November 05, 2014
1. CReAM have now published a revised version of their paper first put out in November 2013 on the Fiscal effects of immigration to the UK. The original CReAM paper was given extensive media coverage and flourished as conclusive proof that immigration was a fiscal benefit to the UK, and that migrants contributed more in taxes than they took in public spending. It was claimed that their estimations were robust and certain and made on the most extreme of conservative assumptions.
Migration Watch published an assessment of this original paper highlighting that
Our assessment suggested that the likely fiscal cost of migration over the period might well be over £140bn.
The authors have now carried out what they call ‘robustness checks’ using different scenarios that do take on some of the points raised by Migration Watch and others. None of these reduce the overall fiscal cost. In fact the overall finding - still absent from their headlines - now appears to be a fiscal cost of £114 billion [para 4.2.1] as a best case, and worse-case scenarios extending this to a cost of up to £159 billion [Table A7 Panel (a) (c)] . Quite different from their previous suggestion that the worst case was a cost of £95bn, and with the MW assessment well within this range.
In their press release the authors continue to avoid highlighting their overall finding of this high fiscal cost of migration of billions of pounds each and every year between 1995 and 2011.
Instead, as before, they cherry-pick particular periods or groups to distract attention from their overall result, which they now concede is an even higher cost than they previously thought.
2. Their original and much publicised headline that - despite the overall cost - EEA migrants since 2000 have contributed 34% more than they have received has been endlessly repeated as a justification for continued high levels of migration particularly from Eastern Europe. They have now revealed that even on their extreme and optimistic assumptions, migrants from Eastern Europe has barely paid its way and on what is now their best-case estimation contributed only just over 10% more than they received.
The authors continue to call this in their press release a 'substantial contribution' from the accession countries. Not only is this a much smaller amount than people have been led to believe, but to suggest that this is somehow more than their UK-born peers is simply wrong.
They put this contribution "mainly down to their higher average labour market participation compared with natives and their lower receipt of welfare benefits". Actually, all this means is that they are more likely to be working-age and not receiving old-age pensions, and much is often made of the fact that these are young workers in the prime of life. But official statistics show that in the UK as a whole, working households without children actually contribute twice as much in tax as they receive in benefits. The assertion we hear so often that migrants in general and Eastern European workers in particular contribute far more than their UK-born counterparts is simply not comparing like with like and certainly not demonstrated in any way by this paper.
3. On specific points raised by Migration Watch:
We said that income should be taken into account in estimating means-tested benefits (including tax credits). This is an obvious and highly significant point that appears still not to have been addressed at all.
We said that attribution of company taxes by simple population share will distort the contribution of recent migrants. The authors have taken account of this in a variant scenario that - in our view correctly - no longer assumes that even the most recent migrants have just the same financial stake in UK plc as lifelong residents.
We said that employee wage data alone from the Labour Force Survey was unlikely to be a sufficient basis for any reliable estimation of personal taxes. The authors have now taken some account of this in varying their estimation of taxes paid by the self-employed.
We said that Business rates should not be attributed to self-employed individuals. The authors have taken account of this in a variant scenario that - in our view more correctly - attributes these in the same way as company taxation and better represents the financial stake that recent migrants have in UK plc.
We said that there are significant characteristics of migrants generally or specific groups that are likely to make a difference to fiscal impact. The authors have taken some account of this in relation to housing benefit, consumption taxes, and family size. On the other hand they do not appear to have taken account of some other issues we raised like inheritance tax or council tax.
The effect of even these partial changes has been to significantly up the authors’ estimate of the fiscal cost of migration and show that Migration Watch was on the right track and correct to draw attention to these issues.
4. These adjustments have a disproportionately large effect on the most recent migrant groups, particularly from Eastern Europe. In fact, the cumulative effect in the authors’ own alternative scenarios is to reduce the contribution made by this group to a mere £66 million over the ten years from 2001-2011 (Table A7 Panel (b) (d]. This is clearly likely to be less than the margin of error in the calculation, and shows that the fiscal contribution of Eastern European migrants - notwithstanding their high rates of employment and their youthful age-profile - may well be nothing at all.
Commenting on the report, Sir Andrew Green, Chairman of Migration Watch UK said:
“This report confirms that immigration as a whole has cost up to £150 billion in the last 17 years. As for recent European migrants, even on their own figures - which we dispute - their contribution to the exchequer amounts to less than £1 a week per head of our population.”