigration actually results in people having any more purchasing power.

Of course, if you have a credible source that evidences this, I would be happy to have a look at it. I'm interested in the economic evidence, though, and not just your "lived experience", which is by its very nature subjective and not necessarily representative.

They think they are too good to do hard work. Actually, it’s racist. Let Johnny Foreigner do the hard work, our DCs are above that.

Thank you for responding.

I do think you have made some valid points here, but your post overstates some of the figures and you're treating gross costs as though they were net economic losses, which I don’t think is a fair representation.

I think the UK population has grown by around 3 million since 2021, with net migration accounting for most of that growth. That is undoubtedly a rapid expansion, and it is entirely reasonable to be concerned that housing and infrastructure have not expanded equally to match this. But “13 million extra people” describes growth over nearly 3 decades, and not just five years.

It is also fair to acknowledge that immigration inevitably increases demand for housing, and it is therefore likely to have contributed to higher house prices and potentially to higher rents. However, the evidence suggests that immigration is just one factor in a much bigger picture. A recent review estimated that immigration might explain around 4–6% of the total rise in UK house prices over the past three decades, while other factors account for most of the increase.

It is true that higher rents might indirectly increase Universal Credit housing expenditure, but I don't think that should simply be assumed - further analysis would be needed to identify how much additional welfare spending, if any, could be specifically attributed to migration-related rent increases.

The infrastructure point is a fair one. A rapidly growing population obviously needs additional schools, healthcare facilities and other public services. If we fail to invest in this infrastructure, then we end up with overcrowding, long waiting lists and poorer services etc.

However, I don’t think it is true to suggest that these costs are wholly ignored by the economic analysis. The OBR explicitly considers public-service and infrastructure requirements, yet in the scenarios that they have modelled, they still calculate that the overall medium-term fiscal effect of additional migration is positive. Perhaps there are flaws or omissions in their analysis, and there is certainly a case for looking more closely at the costs and benefits over the longer term. But it simply isn’t accurate to suggest that infrastructure costs are ignored by the economic analysis.

Finally, overseas remittances are approximately £10 billion annually, not “tens of billions” as stated. These are private transfers from earned income, and not a cost borne by the taxpayer. And if migrant workers happen to send a proportion of their income to their home countries, that doesn’t negate the fact that they still probably spend a significant proportion of their income in the UK, pay taxes and contribute through their work. Treating the entire remittance as an economic loss fails to recognise the wider value of their labour to the UK economy - just as I might spend a proportion of my income on an overseas holiday without it wiping out the value of my wider contribution to the UK economy.

There is a whole lot of projection going on here.

I am asking how we should fund the gap the OBR has identified through decreased immigration as a result of government policy.

Boris was PM during that time. He lived in Government housing, and he was foreign born.

I just mention that for folk that maybe do not know what "foreign born" covers.

Yes. But the private rail companies were not doing the work. The accident reports highlighted that. So the rails were re-nationalised. And now less accidents.

Nail on the head with all that.

Yes, absolutely. Plus people like Joanna Lumley, Emma Watson, Prince Philip etc.

"Foreign born" doesn't necessarily mean what people might think it means.