On Saturday, the Daily Express published an article titled EU THREAT TO PENSIONS. Subtitled ‘Mass migration blamed for £30 billion a YEAR ‘economic catastrophe”, the article is based on a report produced by Brexit think tank Global Britain.
Both article and report make the claim that, contrary to received wisdom that the UK needs an influx of workers to support its growing pension system, economic migration from the EU is actually costing the UK economy £30 billion a year.
The report is the latest in the ‘Brexit Papers’ series published by Global Britain and is titled ‘How The £30 Billion Cost of EU Migration Imperils Pensions and Benefits’. The subtitle is ‘Why leaving the single market is vital for our public finances and to secure our pensions and benefits’.
The report raises some valid points about large corporations effectively exploiting EU freedom of movement rules, as well as countries like the UK, by setting up outlets staffed by low-paid migrant workers. It also mentions (but doesn’t make enough of an issue about) the cost to the UK economy of corporation tax avoidance due to large companies basing their HQ elsewhere in Europe.
But the claim that EU migration costs the UK £30 billion a year is based on some very shaky arithmetic. It’s based on rough figures of 3 million EU migrants in the UK in total – 2 million working and 1 million non-working.
But what author Bob Lyddon has done is take the average UK public spending per head of £10,500 per annum and multiply it by 3 million. He’s then taken off what he sees as the annual tax contribution of EU migrants which he’s calculated as £1 billion. This gives him his balance of £30 billion.
There are a few problems with this:
You can’t use UK public spending per head in analysis like this. Aside from the fact that different groups will use disproportionate amounts of certain budgets (e.g. children in education, pensioners with pensions, health and social care), not all public spending is spent on services accessible to the public (e.g. £45billion annual defence spending, £50billion annual debt interest payments). These amounts are not affected by increases or decreases in population.
The contribution of EU migrants is based on the assumption that all 2 million working migrants are in low-paid work and are paying hardly any tax due to the minimum earnings tax threshold. Mr Lyddon uses a figure of £500 annual tax paid per head, which is ridiculously low. Although a lot of migrants, including EU migrants, are in low-paid jobs, there are also many skilled EU workers such as professors, city workers, lawyers, doctors, technicians, etc. who will be paying top rates of tax. They are completely overlooked in the analysis.
It is also casually assumed that these 2 million low-paid workers pay no tax in the form of TV license, fuel duty, alcohol tax, tobacco tax, council tax, etc. This is dismissed with a comment that low-paid workers aren’t in a position to make much of a contribution here. So we are to assume that all 2 million EU workers live a life of abstinence, don’t own TVs and are all facing impending jail sentences due to non-payment of council tax.
Even if it were true that all 2 million working EU migrants were in such low paid work that they were unable to make much of a tax contribution, this is a problem of low pay and not of migration. This was a problem in the UK long before EU open borders and could well get worse if worker rights aren’t guaranteed after Brexit.
In these heated times of half-truths, untruths, post-truths and alternative facts, we could do with some robust economic analysis to give us a bit of grounding. But this is not it. Figures clearly manipulated to fit a predetermined conclusion and the report used by the Express as yet another stick with which to beat the EU and migrants.
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