Hard evidence: are migrants draining the welfare system?

Are migrants really “costing the taxpayer billions of pounds per year” or is there more to it than that? Carlos Vargas-Silva, Senior Researcher at the Migration Observatory at the University of Oxford, looks at the data.

This article was originally published on The Conversation, where it forms part of Hard Hard Evidence, a series of articles that looks at some of the trickiest public policy questions we face. Academic experts delve into available research evidence to provide informed analysis you won’t get from politicians or vested interests.

Recent data released by the Department for Work and Pensions under the Freedom of Information Act revealed the number of people claiming working age benefits who were non-British nationals when they first registered for a National Insurance Number.

One of the figures from the new dataset that caught the attention of several newspapers was the increase in claims from those who were nationals of EU accession countries (i.e. the new EU members states that have joined since 2004). This number increased from 12,610 in 2008, to 49,720 in 2012. This fact led to statements such as this one from the Daily Mail:

Number of foreigners claiming UK benefits leaps 41% in 5 years … rise has been fuelled by a four-fold increase in benefit claims by Eastern Europeans.

The common narrative was one of growing concern, given the new wave of Eastern European migration that the UK may experience with the relaxation of border controls on Romanian and Bulgarian workers in 2014.

Preliminary number-crunching

It would be tempting to dismiss these new numbers from DWP for three reasons, but these reasons can all be countered convincingly.

1) The data are for those who were non-British nationals when they first registered for a NINO and many of those could now be British nationals.

But this is unlikely to play a big role for nationals of EU accession countries as there is little incentive to become British nationals.

2) The increase in the annual number of nationals of EU accession countries claiming working-age benefits was only 37,000, much smaller than the equivalent increase for British nationals (588,000).

True, but the 2008-2013 percentage increase in the annual number of EU accession country nationals claiming DWP working age benefits was almost 300%, far greater than any other group. The increase was 12% for British nationals.

3) The number of nationals of EU accession countries living in the UK has been increasing over the past few years. Therefore, we should expect the number of nationals of EU accession countries claiming benefits to also increase.

Again this is true, but according to Office for National Statistics there were 497,000 Polish nationals living in the UK during 2008. This compares to 646,000 Polish nationals living in the UK during 2012, representing a 30% increase for the five year period. This increase in the population is much smaller than the increase in nationals of EU accession countries among benefit claimants (close to 300%). Even if you include other major groups of nationals of the accession countries in the UK such as Lithuania, Slovakia, Romania, Bulgaria, Latvia, Czech Republic and Hungary the percentage increase in the population is just 54%.

So the problem is not with the figures, per se. The problem is that some sectors of the media used the data to suggest that migrants (particularly nationals of EU accession countries) drain UK public coffers. The Daily Mail’s conclusion was:

They are costing taxpayers billions of pounds a year.                                    

The fiscal impact of migration

In order to find out whether the Daily Mail was correct in its conclusion, it is necessary to look at two factors: the taxes and other contributions migrants make to public finances and the costs of the public benefits and services they receive. Subtract the second from the first and you get the answer. If the difference is positive, migrants are net-contributors; if the difference is negative, migrants are a burden for the state.

The academic literature on the fiscal impacts of migration suggests that migrants doing highly paid jobs are the ones more likely to make a positive contribution to public finances. These migrants pay more taxes and are less likely to claim benefits. It is well known that nationals of the EU accession countries in the UK tend to do low-paid jobs. Does this mean that they have a negative fiscal impact?

It may come as a surprise that the only study which comprehensively analyses the fiscal impact of migration from the EU accession countries, in their case nationals from the A8 countries (the eight countries that joined the EU in May 2004 – excepting Cyprus and Malta), found that in the four fiscal years after they joined the EU, migrants to the UK from A8 countries made a positive contribution to public finances.

The finding that A8 workers make a positive contribution to UK public finances contrasts with the fact that most A8 workers concentrate in the low-wage sector. However, as shown in Figure 1, A8 workers have one the highest employment rates in the UK, a fact which offsets the effect of their lower wages.

 

Figure 1 – Employment rates of British, Old EU, A8 and non-EU nationals Note: these are ONS estimates from the UK Labour Force Survey

The result that migration has a net positive fiscal impact is not limited to nationals of the A8 countries. The OECD recently estimated that on average, households headed by migrants in the UK contributed about €3,000 more than they received in benefits in 2007-2009.

Netting the benefits

Has there been a significant increase in the number of nationals of the EU accession countries claiming DWP working age benefits? Yes.

Has the positive fiscal impact of migrants from the EU accession countries changed since 2008-2009? This is less clear.

Establishing whether the increase in the proportion of nationals of the EU accession countries claiming benefits has been offset by their increase in the working population or increased wages in that group is not possible to know without further study.

The only thing we can say for certain is that the concept that they are “costing the taxpayer billions of pounds per year” is pure speculation and is not supported by the data.

Carlos Vargas-Silva does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The ConversationThis article was originally published at The Conversation. Read the original article.

A protester holds a sign during a march hoping to draw attention to claims of exploitation and discrimination of migrant workers in 2007. Photo: Getty

Carlos Vargas-Silva is a Senior Researcher at the Migration Observatory at the University of Oxford.

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.