Sam Ashworth-Hayes, journalist at InFacts, highlights how a recent report by Migration Watch misrepresents research findings from UCL academics on the fiscal effects of immigration to the UK by EEA citizens.
Given the focus the Leave campaign is putting on immigration, it is unsurprising that a report from Migration Watch purporting to show that immigrants from the European Economic Area* (EEA) are a drain on the public purse has grabbed the imagination of the eurosceptic press.
In a paper it says “extends” research from University College London, the anti-immigration pressure group says the Treasury spent more in 2014/15 on public services for recent EEA immigrants than they paid in taxes. The original research found that EEA immigrants in the UK paid made a positive contribution of more than £4 billion between 1995 and 2011.
Migration Watch says that it made “some slight differences in assumptions”. If you undo these changes and stick to UCL’s methodology, the Migration Watch paper actually shows that EEA migrants made a positive contribution.
The key difference between the papers – there are others – is how they treat taxes paid by businesses: corporation tax, business rates and the like. Working out who actually pays a business tax isn’t as simple as looking at which party hands over cash. According to standard economic theory, part of the tax falls on a company’s owners and part on its customers, because firms often react to higher taxes by pushing up prices.
As some EEA migrants will hold shares, the UCL researchers reasoned that it was reasonable to assume that immigrants would pay about the same amount per person as the rest of the population.
Migration Watch took a different view. They took a second scenario used by the UCL researchers as a “robustness check” and described as “potentially extreme” – and ran it as their main set of figures. This essentially assumes that any immigrant who has been in the UK for less than 10 years pays no business taxes.
This makes a big difference. Under Migration Watch’s assumption, EEA immigrants took out £1.1 billion more than they paid in. Stick to the UCL method, and it’s the other way around: EEA immigrants paid in £365 million more than they took out.
When a change of assumption makes such a large difference to the result, it’s misleading to describe it as a “slight difference”.
UCL’s research was peer reviewed and appeared in a top academic journal. The same cannot be said for Migration Watch’s report. Nor was any author named, meaning no individual is accountable for it.
Migration Watch said: “The different assumptions on business taxes …. represent different ends of a spectrum of how much business tax is attributable to each group.” But assuming that EEA migrants pay roughly the same as natives doesn’t seem an extreme view, whereas assuming they pay nothing for a decade does.
* EEA is the EU plus Norway, Iceland and Liechtenstein
Sam Ashworth-Hayes is a journalist at InFacts. He studied economics at the University of York, and previously worked for Full Fact.
Note: The views expressed in this post are those of the author, and not of the UCL European Institute, nor of UCL.
This post was originally published on InFacts.