In last night’s TV debate Nicola Sturgeon said of EU migrants “they actually pay in more than they take out.” This is an oft repeated assertion by Remainers that no-one so far as I know has ever questioned. It is based on a 2014 study by some economists at University College, London. They found that EU migrants made a net contribution of £20 bn to the Treasury over the period2000 to 2011. ( Eastern European migrants’s share of this was £5bn .) The Guardian trumpeted ” UK gains £20bn from European migrants UCL economists reveal.”
To sum up this study is worthless. We are none the wiser on the question of migrants’ net contributions.
So what the study was saying was that they paid a lot more in taxes than the sum total of all the benefits they received : welfare, housing, healthcare and education. In contrast “natives paid more tax than the benefits they received..”
What puzzled me was how the economists knew how much tax the different groups paid. You don’t put your country of origin on your tax return. HMRC don’t have it in any of their records.
I read the study – all 51 pages – to find the answer. After hacking my way through all the academic verbiage, graphs and algebra , I saw that it was based on a single source of information: The UK Labour Force Survey(LFS). A small sample of the labour force are sent questionnaires which ask about working conditions, weekly wages and so forth. They are also asked their country of origin.
So what the authors did was work out the tax on the wages and then extrapolate from this allocating the entire UK income tax revenue between the different groups accordingly.They admitted they had no information on tax paid by the self employed.So they were effectively left out of account.It is not obvious that any of the income of the top 1% of earners ( accounting for 30% of the income tax take ) would have been in the LFS weekly wage figures.
The authors then remembered there were other taxes. How should they allocate capital gains tax and corporation tax between EU migrants and natives? They opted for a per capita basis. So if the Eastern Europeans ‘ were ,for instance ,5% of the population they were attributed 5% of this revenue !
Inheritance tax? Simple – allocate equally between everyone over 70.
To sum up this study was a great edifice built on one tiny fragile foundation: the LFS figures. It was worthless. We are none the wiser on the question of migrants’ net contributions.[/pullquote]
It was for me a fascinating insight into the methodology of economists. And their connexion with the real world. I don’t think Leave should tremble at the thought of 91% of economists being ranged against them.
John Carrell is a tax lawyer