Immigration and the British economy: the awful truth is revealed

June 15, 2013 3:45 pm 4 comments Views: 6128

UK Border Agency raid

Immigrants: don’t you just love ‘em? They travel to Britain from far-flung lands, coming here to toil away in our shops and offices and homes, paying their taxes and generally making us all better off.

Now, I suspect that some people who read this post won’t entirely agree with the paragraph above. I suspect that some of you will take a slightly different view. But hopefully, I’ve piqued your interest for long enough to ask you to consider what follows.

The Organisation for Economic Co-operation and Development is an international think-tank backed by the world’s biggest governments. It crunches numbers on an industrial scale, providing data about developed economies that are regarded by a lot of people as fairly credible.

Today, it’s produced a large report about migration and related issues.

Part of that report looks at the fiscal impact of immigration. Broadly, the OECD concludes that migrant workers tend to make a net contribution to the countries they move to. This is because they tend to be younger and more economically active than the average of the wider population in their new country, a population that includes more very young and very old people.

At the same time, migrants consume public services. Do they pay in more than they take out? In lots of countries, the OECD concludes that the answer is Yes.

There are two ways of measuring the impact of immigration on the public finances.

The first is to include pension contributions and payments. However, some people argue that’s a misleading measure, because migrants’ age profile differs from the wider population, and because of the time-lags involved in receiving pensions. So you can estimate the impact excluding pensions.

On both measures, the OECD found that international migration is making a positive difference to Britain’s public finances. That is, the Government’s deficit is smaller than it would have been without the presence of immigrants in the UK.

The numbers are here:

Click to enlarge

So, that’s a 0.46 GDP contribution including pensions, or 1.02 per cent excluding pensions.

It’s a slightly crude calculation, but using the OBR’s estimate for nominal GDP this year, that works out at either £7.337 billion or £16.269 billion.

Either way, that’s a decent chunk of change that the Government would otherwise have to find. And there are only three ways for the Government to raise money: it can impose taxes, it can cut spending, or it can borrow.

(By way of context, the Government is spending about £720 billion this year, of which it’s borrowing around £120 billion. Increasing the basic rate of income tax by 1p would bring in roughly £5 billion a year for HMG.)

So, ladies and gentlemen, we have come back to the beginning. One of the world’s most credible economic analysts has concluded that because of immigration to the UK, British taxes are lower, spending is higher and the deficit is smaller. So, just for fun, let me ask the question again. Immigrants: don’t you just love ‘em?

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