Paying their way?

This morning two professors from University College London published a report tallying the cost to the Exchequer of immigration.

As occasionally happen when complex reports are inflicted on Fleet Street, the study elicited two vastly contrasting stories in today’s newspapers.

Version one, to quote the Guardian, was as follows: “Tax payments by European migrants far outweigh welfare”.

Version two, as seen in the Mail, went thus: “Report finds immigrants have cost more in handouts than in taxes they paid”

By you’re now you’re probably umming and ahhing and thinking: aren’t those, erm, precisely the opposite? And, in headline terms at least, you’d be more or less right. So which is accurate? Or, since this is economics, where nothing is ever quite clear-cut, which is the most accurate?

Having sat through the briefing on this, spoken to the report’s lead author a couple of times and read through the study itself, I believe I may be in a decent position to clarify things, so here goes. The short answer is: version one (immigrants more than pay their way) is by far the more accurate version of the story.

The longer answer goes as follows. There is only so much reliable data on immigration. From 2000 we had figures tracking individual cohorts of immigrants as they arrived in the country. Before that the data was a little more choppy – we can’t track the economic behaviour of newly-arrived immigrants, nor can we see whether they left the country before 1995. Given plenty of prominent British citizens, including Boris Johnson, were not UK-born, these older data are less reliable when it comes to pinpointing recent (as opposed to decades-old) immigrants.

So, the UCL report has a look at both sets of data separately. Its finding from the new data (it looked at 2001–2011) could hardly have been more straightforward:

• EU immigrants who arrived in the UK between 2001 and 2011 contributed a total of £20bn more in taxes to the Exchequer than they received in benefits.
• Of this, £5bn was from the A10, the newest 10 members of the EU, including Poland and Romania.
• New non-EU immigrants in this period contributed £5bn.
• Compare this to the UK-born population, which contributed £617bn less in taxes than they received in benefits over that period.

In other words, version one of the story – immigrants bring in more money than they take out – is true for all new immigrants from all regions over the past decade. To back this up, the professors also found that there was a 40% chance the average Briton claims some sort of benefits or tax credits. Compare that with a 23% chance for all new immigrants since 2000, or 24% for A10 immigrants, a 16% chance for other EU immigrants and a 24% chance for non-EU immigrants.

Non-EU immigrants’ propensity to claim housing support was marginally higher than for UK-born citizens, though this owes a lot to the fact that most of them are based in London, where there is far more social housing.

However, the authors also looked at the data from 1995, bearing in mind the provisos I laid out above – that because this was for all non-UK born people, it would include many who had already been in the UK for some time.

They found that over this period the net contribution of all EU immigrants was similar – they paid in £4.4bn more in taxes than the received in benefits etc. By contrast, non-EU immigrants paid in £118bn less in taxes than they received from the state. This was still a far smaller net takeaway than the UK-born population, whose net contribution was £-591bn, but is nonetheless a significantly negative figure.

Why? In part it’s probably because many of these immigrants will have come to the UK some decades previously and were retired – therefore taking more from the state than they give. In part it is because non-EU immigrants tend to have had more children over this period, and, in an effort to be cautious, the authors decided to assign the cost of their children’s health and education to non-natives, while assigning their children’s future tax payments to natives.

In other words, there are a whole range of question marks over this £118bn.

One possible explanation is that there has been a big shift in the productivity of new incoming workers, with previous cohorts of immigrants proving far more of a drain on the state than recent ones.

However, even if this is the case, it is outlandish to claim, as one newspaper did today, that the numbers are an indictment of Labour’s immigration policies. As the UCL paper points out, in 1995 the average non-EU immigrant, who was responsible for these higher benefits claims, had already been in the UK for 23 years. In other words, since 1972. So, if it’s an indictment of any particular government, it is of that of Ted Heath, who let them in in the first place.

I suppose my point is that in a thoughtful, peer-reviewed economic paper such as the UCL one, there are always likely to be little contradictory pieces of evidence – sometimes they are artefacts from the data; sometimes they reflect deeper truths, such as, in this case, the fact that the longer someone has been in this country, the more like a native they behave. But they do not change the main thrust of the report: that recent immigrants, whether from the EU or elsewhere, more than pay their way.