Select Committee on Economic Affairs Minutes of Evidence


Memorandum by Professor David Coleman, Oxford University

SUMMARY

1.  General conclusion

  This note acknowledges that expanded immigration has brought short term benefits to some sections of the economy and society, notably to immigrants and to their employers. But it suggests that overall the effects of the new policy are counterproductive and damaging to the national interest, especially in the long term.

2.  Effect of Immigration upon population, on overall GDP and on individual welfare

Immigration only expands overall GDP roughly to the extent that it expands the working-age population. But if the well-being of the members of our society is the primary aim of government, what matters is the effect upon GDP per head, roughly equivalent to the real income of individuals, and on other broader measures of individual welfare. The benefits of immigration to the average individual are trivial in relation to average incomes and may be slightly negative. But most arguments in favour of immigration have cited its effects on the expansion of overall GDP. That has, in the long run, some bearing upon the power of governments and the relative might of nations but has little relation to individual welfare.

3.  The need to consider broader criteria

  Conventional economic evaluations of the effects of immigration are framed within narrow criteria of output, tax and welfare transfers. They do not consider whether there may be other economic and partly economic externalities arising from immigration and from populations of recent immigrant origin. These could include statistically disproportionate costs in education, crime, security, health, race-relations and multicultural activities, remittances and asylum. That apart, the higher population size and density arising from immigration imposes congestion costs, diverts investment to new infrastructure and housing, impinges on space and amenity, and accelerates the output of waste and greenhouse gas emissions. Those might prove to have costs sufficient to tip the economic balance substantially against large-scale migration into the UK. This paper provides some estimates of a highly preliminary kind.

4.  Looking beyond the conventional economy

  Immigration is driving population growth and changing the ethnic balance of the country. Projections are provided showing the implications of current trends upon population and ethnic composition to mid-century. Social cohesion, national identity and solidarity and related issues do not usually come under the heading of economics but unless the future is one of perfect integration then they may well have to. The wider effects of immigration and the population increase that it generates are likely to be much more important than those conventionally measured by economics.

5.  BACKGROUND

  A new official policy was adopted at the beginning of this century radically to expand immigration into the United Kingdom in order to promote economic growth and satisfy the demands of employers. The economic case rests upon four related but separate arguments: beneficial effects upon the annual rate of increase of overall GDP and fiscal balance, the satisfaction of employers' demands for labour and alleviation of labour shortages, and the corresponding damping of inflationary wage claims. In support of this policy has been repeatedly claimed that migration is and always was absolutely essential to the UK economy, which would collapse without it. More general advantages are also cited; for example the enhancement of the supposed cultural benefits of "diversity" and the moderation of future problems of pensions and old-age care arising from population ageing. This note questions these supposed benefits and draws attention to some aspects of current large-scale immigration which have not yet been put into the balance.

6.  EFFECTS ON GDP

  Other submissions, for example from Professor Rowthorn and other sources, will already have shown, on the basis of the Government's own figures, that these inflated claims cannot stand. There is little that I can add to those analyses of the central economic issues. In general, the macroeconomic benefits are simply what would have been expected from an expansion of the size of population and workforce and even then are not impressive in relation to overall GDP. The effects on the economic well-being of the average citizen are trivial (Dustmann et al 2007) and might even be slightly negative, being so small either way that quite detailed differences in assumptions can swing the balance in either direction, as an earlier paper has shown (Coleman and Rowthorn 2004). Immigration and its effects, its winners and losers, are highly heterogeneous. Employers of labour, especially low-productivity employers seeking cheap labour, and their immigrant employees are the most obvious beneficiaries. Others may lose.

  7.  A few additional points might be made, however. Many of the arguments have concentrated on macroeconomic indicators, as might be expected from the Treasury and the Bank of England, rather than indicators of individual welfare. But the macroeconomic indicators (GDP, inflation) only show the most modest, or no, response to the very substantial increase migration inflows of the last decade. There has been little change in overall GDP trends in the years since immigration has accelerated, compared with the previous period when a more restrictive (although still relatively open) policy prevailed. (Figure 1). Overall GDP has grown in a more or less linear fashion since the UK escaped from the Exchange Control Mechanism in September 1992. Indeed the trend follows approximately the same slope as that observed in the early 1970s and most of the 1980s when net immigration was, of course, negative and population growth much more modest than today. It could be argued that the economy would have failed without the accelerated immigration after 1997. Strictly speaking only a counterfactual scenario of a UK economy with only the modest net immigration of the early 1990s could provider a proper evaluation of the effects of migration. None has been attempted. But it seems ludicrous to suggest that without the recent rise in migration then the economy would be in parlous state or that "immigration is essential for UK prosperity". GDP, incomes and all the rest were prospering well in the middle 1990s before the post 1997 acceleration of immigration. and the incoming government endorsed the economic policies of the outgoing one.

  8.  The slope of GDP growth in Figure 1 is approximately 2.5% per year. The Treasury insists, on the most elementary (and partly wrong) assumptions about workforce participation, that migration has elevated trend growth of GDP by 0.25% from the underlying 2.5% to 2.75% (HM Treasury 2006, 2007). Record migration, however, has not stopped the forecast being revised downwards to 2% in the October 2007 pre-budget report, and to less than 2% according to most City sources. Sometimes the published Treasury justifications of the economic benefits of migration give a slight impression of having come off the back of an envelope or, in the case of those from the Bank of England, off the cuff (eg King 2005).

  9.  The expected inflow from Eastern Europe was initially cried down as trivial. The government endorsed an amusing Home Office report which suggested that the net annual inflow would be between 5,000-13,000 (Dustmann et al 2003; Stone 2003). Thanks to the inadequacies of immigration statistics we do not know what it is—the ONS estimate is clearly absurdly low in relation to the cumulative gross inflow of well over half a million registrations since 2004 (the biggest inflow in Britain's history) and the LFS estimate of stock of over 450,000 in 2006. Even that the startlingly higher immigration of recent years has not provoked the economic acceleration that would have been expected from it if recent claims were to be taken at face value.

Figure 1

UK GDP AT CONSTANT PRICES 1970-2006


  10.  In any case, the annual rate of overall GDP growth is an unsatisfactory and inappropriate criterion. Overall GDP and its growth are not in themselves rational aims of public policy. In the Western world, overall GDP is strongly related to population size and its growth is in part a function of population growth. UK GDP is several times that of Switzerland, but our standard of living is lower. What matters is the level, and the growth rate, of GDP per head, a measure which removes the factor of population. It approximates to income per head and thus is a measure of the level, and increase, of material prosperity of the average resident. In the Western developed world, the standard of living bears no relation to population size or population growth. In fact in the data in Figure 2 below there is a small negative correlation between the two, although it completely lacks statistical significance.

Figure 2

RELATIONSHIP OF PER CAPITA GDP TO OVERALL GDP


Source: Penn World Tables.

  As will have been noted in other submissions, when population is taken into consideration the benefit to the average individual is trivial, well within the margins of error and whether positive or negative at the mercy of specific assumptions.

11.  THE TREND IN PER CAPITA GDP

  Not surprisingly, therefore, growth in GDP per head (Figure 3) inevitably highly variable, seems, on simple inspection, untouched by the immigrant influx except perhaps somewhat downwards in the last few years. It has fluctuated around an average of 2.1% over the last 50 years—somewhat less than overall GDP as it omits the factor of population growth. The pre-budget report for 2007 expects this fall to continue; workers' pay rises are now at the lowest level for five years. These overall GDP and per capita GDP trends are very blunt instruments for evaluating claims for the "essential" economic contribution of immigration. But at the least they indicate that no effect is discernible at this scale except possibly downwards and that the effects of migration must be very small compared with those of conventional economic factors. That is exactly what would have been expected from previous knowledge. They may take a different view, of course, down at the Market Deeping Potato Picking Company. But what is good for them may not be good for the United Kingdom.

Figure 3

TREND OF GDP PER HEAD CVM, SA PERCENT CHANGE ON PREVIOUS YEAR


12.  THE CONTRIBUTION OF IMMIGRATION TO POPULATION GROWTH

  Immigration has, however, an undoubted effect upon population size and growth. It has propelled the recent increase of the growth rate of the UK population—now about 0.6% per year. Since the beginning of the century, net immigration has accounted for about 65% of UK population growth. The increase in the UK birth rate (TFR) from 2005 to 2006—from 1.79 to 1.85—has taken that down to 55%. However, just over half the birth rate increase is due to an increase of births to immigrant mothers, who now account for 24% of all births in England and Wales, so the direct and indirect contribution of immigration to population growth is somewhat higher According to the 2004-based Principal Projection of Government Actuary's Department (GAD), 85% of population growth to mid-century is projected to arise from the direct and indirect effects of immigration, that is to the arrival of immigrants themselves and their children. In common with all recent GAD projections, this employs assumptions about long-term net immigration levels (145,000 per year) that are substantially lower than the actual level as recorded and published by the Office for National Statistics (ONS). On the GAD 2004-based assumptions, UK population will increase by 9.3 million by 2051.

  13.  On 27 September 2007 it was announced that the migration assumption behind the 2006-based projections (to be released on 23 October) would be a more realistic 190,000, together with a higher fertility assumption (TFR 1.84, not 1.74) and improvements in forecast expectation of life. The first two of those assumptions would imply a further increase to just under 75 million by mid century. Figure 4 compares a cohort-component projection using the new assumptions on fertility and migration (but not, because of shortage of time, the assumptions about improved survival) compared with the GAD 2004-based projection. Incorporation of the improved survival would increase the projected totals further. Without any migration (that is, a "natural change" projection, not a "zero net migration" one), on the same higher fertility assumption the UK population would increase to 62 million by 2026 and then return to its present level of just over 60 million by 2051. Comparing the basic projection to the natural change projection, 74% of the projected increase to 2026 would be due to the direct and indirect effects of international migration.

14.  AN ACCIDENTAL 15 MILLION

  As far as public pronouncements are concerned, HM Government shows no interest in the new population growth which its migration policies have provoked. Indeed it seems to be unaware of it. When quizzed on the matter, Home Office officials have simply stated that population growth is not the concern of their department (even though its policies lie behind it). But the impact of an additional 15 million people would obviously be considerable: economic, environmental, social and ethnic. Even if a formal population policy is inappropriate or undesirable, then at least there should be a requirement for policies to consider their impact on population. In fact the obligation to provide environmental impact assessments of policies already logically makes it a requirement. As it stands, the absent-minded commitment into which we have drifted, to house a further 15 million people—one million every five years—must be the biggest unintended consequence of government policy of almost any century. As it is by no means unavoidable, being almost entirely dependent upon continued immigration, it might be thought worthy of discussion. In official circles, there has been none.

Figure 4


  15.  There are no merits in the promotion of population growth itself and many reasons to regret it especially in a country as crowded as the United Kingdom. The characteristic settlement patterns of immigrants magnify this effect as the majority have settled in the South East, already the most densely-populated area of the country. Neither increased population growth nor increased overall GDP growth should be policy goals. China has recently overtaken the UK in terms of overall GDP and India will follow in due course. Both have populations over 1 billion, with over 300 million in China and 400 million in India still living in abject poverty (mostly in the rural areas but also in the urban slums) with what appear to be widening income gaps and increasing problems of malnutrition. Neither is there any prospect of "catching up" countries with larger overall GDPs by encouraging population growth, or avoiding being overtaken by others with much larger populations than ours, as Brazil may soon do. Larger GDP obviously allow governments to spend more on (for example) defence, and to assume a larger share of world and regional governance. To that, the UK, and other Western countries, will have to adjust as ingeniously as it can. When population growth eventually ceases, as it probably will towards the end of this century, the world demographic rank-order will be very different from what it is now. So will the rank order of overall GDP. That is inevitable. It is also certain that population growth must cease, in all countries. That will eventually close off easy options for growth through the expansion of customers, investors and workers and concentrate attention on productivity and the efficient use of constant, or even declining, sources of labour.

16.  ETHNIC CHANGE

  Official UK population projections to mid-century, unlike those of some other countries, do not include an ethnic or national-origin breakdown of the projected population. But the effects upon the ethnic composition of the continuation of immigration and emigration trends even at the level of 2001 would be substantial (at 2006 levels they would be greater). A conventional cohort-component projection is given in Figure 5, combining the results of the separate projection of 12 ethnic groups. It takes as its starting point the ethnic composition for the UK in 2001, fertility patterns of ethnic groups as at 2001, assumed to be diminishing over time, and mortality change in all groups as projected nationally by the GAD in the 2004-based projections. The ethnic composition of migration had to be estimated from information on net inflows and current population according to birthplace, country of origin and nationality and for the most part is similar to that assumed in the short-range ethnic updates for England published by ONS (Large 2006). The projections were presented to the British Society for Population Studies Annual Conference in 2007. The broad ethnic groups in Figure 5 are the amalgamation of 12 conventional ethnic groups that were projected separately.

  17.  In summary, on those assumptions, the British, Scottish and Irish population of the UK would decline to 44 million (63%) by 2051, the white non-British would increase to six million (8%) and the non-white population to 20 million (29%). The projected overall total would be 70 million, just half a million more that the GAD 2004-based projection of 69 million and substantially higher than the GAD 2001-based projection of 64 million. The projection is most sensitive to the level of migration, which is the most difficult component to project and can change greatly over time. Here, the simple assumption adopted by the GAD has been followed, of a continuation of the then current levels. Without migration in or out, those totals would be 47 million, two million and seven million respectively. These projections do not include the post-2004 inflow from Eastern Europe. The terms of reference of the committee to not embrace ethnic change, but these revisions of ethnic distribution would be unlikely to be without economic as well as social and political consequences, although the latter would probably be much more significant than the former. Some aspects of diversity cost money, and on current trends there is going to be more of it.

Figure 5

PROJECTION OF ETHNIC COMPOSITION OF THE UK POPULATION 2001-51, BROAD ETHNIC CATEGORIES


18.  MACROECONOMIC TARGETS VERSUS INDIVIDUAL WELFARE AND LONG-TERM STRATEGY

  Policy that justifies continued expansion of the labour supply puts macroeconomic targets in front of the welfare of individuals, especially the interests of the lower paid and those without employment with weak incentives and weak bargaining power. Importing labour to "contain inflationary pressures" is just macroeconomic language for importing labour to "keep down the wages of workers" thus making their incomes and welfare less than otherwise it might be. Keeping labour abundant so that its wages (and therefore its standard of living) and its bargaining power are low is naturally in the interests of employers and the owners of capital in search of the path of least resistance. Not surprisingly the responses of employers analysed by the Institute of Directors (2007), the British Chambers of Commerce (2007) and by Home Office research (Dench et al 2006) mirror some of those views. They also emphasise, however, the positive aspects of immigrant labour in terms of work ethic and other qualitative advantages especially in lower-skilled work. On the other hand, migration is seen by some of those employers only as a short-term solution to a long-term problem, and social problems could be storing up if chronic domestic skills shortages are not addressed.

  19.  Lower wages than otherwise and unemployment among the lower paid and less skilled are predictable results. Profits at British companies are growing at their fastest pace in nearly 13 years while wages of ordinary workers are rising at their slowest pace since 2002. John Philpott, Chief Economist at the Chartered Institute of Personnel and Development, has remarked: "High levels of immigration were a significant reason for subdued wage growth. Clearly immigration has been good for UK plc but it is clear from these numbers that businesses rather than workers are benefiting." (Guardian, 16 August 2007). Whole economy unit wage costs in the second quarter of 2007 were only 1.2% higher than the same quarter a year earlier, down from an increase of 2.4% in the previous quarter. This is due to a decrease in the growth rate of average wages and salaries (ONS 2007, 27 September 2007) accompanied by a very small decline in productivity.

  20.  As the OECD has commented (2007), in the UK economy "employment rates among the least skilled remain too low. A key challenge is to raise education performance without significant further increases in expenditure, while a related key challenge is to ensure strong incentives for the least skilled to participate in the labour market and to progress in work". Easy access to migrant labour for employers removes one of the spurs to such reform. In the UK there are about 1.2 million young people not in employment, education or training (NEET). At all working ages, 7.95 million people were not in employment in July 2007. Among them are a serious over-representation of existing immigrants and their children. Some of those out of work will and cannot ever be in employment and many others are either discouraged or show little incentive or aptitude for it. The task of mobilising some of them is not easy and one can understand why initially keen and disciplined overseas workers are preferred. Eventually, however, keen immigrant labour assimilates to the welfare and work ethic of the local population, a trend already noted among Polish labourers (Sunday Times, 15 September). Here is no point pretending, however, that improvement can entirely be achieved through wage or other inducements. Welfare, the other side of the equation, also needs to be reformed, perhaps on the lines successfully adopted by President Clinton including the last, crucial step—that is making unemployment benefit strictly time-limited.

  21.  Discussions about the need of the market for labour seem to place little faith in the ability of market forces to adapt to any shortage of labour. It is assumed that the system cannot adapting to a tighter labour market, and that increasing labour supply is the only solution. In many cases that must be true. But in the longer run the appropriate response to "shortages" of labour in a modern economy is to increase the wage to a market clearing level and make appropriate improvements in efficiency and productivity by new investments and new techniques, That is how modern knowledge-based economies must grow and compete. When formerly abundant low-skill labour dries up, as in the California vineyards in the 1980s, an adaptive economy out-sources or mechanises (Martin 2003)—thus moving up the technological evolutionary ladder. The strategic goal has often been proclaimed to be a high-wage, high-output, high skill knowledge-based economy, with fewer extremes of poverty and income. The East European influx in particular inhibits that aim. The numbers of the low paid must have been substantially augmented by the inflow from Eastern Europe. Of those who have registered since 2004, over 80% earn less than £5.99 per hour, that is about £12,000 per year.

  22.  It is not possible to live an independent life on such an income. In due course more of the new entrants will be entitled to welfare benefits and will need them unless there is massive upwards social mobility. In a welfare society there is no such thing as cheap labour, immigrant or otherwise. If employers do not pay enough for independent living then the welfare system—the taxpayer—will have to do so. Cheaper services for consumers are often adduced as a benefit of abundant low-wage labour. That is deluded. In a welfare economy the consumer will eventually pay, although less noticeably, through the more diffuse effect of higher taxes. Meanwhile the employer is subsidised.

  23.  It is surprising to find that a government and its institutions should give such primacy to the demands of employers and businessmen on labour supply, when it would not do so in respect of, say, employment law, consumer standards, environmental protection and so forth. Instead, to misquote the late Reg Prentice, the principle seems to have been "Find out what the employers want and give it to them".

24.  UNCOSTED EXTERNALITIES OF IMMIGRATION

  A number of important components are excluded from the fiscal and other calculations that attempt to evaluate the economic costs and benefits of immigration. Such calculations, for example of the kind presented by Gott et al (2002, p 29) and Sriskandarajah et al (2005), compare the tax paid by immigrant (not the whole ethnic minority) populations with the welfare benefits and rebates that they receive. Those calculations employ relatively orthodox statistics reasonably available from public sources, in conjunction with demographic data on the size and age-structure of the populations concerned. Other costs and potential benefits, outside the tax and welfare accounts for which data are not so readily available, are not included or are explicitly excluded. For example the earlier paper explicitly assumed that costs per head of primary and secondary education, and share of expenditure on health services provision were equal, within each age-group, across all categories in the UK population as a whole. This is understandable given the difficulties of doing otherwise. The authors go on to acknowledge, however, that rates of utilisation may be different for public education and health and that providers might incur different costs for migrants. No mention is made of crime, security or the costs of the immigration, integration or the race-relations and equality processes. In fact some data are available in some of these areas, although to an excessive degree they refer to "ethnic minority" not "immigrant" populations like so many UK sources. It would be preferable to be able separate the non-UK born (ie immigrant) component, although as with the demographic effects of migration, it is logical to include in the costs and benefits of migration the effects of immigrants themselves and those of their descendants. The benefits enjoyed by illegal immigrants and overstayers, and their tax contributions do not form any explicit part of these calculations. Illegal immigrants were estimated to number 430,000 as of April 2001 (Woodbridge 2005).

  25.  Some indication of cost can be determined for some of these potential externalities, although usually only in a partial or indirect way. In respect of others the appropriate data are not collected at all and it is difficult to infer them indirectly. Some are discussed below and listed in Table 2. They comprise an unsystematic collection of topics for which at least an outline indication can be made on the basis of a brief enquiry made for the purpose of this note. Most refer to ethnic minority populations rather than to their component born abroad. Attention has been focused upon costs not benefits. There has been no time to attempt to redress that imbalance. An attempt to do so must be made in the interests of equity but it cannot be done here. To this author, it is difficult to think of positive externalities that have not already been included in the wide range of economic benefits presented in the case for expanded immigration. There must be some; one would surely include the benefit of a variety of languages and cultural knowledge in UK enterprises oriented to the export of goods and services to countries that send immigrants to the UK.

  26.  For many of the items discussed below it is questionable how much of the cost should be attributed to immigrants or to their descendants, and how much to the indigenous population. Immigration controls are necessary, for example, because there is pressure to migrate but they also protect the population and facilitate the economic and other benefits of migration. It could be argued that much of the race relations and equal opportunities apparatus is made necessary, and its expense therefore caused, by the discrimination imposed on the non-native population. Furthermore, that the expense of equal opportunities programmes serves to make the best use of talent otherwise marginalised and therefore benefits everyone. The categories below have all been included, however, because all are contingent upon current and past migration, without which they would not exist. The main purpose of presenting this sample is to show that there are likely to be some uncounted costs which may, on more thorough analysis, turn out to be substantial and to show that much more detailed and consistent enquiry is needed and is justified. Table 2 below includes no total; it would not be appropriate. Estimates are highly preliminary. Some of the categories listed may overlap and they vary greatly in the degree to which it may be valid to include them.

27.  MEDICAL COSTS

  Medical costs are a particular bone of contention. A number of surveys chart ethnic minority health and estimates have been made of the comparative mortality of infant and adult immigrants and adult members of the ethnic minority populations (eg Griffiths and Brock 2004, ONS 2005). In general these show that the health and mortality experience of immigrant or immigrant-origin populations are very diverse, although put together they do not differ greatly from that of the native population. Some (eg the Chinese) appear to enjoy lower mortality than the native population, a finding noted among non-European immigrants in other countries as well. Bangladeshis, and Africans, and women in general do worse than average. Information is not collected by the NHS on the country of origin of those who use its services. So it is not known how any immigrant or ethnic differentials translate into NHS costs, whether heavier or lighter than average. Entitlement to treatment is in theory meant to be established. It has been estimated on a sample of 106 hospitals that NHS hospitals gave £50 million worth of treatment to ineligible payments in 2005, of which £20 million would be unpaid (Daily Telegraph, 2 October 2006). It is not known if the patients were non-EU immigrants or short-term "health tourists", especially for childbirth, in which case they would not strictly speaking be "immigrants" at all whatever the damaging effect on the NHS.

  28.  Some specific ailments are more prevalent among immigrant and some ethnic minority populations, for example tuberculosis. The increase of new cases of TB, up 11% from 2004 to 8,113 in 2005, was all accounted for by cases from abroad. The prevalence among the UK-born population remains stable. Sexually transmitted disease, notably HIV/AIDS is much more prevalent among immigrant and minority populations, especially African and Caribbean. In 2005 63% of new HIV diagnoses (3,691) were from ethnic minority males, of whom 3,064 (four fifths) were African and 306 Caribbean (Health Protection Agency 2006). 63,500 persons were known to be infected with AIDS/HIV in 2005. 22,014 from the ethnic minority populations sought treatment, 70% of all requests. That is a seven-fold increase since 1996 (2815). The prevalence of HIV infection among African males was 3.6%, and 0.3% among Caribbean males, 46 times and 3.7 times respectively the rate of English heterosexuals. It was estimated that 64% of adult heterosexuals with HIV had been born in Africa (14,000 women and 7,500 men) with perhaps another 54,000 unaware of their infection. In 200-03 it was estimated that the cost of managing a patient with HIV was £15,000 per patient per annum (Commons Select Committee on Health 2003, para 146). On that basis, given the figures above, the annual cost attributable to the immigrant-origin victims would be £330 million, assuming that all those who sought treatment received it. Early diagnosis of HIV, and best of all prevention, would remove a scourge from the population and enable large sums to be diverted to other health priorities.

29.  EDUCATION AND ENGLISH LANGUAGE

  Additional funds have been directed towards schools with a large number of ethnic minority origin (initially New Commonwealth) pupils since the provision of "Section 11 grant" by the Home Office in 1966. Elements of Section 11 grant devoted to helping (mostly) adult immigrants to learn English are now managed by the Learning and Skills Council under the English for Speakers of Other Languages scheme at a cost of £280 million per year (for 580,000 students). For schools, the Department for Children, Schools and Families is responsible for Ethnic Minority Achievement grant of £169 million year. More broadly, the cost of providing translation for all services to immigrant and ethnic populations was reported to be £100 million annually in a speech by Ruth Kelly MP (Times, 11 June 2007).

30.  RACE RELATIONS AND RELATED EQUAL OPPORTUNITIES ACTIVITIES

  The Commission for Racial Equality itself, now absorbed within the Equal Opportunities Commission, had a budget of £32.4 million in 2005 according to its annual Report (CRE 2006). Equal opportunities activity in relation to race and now religion is now pervasive throughout the public sector, in education and increasingly in the private sector, following the wide-ranging requirements of the 2000 Race Relations (Amendment) Act. The cost of time and other resources relating to ethnic monitoring and the enforcement of targets, and associated litigation, is not known but in view of its scale is likely to be high. The intention of the 2000 Act to embed race-related and other equal opportunities activities as a mainstream component of the business of all public bodies makes apportionment of costs difficult. But if a medium-sized town of 150,000 inhabitants employs four personnel to cover all aspects of equal opportunities, of whom 1.5 FTE is devoted to race and diversity matters, then the total annual UK cost would be about £32 million and another £7 million for higher education, assuming one FTE per institution. That estimate assumes an average salary cost of £33,000 to the employer per employee. Similar estimates could be made for hospitals and hospital trusts, police forces and other public bodies. There is also local authority expenditure on capital projects for facilities and regeneration wholly or partly for ethnic minority populations, for immigrants or for asylum seekers, and grants to local support groups of various kinds. In the past some elements of this could be identified through specific components of the Urban Programme. But the "mainstreaming" policy makes their identification more difficult.

31.  SECURITY, IMMIGRATION AND ASYLUM

  All counter-terrorism activity is directed against Islamic groups and individuals of predominantly ethnic minority, immigrant or asylum seeker origin. Of the MI5 budget of £200 million 87% or £174 million is devoted to counter-terrorism (Times, 9 August 2006). There must also be considerable costs from the same cause for the enhanced police presence and other security staff at airports and elsewhere, the costs of screening passengers and those entering public buildings. Those are unknown (to the author) but not unknowable.

  32.  According to the 2007-08 Business Plan of the recently—established Borders and Immigration Agency (BIA), "border control" and "migration" account for £350 million of the £1382 million projected budget, part of which is paid by visa fees. It is not clear how much of this should be attributed to immigration and immigrants. As Sriskandarajah et al (2005) reasonably point out, the immigration control system and the scrutiny of asylum claims are undertaken for the benefit of the domestic population, to protect them against unwanted inflows according to policies democratically arrived at, and to facilitate to entry of immigrants whose presence may benefit the country, and of returning UK citizens. They are, however, necessitated by pressure to migrate to the UK and before 1905 scarcely existed. A rational calculation might be to attribute the increase in the costs (adjusted for inflation) of immigration control incurred since the early 1990s, when net immigration was approximately zero. Such data were not to hand at the time of writing but should be relatively straightforward to obtain.

  33.  Asylum seekers count as international migrants except for those who are refused and removed, or leave of their own accord, within 12 months of their arrival. That is why the majority of asylum claims in each year are included in the Total International Migration estimates published annually by the Office for National Statistics, following the UN definition of an international migrant. That part of the cost of processing and supporting asylum claimants due to those who are granted asylum or indefinite leave to remain should be put in the balance of costs of immigration. Such persons become part of the "regular" population and are counted in the numerators and denominators of all the calculations on labour force, tax and benefits etc with which we are familiar. It is only appropriate that the costs associated with their movement into the UK should also be included.

  34.  It is difficult to evaluate the costs of the large numbers who are refused asylum, most of whom are believed to remain in the UK. Around 2002-03, total costs of processing and asylum support were over £2 billion. With the decline of asylum claims that has now fallen considerably. The BIA 2007-08 budget allots £584 million to "asylum" and £337 million to "enforcement", much of which will relate to attempts to remove failed asylum seekers. Asylum seekers are also entitled to special welfare support while awaiting decisions. On 17 March 2006, in response to a request under the Freedom of Information Act, the costs of this National Asylum Support Service were stated to be £1,008 million in 2003-04. The current figure is not known to this author or whether it is in whole or part included in any of the figures cited above.

35.  CRIME

  Ethnic minority populations, considered in a very broad classification, have for a long time been statistically over-represented at all stages of the criminal justice system (Smith 1994, Home Office 2006). However, few figures have been released concerning the immigrant population. Understandably, strong feelings are aroused by this topic and opinions differ sharply as to the cause. Many attribute this dismal statistical conclusion to the depressed condition of the populations concerned, their poor housing, unemployment, the discrimination and hostility that they are claimed to experience, and institutional racism and prejudice at all stages of the system including the identification of suspects in victim surveys, and the more severe sentences handed out to ethnic minority offenders (Hood 1992). Furthermore it is correctly pointed out that the members of the ethnic minority populations are more likely to be the victims of crime than are whites. That is all contentious, but in any attempted explanation, structural factors are taken into account especially the age-structures of the populations concerned. Crime is a youth activity and the ethnic minority populations have a youthful age-structure. That, however, does not remove the statistical imbalance. This note cannot discuss these issues of the unfairness or otherwise of the conditions that might lead to offending and does not need to. All that matters for the present purpose is that the data show over-representation that is sufficiently strong and regularly repeated so as clearly to reflect some degree of reality. It could be argued that differences in age-structure should not be taken into account. These are presented as an advantage when it comes to (eg) workforce participation of immigrants and if statistically accounted for then the claimed advantages relating to GDP would be ironed flat.

  36.  The costs of crime attributable to immigration fall into two broad categories: any disproportionate level of crime committed by individual offenders of immigrant origin, and the growth of organised crime, directed to particular market sectors, run by gangs of relatively homogenous immigrant or ethnic origin: robbery, prostitution, firearms and drugs rings run by Jamaican "Yardies", Chinese "snakehead" immigrant traffickers, Vietnamese cannabis growers, Romanian cash point and credit card specialists, Turkish and Pakistani gangs competing for the heroin trade, Albanian brothel suppliers, Russian mafia executives and others. While widely reported in the press as major growth industries, it is difficult to evaluate the costs involved to the economy. This ethnic dimension appears to be particularly difficult to deal with because such gangs operate outside the usual networks of informers, information and local knowledge available to the police. Some clue as to scale can be inferred from the 11,195 foreign prisoners in England and Wales at 31 December 2006; 14.3% of the total (Written Parliamentary Answer, 14 March 2007).

  37.  An estimate of the costs of crime against households and individuals—the only categories for which data are available—might embrace elements of both. That form of crime was estimated to have imposed a "current burden cost" of £36.2 billion in 2003-04 (Dubourg et al 2005; Home Office Online Report 30/05). What proportion of that is due to the ethnic over-representation in offending? A very simple "pilot" calculation comparing the expected and actual distribution of the costs suggest that the excess attributable to the ethnic minority population (including immigrants and the foreign prison population alluded to above) is £3.08 billion (Table 1). That does not take any account of the distribution of crimes of different types for which members of different groups are arrested, prosecuted or imprisoned. (on which data are published), nor of the detailed age-structure of the offender population (on which data are not published) except that all data refer to the population aged over 10 years.

Table 1

CALCULATIONS OF APPORTIONMENT OF COST OF CRIMES AGAINST INDIVIDUALS AND HOUSEHOLDS BY ETHNIC GROUP OF OFFENDER


Percent distribution according to ethnic group
White
Black
Asian
Other
Not known
Check

2001
Population
91.3
2.8
4.7
1.2
0.0
100.0
Arrests
84.3
8.8
4.9
1.4
0.6
100.0
Youth Offences
84.7
6.0
3.0
0.6
3.3
97.6
Crown Court
75.7
13.0
7.4
3.9
*
100.0
Prison Population
76.8
13.5
5.4
0.9
0.7
97.3

Note: *22% ethnic origin not stated.
Ethnic representation higher in crown court partly because of choices for trial in higher courts.
Ethnic prison population higher than prison receptions because sentences are longer.

Source: Home Office 2006 table A p viii.


APPORTIONMENT OF COSTS OF £36.2 BILLION (datum from Dubourg et al 2005)


Expected from:
White
Black
Asian
Other
Not known
Check

Population
2001
33.05
1.01
1.70
0.43
0.00
36.20
Arrests
30.52
3.19
1.77
0.51
0.22
36.20
Youth Offences
30.66
2.17
1.09
0.22
1.19
35.33
Crown Court
27.40
4.71
2.68
1.41
36.20
Prison
27.80
4.89
1.95
0.33
0.25
35.22


EXCESS ATTRIBUTABLE TO ETHNIC OVER-REPRESENTATION (£ billion)


Based on:
White
Black
Asian
Other

Arrests
-2.53
2.17
0.07
0.07
Youth Offences
-2.39
1.16
-0.62
-0.22
Crown Court
-5.65
3.69
0.98
0.98
Prison
-5.25
3.87
0.25
-0.11
Mean Excess
-3.95
2.72
0.17
0.18
Total Ethnic Excess
3.08

Note: Small error suspected in HO table in the "prisons" column.


38.  REMITTANCES

  Remittances from rich to poor countries are always discussed in terms of the expected benefits to the populations receiving them. While their effects are not all benign, many commentators agree that they are advantageous or even in the short run essential (Kapur, 2004) although there are dissenting voices. It is difficult to measure their magnitude, especially in the UK after 1979 following the abolition of exchange control. But in general they comfortably exceed the volume of official foreign aid. Their impact on the country of origin is seldom discussed. Remittances may have some negative effects on the balance of payments, although surely small in relation to GDP. The remittances exported might return in the form of goods or services imported by the country receiving the remittances. But that is likely to be no more than a fraction of the total dispersed. The ONS estimates the annual value of remittances from the UK to the developing countries of origin of immigrants to be about £3.5 billion. However this includes more than workers' remittances. Household-based methods estimate the true figure to be £1.4 billion—possibly an under-estimate—of which £0.5 billion is moved through informal channels (Blackwell and Seddon, 2004). The effect on the balance of payments, if any, would be smaller than that, certainly so relative to national GDP of £1.3 trillion. But this is an area that might warrant further investigation.

Table 2

SOME POTENTIAL COSTS OF IMMIGRATION AND DIVERSITY


£ million

Ethnic relations and support

Local Authority race relations
31.6
      estimate assumes 1.5 staff per LA
Higher Education race relations
6.7
      estimate assumes 1 staff per institution
CRE
32.4
      CRE Annual Report 2005
Ethnic Minority Achievement grant
169.0
      DfES. For schools, from Home Office Section 11 Grant. Administered by Learning and Skills Council

English for Speakers of Other Languages
280.0
      Learning and Skills Council
Translation
100.0
      Ruth Kelly MP, Times, 11 June 2007, re Commission on Integration and Cohesion "Our Shared Future"

Security, Immigration

Security (MI5) (from Home Office?)
174.0
      Times, 9 August 2006. Terrorism component only
National Asylum Support Service 2003-04
1,008.0
      Home Office via Freedom of Information Act FOI 2947, 17 March 2006
Asylum process 2007-08
584.0
      Borders and Immigration Agency Business plan 2007-08 p 45
Border control
229.0
      Borders and Immigration Agency Business plan 2007-08 p 45
Enforcement action
337.0
      Borders and Immigration Agency Business plan 2007-08p 45
Migration
121.0
      Borders and Immigration Agency Business plan 2007-8 p 45
Crime

Additional cost attributed to minority populations
3,080.0
      Base data from HO (2006) and Dubourg et al (2005). Crimes against individuals and property only

Medical and related costs

Annual costs of management of minority HIV
330.0
      p/c cost cited in House of Commons Select Committee on Health 3rd Report
Remittances
1,400.0
      A proportion of this could affect balance of payments. Data from Blackwell and Seddon (2004)

Note:  These different estimates should not be added to make a total. They are preliminary and some categories may overlap with others.Please see relevant text, especially paragraph 26.

39.  EMIGRATION

  A final aspect of contemporary migration is the substantial recent emigration of UK citizens. Some find this troubling, others regard it as a natural consequence of globalisation (eg IPPR 2006). While Britain is historically a "nation of emigration", departure of UK citizens had fallen to modest levels after the 1960s except for a transient increase in the early 1980s. In the last few years, net outflow of UK citizens has risen to about 100,000 per year, in almost mirror-image of the increased inflow of foreign citizens. The flow is very diverse; pensioners to Spain, some workers to Europe, but also many young people, and families, following an earlier track to Australia, the US and elsewhere. We do not yet have a clear idea why emigration has increased. Research in the Netherlands, where the outflow is much higher relative to population than it is here, many respondents cite overcrowding, a deteriorating urban environment, and poor public services (van Dalen et al 2006). These possibly difficult areas have not yet been explored in the UK. Qualitative aspects are not encouraging. The UK is the only major OECD country that has lost almost as many tertiary-qualified people as it has gained through the migration process (Dumont and Lemaitre 2005). That somewhat nullifies the economic benefit derived from high-level immigrants.

40.  GENERAL CONCLUSION

  Immigration and emigration for work, family, retirement, study and other purposes, are normal processes for any civilised open society trading at peace with its neighbours. Migration benefits immigrants themselves, employers who have access to easy labour and some consumers of services, especially those at the higher end of the income distribution. In expanding (working) population it inevitably expands overall GDP. But the net effect on average individual economic welfare in the narrow sense is small at best. Broader economic effects, not usually included in models based on fiscal or GDP criteria, are potentially substantial and seem on first inspection mostly to be negative. However this note has not explored any equivalent uncounted economic benefits of immigration. Easy access to labour may also have adverse strategic effects upon education, training, employment and productivity.

  41.  If current levels of migration persist, however, their most striking and permanent effects will be to increase the population size of the country by 15 million by mid-century. That would do no good to housing quality and other amenity, wildlife and environment and would accelerate the UK contribution to global warming. There would be concomitant permanent and progressive changes in the ethnic composition of the population. These radical and permanent transformations to the national life are on a different scale to the small and often short-term benefits that the same migration patterns bring to employers and consumers. None of that is set in stone, however. Immigration can go down as well as up.

15 October 2007



 
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