Red lines are the new thing. Red lines make politicians sound resolute and assertive. This Red line however means the UK is prepared to risk its economy & spend billions to keep 90,000 people a year out of the country.
Theresa May has agreed with her cabinet that restricting immigration will be a red line in any negotiations with the EU, in a move that experts claim will end Britain’s membership of the single market.
So May and the government have put immigration at the very top of the priority list. Notice that “sovereignty”, the EU budget contribution or any of the other things brought up by Vote Leave aren’t red lines so these presumably are back on the table. Kwasi Kwarteng MP echoed this priority on Channel 4 news when he said “Freedom of Movement is a red line, I’m quite prepared to walk away from the Single Market” (though he appears to have changed his priorities somewhat).
What I’m going to try to do here is to discard all the noise and propaganda and take this decision by May down to its essence, which is this:
This government is prepared to risk the economy and almost certainly lose billions of pounds in tax revenues in order to stop 90K people, 0.14% of the population, coming into the country every year.
This decision makes no economic sense and therefore can only be because this government has decided it is worth paying billions to keep these people out.
Strong statement? Well it comes down to 3 logical steps:
- Why is it 90K people?
- How much do these people cost the UK?
- Why will it cost us Billions?
Firstly, why 90,000 people? The figures for total population growth last year (EU, non-EU, births less deaths) are shown below.
A 50% reduction in EU immigration (a fairly aggressive target) is 90K people per year, about 17% of total population growth and 0.14% of today’s UK population. Why 50%? Well clearly we will not eliminate EU immigration completely therefore lets assume it’s reduced by half. It would take 7 years of constant reductions at this level to reduce the overall population by 1%. There are no plans to repatriate anyone, in fact almost all Brexiters are pushing to guarantee the status of EU nationals. Therefore, however many Europeans are here is irrelevant, this can only be about reducing the number coming in from now on.
So, how much do 90K people cost the state? Well the reality is they contribute to the UK, so they don’t “cost” anything, as shown in various studies. In any case the UK can refuse to support unemployed immigrants. Cameron also won the right to limit in work benefits for 4 years. All of these points mean that the costs of EU immigrants to the state are essentially zero. It’s also the case that there is not a limited “job pool”, jobs create economic activity which creates new jobs etc.
However the Leave campaign dismissed these arguments and so let’s assume a “worst case” (and near impossible) scenario, namely the extreme where the 90K are all on out of work benefits (and claiming up to the £26K cap per household) OR they have displaced UK nationals in employment, in an average family size of 2 people, aged below 40 and with 1 in 4 being children and in education.
The absolute maximum they could possibly cost the UK in the most extreme scenario is £1.4 Billion. The reality is far closer to or even less than £0.
OK, but why will we lose billions? Well we’ve had several months of Vote Leave pretending we could have it all, however now its reality and we’re down to hard choices. There is only one red line, its not the Single market and therefore its not the economy. The government will certainly hope to salvage as much of our previous relationship as possible but in the end they have made a choice.
That means 50% of our trade will be impacted, the only question is, how much will we lose and how long will it take to replace those losses with new trade elsewhere?
The City alone brought in £65 Billion in tax revenues in 2015. A loss of 10% (through say the loss of financial passporting, a highly likely casualty ) would cost the UK government £6.5 Billion in tax revenue, or nearly 5X the total possible, most extreme case cost of those 90,000.
And that’s just the city.
It’s possible that the losses won’t be as high, however the point is, May is prepared to accept them and so is her government.
If the Conservatives are known for one thing it’s that they are trusted with the Economy, it was a constant refrain from Cameron, that everything flows from a strong one.
Yet here, for the first time, May and a Tory government are putting EU Immigration (not even all Immigration, just EU immigration) above the economy on the priority list. There can be no doubt of this, she had to pick one, and that was her choice.
And we’re now back to that choice, with all the rhetoric stripped away. Its 90K people per year, 1/6th of total population growth, 0.14% of total UK population. These people cost between £0 and a theoretical £1.4B, and in reality they almost certainly contribute a net amount to the state . At 0.14% per year additional population there will certainly be some impact on housing, jobs, wages and the NHS but nothing that could not be managed by a competent government and again, it’s only 1/6 of total population growth anyway. And by putting the single market lower down the priority list, and in particular exposing the City to difficulties, we stand to lose billions of pounds a year for several years with all the impacts that will have on the NHS, Schools and Services.
So here’s the final conclusion. We can tell ourselves immigration is “unsustainable” and needs “reform”, that its putting pressures on public services whilst also saying we want to make things fairer for non EU immigrants. We can tell ourselves any number of things.
But should we actually conclude that the UK as a nation just doesn’t want them, and that it is prepared to pay billions not to have them here? And furthermore, that many politicians from all sides now appear to support this position, explicitly or implicitly?
Is this where the UK is now?
“The sector paid an estimated amount of total taxes in the region of £66.5bn, or 11.0% of total UK Government tax receipts (2014: 11.5%). This includes both taxes borne of £26.2bn and taxes collected of £40.3bn”
“The half a million increase was driven by a record net migration figure of 335,000 to Britain and a 171,100 rise in “natural growth” – births minus deaths. The detailed figures confirm that the increase in immigration is swelling the ranks of twenty and thirtysomethings in Britain while the resident population is becoming more middle-aged.”
“On 22 Jan 2014:Kwasi Kwarteng voted to support the that view that promoting jobs and growth in the EU, including by completing the EU Single Market, is the top priority.”
“The average for all authorities across England is £4,550.54 per-pupil”