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 most of the money paid in welfare goes back into the economy.

A significant amount for working age households (not pensioners), goes to private landlords because housing is the biggest expenditure in a household on benefits. Out of £145bn in welfare for working age households, £37bn goes to landlords - which isn’t the full cost of rent as most households find they have to top up the housing benefit/housing element.

That’s because GDP and GDP per capita can be manipulated to be higher by the government spending more and handing out tax breaks to get businesses to invest more. GDP is not a good indicator of how well off we are because it can be manipulated to look better very easily,

@AmberTigerEyes And of course they spend their earnings! They don’t just save it! Although savings are there to fund business growth! Or fund the government via gilts. The whole economy depends on inter-connected money. However the biggest problem
is that we have low growth, and we are not generating enough money! This is what we need to do or government spending will curtail. Recycling money doesn’t fund growth in any meaningful way or provide income tax either. All welfare spending is provided by taxes or borrowing. Taxes revenues are falling because too few are working and borrowing is at record levels so taxation goes on borrowing costs ! It’s madness.

Agree. Young people should be working.

What? Person A still exists, if they’re unemployed you’ll have to continue supporting them via the state.

What an odd argument you’ve made.

I say no to anymore increases in immigration.

It’s not just the headline figures which count. Theres a real complex situation on the ground which helps no one and has been slowly developing for decades.

I do think immigrants work, if you look at the high street where I live 2/3rds are ‘immigrant’ run shops. I say immigrant because these could be British citizens now, and some second generation. They work hard. I am not saying they shouldn’t be doing what they are doing.

My point to the above is that it’s not an issue in itself, and they offer entry level unskilled work and plenty of it.

My issue is that if you as a white British woman, or your partner as a white British man, or your children as white British youth were to go into any of these establishments and try to get a job - 90% would be a no. They hire within themselves. Whether that’s family, ethnic ties, language ties, country ties.

This phenomenon is not unique to small private retail. I work with a large national employer of ‘unskilled labour’ with various locations across the country and the moment you have a manager of an ethnicity you can guarantee the team will quickly transform with new hires matching the managers. Ie. Turkish will hire Turkish. Polish hire polish, Indian hire Indian.

So on the ground there is a logistical issue with white brits getting work and that leaves it all to the super big employers. And I am not 100% sure the problem doesn’t exist there either.

And then everyone complains white Brits don’t work!

Thanks for this post. Yes, it's completely crazy and a recipe for a breakdown in community cohesion.

Having a million NEETS is a disaster for any country and it's about time the government sorted it out. Immigration doesn't help, it just makes the situation more entrenched.

Another thing that happens when foreign nationals are employed ahead of Brits is that a good part of the money they earn is sent abroad to help family in the country of origin. So it's sent out of the UK economy.

The UK is like a leaky bucket. Loads of money leaving our country and porous borders where low skilled people can easily get in.

I agree. Our answer to our problem is get white Brits working.

Importing more people doesn’t solve that problem.

Just picking up on the issue of young people not wanting to do care work, I think there is a lot that needs to be sorted in the system. Although I have no direct experience, I have spoken with many of my neighbours carers (home care several times a day) and they suggest that the title is a complete misnomer - they don't have time to care. They are rushing from one care recipient to the next, not given sufficient time to do much beyond the essential and not paid enough for travel between jobs.

There is a huge mark-up on the cost of wages, as the patient pays substantially more than it costs, probably about double, which suggests that either there are huge admin costs involved or large profits are being made - maybe a combination of the two?

The cost of 4 x 30 minute visits a day (14 hours a week) over the course of a year amounts to around £28,000 (https://caretoolkit.co.uk/home-care-cost-calculator-uk/) - more than minimum wage for a 35 hour week and approximately the same as the cost of employing somebody full-time.

Carer's allowance however is just £86.45/week for a family member providing 35+ hours a week of unpaid care, a total of just £4,495.40 a year. The huge discrepancy between the cost of paying for in-home independent social care as opposed to paying a family member is another aspect that I think needs to be addressed. Caring needs to be valued in our society and this suggests otherwise.

The biggest drop in tax revenues is due to Brexit (loss is £250million per day, or £90bn per year)

Brexit has also caused job losses, so the too few working is mostly about there being too few jobs not a sudden explosion in laziness.

There has been an increase in fewer working due to disability but that is a consequence of underfunding the NHS for decades. People on waitlists for simple surgeries that could have got them back to work end up being permanently disabled due to surgery delays.

To fix this, we need to reverse Brexit and invest into the NHS.

They need to abolish the student loan system to get more British qualified for the skilled jobs that are being taken up by immigrants. The minimum salary for a standard UK work visa is £41,700. For shortage occupations like health and care workers the minimum salary is £31,300.

Immigrants aren’t cheap labour, our under-educated youth are the cheap labour and expected to survive on £26k (minimum wage).

Well it seems that’s back in the spotlight but as other threads have in more detail it’s not as easy as just re-joining.

It won’t be easy to rejoin, but we need to admit it and get started on it.

I'm seeing this to.

My large local Sainb only employs people of certain origin, a lot of them don't even speak English, so assume all very recent migrants. If you ask any of them where certain item is they call another colleague because they don't understand your question. This is in London

Whilst not condoning the costs, you also have to factor in employers NIC, employers workplace pension contributions, paid holiday entitlements, statutory sick pay (paid by employer), etc., which can add a lot to the wage the carer actually receives.

Then the cost of the admin and management, i.e. wages for the "head office" staff to do HR, payroll, invoicing, debt collection, paying overheads, rent of office, utilities, telecoms, etc.

The care providing firms I've worked for over the years havn't been making "super" profits. Yes, they've been profitable for the owners, but not excessively so.

No issues such as the currency need to be thought through.

But I thought Rachel Reeves said the drop was due to headwinds and the billionaires? And Andy Burnham says its due to Thatcherism? This is strange.

Burnham has said nothing of the sort.

Ah, see where we are I was categorising Sainsbury’s as super big employer and here the supermarkets are still hiring white Brits.

It is such a natural thing I am not surprised it happens. I bet if you ask to see the manager they will match the cohort of workers.

Yes, it's human nature, being biased towards your own kind.

But we really need to get serious about 'British jobs for British workers' and that means black as well as white people. Welfare should an option only for those who cannot work. The young should be working, even if it's minimum wage as they will learn skills, meet people and maybe it will be stepping stone to something else.

I fully agree about getting people into work.

Our politicians over the decades have really let us down with the short term thinking of "offshoring" low value work, i.e. getting clothes, appliances, trains, ships, plastic tat, steel, plastic tat, even coal, oil and wood, imported from abroad because it was "superficially" cheaper.

It was only "cheaper" in terms of product pricing.

No account was taken of the ramifications of putting people out of work, i.e. unemployment/disability benefits, social costs i.e. higher crime, unhealthy lifestyles, etc.

As you quite rightly say, working is good for you, learning new skills, meeting new people, a sense of community etc - far better than a lazy life on benefits being bored and getting into unhealthy/antisocial habits.

Personally, I think it's worth governments paying a bit more to have goods manufactured in the UK to save the costs of unemployment, social problems, unhealthy people, etc. Likewise encouraging UK employers to take on UK workers rather than "importing" cheap labour from abroad - same principle, short term savings for the employer, but long term costs for the taxpayer in terms of the unemployed who could/should be doing that work.

Yes, this is one of the most dysfunctional aspects of our creaking society, the cost of housing.

Why is housing so expensive, both rents and buying? Could it be something to do with the fact that the UK population has increased by approx 9 million in the last 20 years, most of that driven by immigration (2.5 million added in the last 5 years)?

We are one of the most nature depleted countries in the world and it's not hard to see why.

Yes, Labour are making some of the right noises, talking about NEETS and opportunities for young people instead of so many people going to university to do pointless degrees and ending up with masses of debt. Getting Brits into work ahead of foreign nationals should be part of Labour's agenda.

I used to work for a community project years ago at the time when the Poles were coming over. Our CEO who was a black Brit (African-Caribbean) complained bitterly about how employers were recruiting Poles instead of young black Brits. I think that was happening and still does, and it doesn't help us at all (not blaming the Poles, I've visited Poland and love the place, that's a country that does prioritise its own people).

Some legal migration helps us, as they tend to be people we need.

Undocumented arrivals costs us a fortune.

But, overall, migration here, is a financial negative for us. 🤷‍♀️