High taxes or high migration? The UK’s dilemma

After record migration figures, the government wants fewer people coming to the country. What does this mean for the UK and its citizens?

“Migration to [the UK] is far too high”, was the reaction of the Conservative Home Secretary, James Cleverly, to new migration figures in November 2023. As revealed by data from the Office for National Statistics (ONS), the flow of people to the UK has reached the highest level in more than 50 years, if not ever.

In 2022, just over 1.2 million people immigrated to the UK. At the same time, fewer than 500,000 emigrated. This difference between levels of immigration and emigration  is known as net migration, which reached a record-breaking 745,000 in December 2022. In other words, through migration, the UK population has grown by the equivalent of the size of Glasgow.

As a result, the UK Conservative government has become increasingly alarmed. At a time when net migration sat at less than 300,000, the Conservative party’s manifesto for the 2019 election promised to “bring [these] numbers down”.

In December 2023, an announcement regarding stricter migration rules was made, declaring that Health and Care Workers would no longer be able to bring family members to the UK. Furthermore, the minimum salary to recruit someone on a skilled workers visa would rise substantially to £38,700 a year. A list of “shortage” jobs, where this threshold is relaxed, would also be tightened, and immigrants already settled will thus be required to earn a much higher income to bring in partners from abroad. Most of these changes will come into effect in April 2024.

A potentially significant decision for students was also made, as the government will review the graduate visa route, which allows students to stay in the UK for two years after completing their course. Furthermore, it was announced in May 2023, that beginning on 1 January 2024, new “normal” Masters students to the UK can no longer bring their family members to the UK. This option is now limited to PhD and Research Master participants.

Following the implementation of these measures, the government aims to reduce immigration numbers, noting that the new restrictions would prevent around 300,000 people who immigrated last year from doing so now. This will not mean, however, that net migration numbers will fall by this amount. When migrants begin to leave the UK after a few years, emigration rates will rise whilst immigration rates fall, reducing net migration numbers.

For similar reasons, record rates of net migration at 745,000 probably are a one-off, even without the crackdown. Around a third of current net migration rates is now driven by a new wave of international students after the Covid-19 pandemic. As they finish their studies, most will return home. Additionally, around a fifth of the 2022 numbers can be attributed to one-time humanitarian routes – a majority migrating from Ukraine and Hong Kong.

Still, the government measures could result in a general shift to a lower migration rates. Higher salary thresholds will mean less people will be able to immigrate for work, and “no-dependents” rules for students and health-care workers will make the UK less attractive and recruitment abroad more difficult. What does this mean for the country at large?

Whilst on one hand, the government professes to wanting to lower immigration, it has arguably been allowing numbers to grow. The reason for this is that, in some areas of the UK, the economy depends on migrants.

This is true first and foremost for the higher education sector. According to a study by The Guardian, 21 percent of university income in the UK was provided by tuition fees from international students in 2021/22. That’s almost as much as the 29 percent paid by UK fee-paying students.

If the new rules deter overseas students, that results in less money for universities. As staff wages make up the bulk of expenditure, saving usually means either less pay for workers, or fewer employees for the same workload. This could decrease the quality of education provided, and potentially lead to further strike action by university staff members.

For the NHS, staffing shortages could worsen. In the 12 months up to June 2023, most work visas were granted for healthcare workers – about 120,000 in total. The number of healthcare workers from overseas joining the NHS has also increased in the last ten years, with more than half of all nurses who join the NHS England coming from outside of the UK. Tougher rules on dependants will make it harder to sustain these numbers, which could result in a decline of healthcare standards.

There are also more direct implications for people’s wallets. For the last 20 years, migration has been the main driver for population growth. Lowering it in the long-term could mean fewer people living within the UK.

This might help in some areas by alleviating the housing shortage and lowering prices. For economic growth, however, lower levels of migration present a problem. This is because there are two ways to increase economic output (GDP); employ more workers, or make each worker more productive. However, labour output rates within the UK have hardly been growing.

That leaves an increase in sheer worker numbers as the main path to economic growth. And migrant workers have become vital for this. Since 2008, the number of foreign-born people in employment has increased by over 2 million, leading to an increase in employment rates. Almost one out of five employees in the UK are now born abroad.

Why does this matter, you may ask? Jobs for migrants might grow the economy, but they will not impact economic output per person, the most important metric for living standards. True in theory, but incorrect in practice. Migrants are more likely to work than UK natives, and their wages are somewhat higher.

Migrants increase the percentage of the UK population in employment. This means every employee has to pay for those who are unable to work – mainly children and the elderly. This happens when the state collects taxes and then provides for schools, nurseries, pensions and care homes.

Lower migration rates also make it more difficult to keep national debt levels under control. If economic output (in the form of GDP) grows less because there are fewer migrants, the state has to take on less debt to keep debt levels, as a share of GDP, constant. This means the government either needs to raise taxes or lower expenditure.

This is the dilemma – the Conservative party doesn’t like high migration, but it also abhors high taxes. Similarly, it dreads the reaction of voters to more spending cuts and a decline in public services. The migration measures are designed to minimise the economic impact by mainly targeting dependents. But in the long term, the UK still has to decide – do we want high taxes or high levels of migration?