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FactCheck: do migrants benefit the economy?

By Channel 4 News

Updated on 01 April 2008

Migrants coming into Britain are of little benefit to the nation's economy, a Lords report said today.

The study, called The Economic Impact of Immigration, found "no evidence" of the cash benefits of immigration to Britain.

Its findings contrasted steeply with the similarly catchy-titled report, the Economic and Fiscal Impact of Immigration, a government study published six months ago.

FactCheck takes a look at government's three favourite migration boasts in the light of today's study.

Claim 1

"The report [The Economic Impact of Immigration] actually confirms that about £6bn was added to the economy in 2006. That is a big number."
Liam Byrne, immigration minister, GMTV, 1 April 2008.

The analysis

Byrne's boast was echoed by Gordon Brown at his press conference today, when he highlighted that £6bn was a "very substantial extra income".

Certainly, you can't argue with either Brown or Byrne, £6bn is indeed a large sum. But is big always beneficial?

The figure relates to total gross domestic product (GDP), which on its most simple level describes the size of the UK economy, rather than its general prosperity.

As the Lords report points out, GDP per capita (per head) would be a better way to measure whether recent immigration has had a positive effect, as it hints at average individual wealth.

Brown was keen to pick up on this point today, when he said he said that GDP per head had risen dramatically since 1997, from £13,900 then to £22,840 in the past year.

But again, this is not a fool-proof indicator, as a new immigrant with a higher average income than the average British worker could raise GDP per capita without necessarily changing the income of the resident population.

If you look at the bottom line - the cash in people's pockets - increases in weekly earnings have actually dropped from 4.4 per cent in 1997/8 to below 3 per cent in 2006/7.

It's still a year-on-year growth, but migration does not seem to have accelerated those rises.

As a footnote, it is worth acknowledging that when Byrne said: "The report actually confirms that about £6bn was added to the economy" he is not talking about an independent validation.

The government supplied the figure to the Lords inquiry.

Claim 2

"Migrant workers bring enormous benefits to Scotland and the rest of the UK and we need them to fill vital gaps in the jobs market."
David Blunkett, home secretary, 7 May 2004

The analysis

It is a claim government has repeatedly made over the past four years.

The government report [Economic and Fiscal Impact of Immigration] last October restated it: "Polish workers were generally valued in London where they were seen as highly motivated, skilled workers who could fill a skills gap.

"This supports the notion that migrants are filling jobs that natives will not do."

There is no doubt migrants are taking jobs that many Britons seem reluctant to take, but is the government correct to sell this is a benefit of immigration?

Today's report says that all it serves to do is to keep wages low and moderately increase demand to such an extent that companies just advertise for more staff to meet the requirements of a bigger population.

Put simply, it is a vicious circle. Migrants fill vacancies that only serve to drive the economy to create more vacancies...

This is highlighted by vacancy figures from the Office of National Statistics (ONS) which show the number of vacancies has stayed remarkably consistent, despite significant immigration.

It stood at 666,000 unfilled posts in April 2001, 607,000 in April 2002, 567,000 in April 2003, 632,000 in April 2004, 618,000 in April 2005, 582,000 in April 2006, 632,000 in April 2007 - and as of February this year 635,500.

Claim 3

"Migrants appear to pay more to the exchequer in tax than they consume in services: indeed in 2003-4 IPPR estimates migrants paid 10 per cent of government revenue but ate up only 9.1 per cent of government expenditure."
Liam Byrne, speech, 17 October 2007

The analysis

Today's report says the 0.9 per cent difference between the two payments is not large enough to justify mass immigration, even if it is true.

But there are other more detailed problems with the government's boast which should be noted.

The first is that the Institute for Public Policy Research (IPPR) figures are based on the following definition of a migrant: "Someone who was born outside the UK, but is resident here."

To highlight this, under the definition used to provide the basis for the claim above, a pair of hard-working GPs who moved to the UK from India in the 1960s and are now earning in excess of £100,000 each will be included in the immigrant tax contributions.

Even the IPPR admitted it was uncomfortable using such a broad term, as it does not isolate recent immigration, which is of course where the political controversy lies.

Another point of note is that the figures are drawn from the ONS's Labour Force Survey, which provides a tiny snapshot of the number and type of people coming in and out of the country. It has to be taken with a pinch of salt.

The tax figures also fail to deduct the costs of the immigration system itself. Although this is a debatable point - as it can be argued the system is not just for immigrants' benefit.

The verdict

There is no doubt that immigrants have helped fuel an increase in the size of Britain's economy and filled posts previously left empty by British workers.

No doubt either that hundreds of thousands have made significant tax contributions.

However, FactCheck thinks the government might have been too quick to confuse overall growth with individual prosperity - a bigger economy does not always seem to mean a better off one.

FactCheck rating: 3.5

How ratings work

Every time a FactCheck article is published we'll give it a rating from zero to five.

The lower end of the scale indicates that the claim in question largerly checks out, while the upper end of the scale suggests misrepresentation, exaggeration, a massaging of statistics and/or language.

In the unlikely event that we award a 5 out of 5, our factcheckers have concluded that the claim under examination has absolutely no basis in fact.


ONS average earnings statistics
ONS vacancy statistics
The Economic and Fiscal Impact of Immigration
Liam Byrne speech October 2007
IPPR: the fiscal contributions of immigrants in the UK
David Blunkett press release May 2004
The Economic Impact of Immigration

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