Migration Watch Paper On The Fiscal Effects Of Immigration To The Uk And The Response From Cream


Economics

1. CReAM has responded to our paper by misrepresenting the points we made without answering them[1]. Perhaps this was a ploy to distract attention from the weaknesses we have identified but it is not what we should expect from an academic institution.

2. The Migration Watch analysis is anything but the “violent attack” claimed. On the contrary, It is a careful assessment, prompted initially by the absence of any mention in the abstract of their paper of their finding of a fiscal cost of migration of  £95 billion between 1995 and 2011, and the incongruence between this finding and their conclusion “Overall, our findings draw a positive picture of immigrant contribution”. This  important finding was obscured in CReAM’s report of their research both in their paper and in their media presentation of it.

3. To anyone who has read the MW paper, it will be clear that:

On their first claim that MW asserted that the CReAM report assumed that[Migrant] employees earn the same as the UK-born population:

•          This point was made in respect of CReAM’s allocation of means tested benefits. In CReAM’s estimation of expenditures, by allocating means-tested welfare spending on the basis of recipient share among the migrant and UK-born population while taking no account of the evidence they had of differences in income, CReAM, in effect, assumed that they all earned the same. It is entirely legitimate to draw attention to this assumption and to the fundamental distortion that is likely to result.

•          In assessing CReAM’s estimation of revenues, MW do not say that CReAM treated everyone as earning the same amount. In the preparation of the paper, MW sought to engage with CReAM, and received the response that all of their methodology was in their paper. In fact, CReAM’s paper was silent on how they had treated the self-employed, on whose income it is now clear that they had no data, and had not sought to gather any. MW noted that, in a previous paper on the fiscal effect of immigration, the CReAM authors had described a methodology which by treating self-employed people as if they paid the same amount of income tax, effectively treated all self-employed as earning the same amount. But MW were cautious in their approach and (at para 42) clearly noted in the conditional “If this is what they have done in their present paper ….” .  But MW did not assume this is indeed what was done, and in para 44 they outlined an alternative scenario which CReAM do now, in fact, appear to accept is the methodology they used.  Thus there has been no misapprehension at all – even though CReAM declined MW’s attempts at discussion. And as the MW analysis points out, both methods are likely to result in similar distortion.

 

4. On the second claim that MW had asserted that CReAM had assumed that Self-employed migrants contribute far more than those employed

  • CReAM treat MW’s comment in the summary as if it refers only to income tax. But it is clear to anyone reading the body of the paper that this derives from CReAM attributing a contribution of over £6,000 in Business rates a year (by 2011) to each self-employed migrant. There seems no doubt at all that on this basis alone, CReAM have assumed that self-employed migrants contribute far more than those employed.

 

  • On the income tax point, CReAM’s response confirms that MW had indeed correctly identified the methodology used. But CReAM then assert that ‘since self-employment is more common among recent EEA immigrants than among natives, this choice may lead to an underestimate of total EEA immigrant tax payments, exactly the opposite to what they [MW] claim’. This is simply wrong. The only circumstance in which that could be the result is if the difference between the income of self-employed recent EEA migrants and self-employed UK-born was less than the difference between the income of recent EEA migrants and UK-born who are employees. On the basis of the available evidence – particularly in the form of HMRC’s analysis of self-assessed income tax and income across sectors that is about the least likely scenario possible.

 

5. On the third point: Migrants own the same investments, property and other assets as the UK-born and long-term residents from the day they arrive in the UK.

•          CReAM’s previous response merely pointed out that taking ‘an extreme scenario’ for company taxes and Business Rates does not turn their positive result for recent EEA migrants into a negative, although it does for recent non-EEA migrants. Their further reference to it raises two issues.

•          Firstly, the CReAM paper stresses its use of ‘worst-case scenarios’ but it is clear from their treatment of these revenues (and indeed other revenues and expenditures) that is has done no such thing. As MW point out, this stress on ‘worst-case scenarios’ is particularly disingenuous when the CReAM authors used a worse case in their previous paper on the fiscal impact of immigration.

•          Secondly, to say that adjustments of particular discrete revenues or expenditures do not turn the balance from positive to negative simply obscures the point that it is the cumulative and total effect that is what matters.

6. To conclude, having read CReAM’s response, we fully stand by our research that CReAM’s finding that immigrants have cost the tax payer £96 billion between 1995-2011 is likely to a considerable under-estimate, the actual amount being nearer to £148 billion [2].   It would have been better if some commentators had read our report before criticising it.



[2] http://www.migrationwatchuk.org/briefing-paper/1.37

13th March 2014

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