MNI INTERVIEW: Fall in UK Immigration Driven By Lower Paid

A recent fall in UK immigration has been driven by low-paid workers and dependents who tend to make net negative fiscal contributions, the former chair of the government’s Migration Advisory Committee told MNI, adding that lower-than-expected net arrivals pose little risk to fiscal forecasts.

While the Office for Budget Responsibility's Economic and Fiscal Outlook, published alongside the Nov 26 budget, said the undershoot in net migration figures presented "a risk to our forecasts,” London School of Economics Professor Alan Manning said in a phone interview that he considers this risk to be small. 

"I'd be really surprised if this is a big risk" to the OBR's forecasts for tax receipts and output, he said. “Migrants who are no longer coming are lower-skilled work migrants, the dependents of international students, dependents of care workers, and care workers themselves.”

In a recent book, Manning highlighted that immigrants vary widely in their impact on fiscal policy, though some groups including dependents and children are clearly fiscally negative.

Big changes to immigration policy in recent years have reduced visas given to workers at the lower end of the pay distribution, whose lifetime contributions, he said, are very small if not negative. "The fiscal consequences of [these changes] are not very big, one way or the other, certainly relative to the uncertainties," he added. (See MNI INTERVIEW: Budget Shouldn't Prompt BOE Cuts-OBR's Miles)

ONS DATA

The Office for National Statistics, which supplies population data used by the OBR, has been widely criticised for the quality of its data in recent years.

"The ONS has been on a journey of improving its methodology," Manning noted. "It's come quite a long way, really, but it's still got some distance to go." 

"One of the reasons for the surprisingly low [net migration] figures was that the changes to the ONS methodology, particularly for British nationals, suggested there's perhaps higher emigration of British nationals than previously thought," he said. 

The ONS used to calculate immigration and emigration by extrapolating from interviews by its agents of people leaving or entering the country. "The new methodology for British citizens is much better than the old one," he said, as it is based on interactions with the state, such as by paying income tax.

"If in any particular year, you stop interacting with the British state, and then you'll potentially be classed as an emigrant," he said, adding that he suspects the ONS's adjustments are not enough to mitigate this overestimation. (See: MNI INTERVIEW: UK Fiscal Gap Needs Simple Tax Hikes - King)

LABOUR MARKET

Bank of England Chief Economist Huw Pill said in 2023 that the Phillips Curve has steepened since the UK left the EU, and that "post-Brexit immigration has proved less effective in addressing labour market mismatches," but Manning disagreed with this assessment.

"I don't think it's at all obvious that immigration is now less effective in addressing [labour] shortages."

Nonetheless, Manning emphasised that the magnitude of net migration is marginal relative to the total size of the UK workforce.

"It's really not that important. I can understand why net migration is viewed as important by people, but I think as a narrative of what is happening in the labour market, generally, it's normally not really very important at all." (See: MNI INTERVIEW: UK Labour Market Still Tight - NIESR's Millard)