Report circulated by IPPR think tank ‘dismantles’ economic case for indefinite leave to remain changes, leading Labour MP argues.
LONDON — U.K. Home Secretary Shabana Mahmood has been warned her planned overhaul of settlement rules for migrants will not save the £10 billion she has claimed.
Instead, the policy to drastically increase the length of time migrants must wait before gaining permanent residency could end up costing the Treasury billions, according to a private briefing note shared with the Home Office and obtained by POLITICO.
The document, drawn up by the IPPR think tank where Mahmood made the case for her reforms earlier this month, is being used by Labour MPs to pressure for a rethink of the policy. A leading critic said it totally “dismantles” her financial argument.
In her speech, Mahmood cited increased welfare costs from the 196,000 migrants on health and social care visas and their dependents who arrived during a post-Brexit immigration spike, and who are expected to start getting settled status soon, as a key reason for the overhaul.
Under her proposals, care workers would have to wait around 15 years before being eligible for indefinite leave to remain (ILR), up from the current five years.
“If we do not, we will see a £10 billion pound drain on our public finances and further strain on public services, like housing and healthcare, already under immense pressure,” Mahmood said.
But the progressive think tank, which is well-connected in Labour circles, argues the Home Office’s calculations are flawed for four reasons.
The department’s figure is based on the cost of welfare spending over the individuals’ lifetimes.
But the IPPR points out that estimates from the government’s own Migration Advisory Committee (MAC) show dependents making net positive financial contributions until they stop working, claim the state pension and start having higher health costs.
Though Mahmood’s proposals will lengthen the time it takes them to gain access to the welfare system, the change “will not make a significant difference to the lifetime fiscal impact” of these migrants, according to the report.
“The only way this policy would significantly bring down the £10 billion lifetime fiscal cost is if it led to large numbers of care workers and dependents leaving the U.K. before they reached the qualifying period for settlement,” the IPPR says. As it stands, that’s not the case Mahmood is making.
The primary reason care workers make a negative net lifetime financial contribution is because they are poorly paid. Gaining settlement would allow them to earn more by opening the door to work in any occupation. But delaying this traps them in lower-paid work for longer, the document argues.
“The overall fiscal impact of the proposed earned settlement reforms should therefore consider the potential costs of lower tax contributions from the care worker cohort while they wait for settlement, as well as the fiscal benefits of restricting access to public funds for longer,” the IPPR says.
If indeed the policy is to encourage care workers and their dependents to leave the U.K. in large numbers then the briefing argues it could in fact add to costs.
Estimates by the MAC, which advises the Home Office, point out that their adult dependents are net positive contributors for 20 — and it’s only after around 40 years that they make a cumulative net negative financial impact to the British state.
“Given the [Treasury’s] fiscal rules work to a 5-year horizon, the emigration of care workers would make it harder — not easier — for the Treasury to meet its fiscal targets,” the IPPR argues.
‘Dismantles the rationale’
The briefing also digs into the wider “earned settlement” policy. Estimates of the effects are hard to ascertain because behavioral impacts are uncertain. But last year’s immigration white paper was accompanied by an illustrative example of a drop of between 10-20 per cent in skilled workers, care workers and their dependents.
The IPPR uses this to calculate the cost to the Treasury based on that reduction being applied to both care workers and skilled workers. They argue that this would mean a potential cost to the exchequer of £11 billion to £22 billion over the lifetimes of migrants granted relevant visas last year.
“Even if the policy is designed in such a way to minimise any direct effects on skilled workers who make a positive fiscal contribution, it is possible that the reforms will deter (and indeed may already be deterring) higher-paid workers who seek certainty for their and their family’s status,” it says.
“Even a small impact on higher-paid skilled workers would counteract the savings from care workers, given the per person net lifetime fiscal contribution of skilled workers is £689,000, nearly 20 times larger than the per person net costs of care workers.”
Leading Labour critic of the policy Tony Vaughan used the findings to argue that Mahmood’s proposals “will be a fiscal cost to the U.K. for decades.”
“The IPPR report dismantles the rationale for this earned settlement policy,” the MP told POLITICO.
“It would also undermine community cohesion and integration, weakening the bonds that hold our society together. This is not a policy that can be trimmed around the edges. It is fundamentally flawed and should be abandoned.”
POLITICO reported this week that the government is considering watering down the proposals, potentially introducing transitions to ease the retrospective nature of the changes that are proving most controversial among Labour MPs.
But, as critics consider parliamentary action to force a vote on the issue, Vaughan indicated the compromises under consideration would not be enough.
“I say that as a loyal Labour MP who has never voted against the government and who desperately wants us to succeed, but cannot in good conscience stand by and see a policy as flawed as this, which is so strongly against our national interest, reach the statute books,” he said.
A Home Office spokesperson said: “A £10 billion cost to the taxpayer represents the lifetime cost if we did not take these actions.
“As the home secretary said in her speech at the IPPR, it is right that we address the considerable burden that settlement poses on taxpayers, communities and public services.”