28 August 2015

High immigration is a sign of success


An extra 330,000 people moved to Britain in the year to March. According to immigration minister James Brokenshire, the figures are “deeply disappointing”. Yet on the contrary, increased immigration is actually a sign of success.

Back in the dark days of September 2012 when the economy was stagnant and Chancellor George Osborne was booed at the Paralympics, annual net migration fell to a low of 154,000. Since then, the economy has bounced back and many new jobs have been created, while Osborne’s popularity has soared. As a result of Britain’s strong recovery, many more people want to come work here and fewer want to leave. Surely that is something to celebrate?

Around a fifth of the increase in net migration from its 2012 low is due to reduced emigration, which has fallen to 307,000 a year. Fewer Britons are leaving the country, as are fewer non-EU citizens. One reason why fewer are upping sticks is that Britain offers better economic opportunities that it did three years ago.

The main reason why net migration has increased is because many more people from the EU are coming here to work. Annual immigration, now 636,000 a year, is 139,000 higher than the 2012 low and EU migrants account for 120,000 of that increase. New arrivals from the EU (269,000) are now almost as numerous as those from outside the EU (284,000); the other “immigrants” consist of 83,000 returning British citizens.

If you look at why people are moving to Britain, almost all of the increase since the 2012 low – 115,000 out of 139,000 – is due to people moving here to work, and therefore paying taxes and contributing to society. Family members (20,000) are most of the rest.

Hardly any of the newcomers are refugees. Britain received 25,771 asylum applications in the year to June and only 11,600 were granted asylum.

If there’s a downside to the figures, it’s that international student numbers are stagnating. Education is a booming global industry and Britain’s excellent English-language universities and schools have the potential to be an even bigger export earner. Young Chinese, Indian and other foreign students pay tuition fees that subsidise UK students, spend money in the economy, make courses viable for British students, and create a global network of alumni with ties to Britain that boosts future trade and investment.

Most of the increase in net migration is due to more EU migrants coming here to work. But their composition is changing. Before the financial crisis, the typical EU migrant came from poorer countries in eastern Europe, notably Poland. Now, nearly half of the new arrivals from the EU come from western Europe, notably the crisis-hit eurozone. Economic growth in the eurozone was a measly 1.2% in the year to the second quarter and unemployment in scarily high in many countries. One in four Greeks and more than one in five Spaniards are unemployed, as are more than two in five young Italians and nearly one in three young Portuguese. In contrast, Britain’s unemployment rate is a mere 5.6%. No wonder Europeans want to move here.

The UK’s flexible, job-rich labour market provides lots of entry-level work, as well as plenty of opportunities to get ahead – for new arrivals as well as for British people. Unemployment has continued to fall as immigration has increased over the past two-and-a-half years. As for fears that EU migrants depress the wages of low-paid workers, studies scarcely find evidence of this. In any case, with the new living wage set to rise to £9 an hour by the end of the Parliament, low-paid workers will be earning more in coming years, not less.

Increased EU migration will also boost public finances. Studies show that previous EU migrants are more likely to work than Britons and less likely to claim benefits. Educated abroad and tending to stay temporarily, and thus unlikely ever to claim a pension in Britain, they are net contributors to public finances overall. In effect, EU migrants subsidise the public services, welfare benefits and pensions provided to British people. They enable taxes to be lower than otherwise. And they help repay the vast public debt incurred by the existing population.

Increased immigration can thus help the government achieve its targets of reaching a budget surplus by the end of the Parliament and bringing public debt down. Indeed, the independent Office for Budget Responsibility established by the Chancellor calculates that with net migration of 260,000 a year public debt as a share of GDP in 2062 would be half what it would be without migration.

More broadly, openness to immigration boosts growth. By moving around the country to fill jobs that need doing, migrants help the economy adjust to change and grow faster. Newcomers are twice as likely as locals to start businesses, as I explained in CapX, creating jobs and wealth. And by sparking off British people, their diverse perspectives and experiences help create new ideas and technologies that boost everyone’s living standards.

Economically, the latest immigration figures are excellent news. But politically, they are more problematic. It is unwise of the government to pledge to reduce net migration to the tens of thousands when the figure is largely outside its control. Trying to achieve the target by clamping down on the bit it does control – non-EU immigration – is likely to do real economic damage.

With the Prime Minister and Chancellor likely to campaign for Britain to remain in the EU after concluding their renegotiation of the terms of UK membership, it would make sense to start taking a more positive stance towards freedom of movement within the EU. Some two million Britons live, work and retire elsewhere in the EU. Polls show that freedom of movement is what Britons value most about the EU. And Britain’s emerging cosmopolitan liberal majority – whom Conservatives will need to woo to win elections in future, as I explained in CapX – take that freedom for granted.

Back in the 1970s, when Britain was the sick man of Europe, more people left the country each year than moved here. Now, in our globalised world, Britain thrives by being an open, flexible trading economy. A successful free-trading nation should celebrate its attractiveness to valuable foreigners and have no truck with labour-market protectionism.

Philippe Legrain, who was economic adviser to the President of the European Commission from 2011 to 2014, is a visiting senior fellow at the London School of Economics’ European Institute and the author of European Spring: Why Our Economies and Politics Are in a Mess — and How to Put Them Right.