Effects of immigration upon UK fiscal system. Advantage or drawback?

Nowadays, many people are claiming a new regulation for the wave of immigrants in the UK. There are a wide range of purposes around it, from establish work permits for skilled workers to make Students from the EU pay the same student fee rates as International students.

As UK census gives no indication of the immigrants’ status or intended length of stay, there is no positive or negative discrimination in this way, so here it is used the UN recommendation for defining a long-term international migrant. That is, a migrant is someone who changes his or her country of usual residence for a period of at least a year, so that the country of destination effectively becomes the country of usual residence.

Analyzing the data, about 7.5 million people (11.9% of the UK population at the time) came to the UK between 2001 and 2011. In 2008, the UK government began phasing in a new points-based immigration system for people from outside of the European Economic Area. Just in 2013, 526,000 people arrived to live in the UK whilst 314,000 left (it’s to say a net inward migration was 212,000. The number of people immigrating to the UK increased between 2012 and 2013 by 28,000, whereas the number emigrating fell by 7,000. In 2014, approximately 125,800 foreign citizens were naturalized as British citizens. The Reference Table from the Office for National Statistics of the UK shows the immigration estimates into the UK (pink color), emigration estimates out of the UK (blue color) and the net migration –combined effect of immigration and emigration (superimposed rectangles).


There is a large amount of causes which politicians put forward to justify their particular immigration policy side. Listening to the wide range of political statements regarding to this, it can be heard that it is highly likely that a referendum on an exit from the EU occurs if UKIP supports Conservatives if they fall short of a majority. In the meantime, Conservatives says EU migrants’ rights of free movement will be re-negotiated with Brussels and there will be further crackdowns on abuse of the immigration system by closing bogus colleges and making it tougher for illegal immigrants to remain in Britain, in order to perpetrate David Cameron’s promise to cut net immigration to tens of thousands. On the other hand, it can be heard some politicians pledge in their election manifesto to remain in the EU, and to allow high-skill immigration to support key sectors of the economy, ensuring work, as Liberal Democrats hold. Or even that people who have lived illegally in the country for five years will be allowed to remain unless they pose a serious danger to public safety and that foreign nationals with resources or desirable skills should not be given preferential in the migration policy, as Green Party promises.

Leaving behind these political pledges and opposing views, is it really profitable to regulate immigration from a fiscal system point of view? Dustmann and Frattini, researches from the University College of London and the University of Milan have analysed the recent wave of immigrants – arriving in the UK since 2000 and driving the stark increase in the UK’s foreign born population, and concluding in their academic paper published in the The Economic Journal that immigrants “have contributed far more in taxes than they have received in benefits. Moreover, by sharing the cost of fixed public expenditures, they have reduced the financial burden of these fixed obligations for natives. These findings place the UK in a far more favorable position than its European neighbors”. In addition, their investigation of recent immigration to the UK reveals that, “even one-third of UK immigration is through movement within the EEA and cannot be regulated, the UK is still able to attract highly educated and skilled immigrants. This surprisingly positive trend, which continued even throughout the last recession distinguished the UK sharply from the other European and non- European counties. This ability to attract highly skilled immigrants is a strong and important feature of the UK economy”. The analysis also raises questions unexplored like the remigration of immigrants, as they tend to return to their country of origin after reaching an individual career peak which would bring additional relief to the UK’s fiscal system. Or whether it is immigrants who perform strongly or those whose contributions fall below average that are the most likely to remain.

So why these strongly politic opposing views in light of research studies such as this? If it is clear that immigration has positive effects on the UK fiscal system, why some politics forces want to keep away the immigration waves far from their country? It could be said that a positive fiscal effect cannot be the only cause to hold an open immigration policy in a country. However, it is far more a basic point to put forward a more objective policy in order to come closer together politicians’ opposing views regarding to immigration and finally adopt a much more efficient immigration policy that really benefits the country.

Enrique Muñoz-Salido
Enrique Muñoz-Salido
Enrique works in the tech industry, computer software, in the City, London. His interests lie at crossroads of human behavior and software. Enrique is an Oxford Masters graduate, Talentia scholarship.