The authoritative source for independent research on UK-EU relations

30 May 2017

Politics and Society

The economic debate during this election campaign has not exactly been edifying. Labour’s numbers don’t add up, while the Conservatives have chosen not to even pretend that they’ve costed the impact of their policies. The words of the home secretary, Amber Rudd, last Thursday, are particularly breathtaking.

Her response to the latest immigration statistics, showing a significant fall in net migration, was the following: “It’s good that the overall figure has come down now by nearly a quarter in a year. We’re determined to make sure that we do continue to reduce the overall net migration number.”

It is worth unpicking this. The fall in net migration was driven mostly by more British and EU citizens leaving and fewer moving or returning. In other words, the fall was not the result of any changes to immigration policy but because fewer Britons and Europeans found the UK an attractive place to live, work, start a business or raise a family. Only in the looking-glass world of the government’s objective to reduce net migration to an arbitrary number could this possibly be regarded as good news.

Ms Rudd’s determination to continue on this course is likely to be rewarded. The official ONS data only runs up to December of last year. The more timely (but not directly comparable) statistics for National Insurance number registrations suggest further falls to come. Indeed, the number of new registrations from citizens of the eastern and central European countries that joined the EU in 2004 is now at its lowest level since then.

The fact that EU migration is falling now, before we’ve introduced any controls, illustrates one of the central misconceptions of the Brexit debate. Vote Leave argued that free movement meant that the UK had no control over who moved here from EU, whereas outside, we could choose the immigrants with the skills we need.

But this misses the point: immigrants have to choose us. Under free movement we actually did rather well in this respect because we were an attractive destination for relatively well-educated, skilled migrants, working in jobs at all skill levels.

Claims by, for example, Lord Green of Deddington, the chairman of Migration Watch, that “80 per cent of EU workers who have arrived in the last ten years are in low-skilled, low-paid jobs” are simply false. In fact, the majority of EU migrants, like the majority of non-EU migrants and the majority of Brits, work in middle-skill jobs.

Meanwhile, Remainers argued, and continue to do so, that Brexit won’t reduce immigration because many sectors of the UK economy will continue to need migrant workers. This too is wrong. We may need them, but that doesn’t mean we’ll get them.

The data does not tell us yet exactly who is going or choosing not to come. But if anyone still believes the myth that a significant number of EU migrants are “benefit tourists”, it’s presumably not them. More likely, it’s people who have skills or opportunities that can be transferred elsewhere with relative ease — precisely the people we want, in other words. The number of EU-origin nurses registering in the UK has fallen sharply, worsening the already acute pressures on the NHS.

During the referendum campaign debate on the economic impacts of Brexit focused mostly on the likely impacts on trade and investment of leaving the single market. Indeed, the Treasury assessment of Brexit ignored immigration — an absurd, and transparently political, omission, as I pointed out at the time. But, at least in the short term, British business is probably even more vulnerable to falls in immigration than to trade barriers.

There are signs business is, somewhat belatedly, waking up to the risks. The director-general of the CBI, for example, recently described the uncertainty over the future of the UK immigration system, aggravated by the government’s target, as “one of the biggest uncertainties affecting investment decisions”.

Unfortunately, both for EU citizens resident here, for their families and employers and for business in general, not only is this uncertainty unlikely to be resolved any time soon, but the governnment’s perverse attachment to the target, as illustrated by Amber Rudd’s words, mean things are likely to get worse before they get better.

The costs to the UK will be high. The fiscal cost of meeting the target, estimated by the Office of Budget Responsibility as amounting to about £6 billion a year by 2012, are significant, although since the Conservatives have not bothered to cost any of their policies it is perhaps no surprise they have simply ignored this.

More important are the longer-term impacts on the UK’s growth prospects. Although these are highly uncertain, the potential downside is large: my recent research suggests that Brexit-induced reductions in migration could reduce UK productivity and GDP per capita by perhaps 1 to 3 percent by 2030.

Estimates from the Center for Economics and Business Research are similar, but slightly higher. And this doesn’t just reflect a smaller economy and population, we’d be collectively poorer and less prosperous. “Good news” Ms Rudd?

Jonathan Portes is professor of economics and public policy at King’s College London and senior fellow at The UK in a Changing Europe. This piece originally featured in Times Red Box.


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