Calculating the Bill: The projected impacts of the points-based immigration system after Brexit

By Peter William Walsh and Robert McNeil

This commentary looks at the government’s projected impacts of the post-Brexit ‘points-based’ immigration system, in terms of immigration numbers and fiscal costs and benefits. It reviews data and analysis provided in the government’s Impact Assessment on the new Immigration and Social Security Co-ordination (EU Withdrawal) Bill 2020.

What does the new Immigration Bill propose?

The recent Migration Observatory commentary, The new Immigration Bill: closing the door on Freedom of Movement, discussed the proposed new powers government will have to limit the immigration and work rights of EU citizens. (In this commentary ‘EU’ should be taken to include Switzerland and the three additional EEA countries Iceland, Liechtenstein, and Norway.)

The bill ends EU freedom of movement, but makes no mention of the proposed new points system – a policy outlined in a recent Policy Statement. The government has said that the details of this system will be introduced via the Immigration Rules.

However, the bill’s Impact Assessment examines the immigration, fiscal, and labour market impacts of the proposed points system. It compares projections based on the implementation of the new system to alternative projections in which immigration policy remains broadly the same as now.

Does the Impact Assessment provide a realistic picture of what will happen to migration when the points based system is introduced?

These projections are based on a number of assumptions and therefore incorporate a degree of uncertainty. The Migration Advisory Committee, in its January 2020 report on points-based systems and salary thresholds, specifically chose not to try to make projections based on hypothetical future scenarios, noting: “we do not attempt to predict future non-EU migration flows as they will be affected by a wide range of factors including and beyond migration policy.”

Also, the projections do not take into account all aspects of the new policies, such as the impact of requiring a job offer, English language requirements, or the imposition of fees.

So these are illustrative scenarios that aim to provide a sense of the range of potential impacts rather than forecasts or predictions.

Does the government expect the new system to cut immigration – and at what cost?

Work immigration

With regard to long-term EU workers the government estimates the points system would reduce annual immigration by this group by around 70% over the first five years of the policy. This would mean a fall in long-term EU worker inflows, from over 100,000 annually to between 20,000 and 40,000 per year. This reduction in long-term EU migrants is estimated to have a cumulative fiscal cost of between £1 billion and £3 billion over the first five years of the policy (2021 to 2025).

For long-term non-EU workers, the lower skill threshold of the proposed points system will make 151 occupations newly eligible. This lowering of the skill requirement, in conjunction with lower salary thresholds, are assumed to increase the immigration of this group by either 10,000–15,000 per year, or 20,000–30,000 per year – depending on the assumptions put into the model.

This increase in long-term non-EU worker migration is estimated to have a potential cumulative fiscal benefit for the UK of between £1 billion and £4 billion over the first five years of the policy. Therefore, the assessment estimates that changes to long-term work immigration would produce an overall fiscal outcome of between -£2 billion and £3 billion.

It is important to point out that that these inflows represent only a small share of the current EU and non-EU workforce in the UK.

Study immigration

For students in higher education (the estimates do not include people in independent schools or further education), the government estimates that EU student immigration will fall by 20% and non-EU student immigration increase by 10%. Numerically this would see EU student enrolments decrease by an average of 15,000 per year and non-EU enrolments increase by an average of 25,000 per year in the first five years of the policy – an overall potential increase in student immigration of 10,000 per year.

Projected university tuition fee income is predicted to increase under the future immigration system, by between £1 billion and £2 billion over the first five years of the policy due to higher numbers of non-EU students. The projected net fiscal impact (the overall balance of the costs and benefits for the state) is projected as a benefit of “under £1 billion”.

Family reunification and asylum

No new policies have been announced relating to family reunification or asylum, so the Impact Assessment does not consider how these might change after Brexit.

Projected impacts on total immigration levels, and cost implications

While the projections do not deal with all areas of immigration, they do cover the main immigration routes into the UK – work and study. The Impact Assessment suggests that in these areas at least, total immigration will neither increase nor decrease significantly. It also projects an overall fiscal outcome for the UK, which ranges from a cost of up to £1 billion to a benefit of £4 billion.

What are the projected impacts on different occupations and sectors?

As well as the overall impacts of the proposed new immigration system, the impact assessment also considers the implications of introducing skills and salary requirements on EU workers for particular occupations and sectors of the economy.

The projections suggest that the new skills and salary thresholds would reduce to zero the inflows of EU workers into lower skilled occupations, such as machine operators (Figure 1). Inflows of EU workers into caring and leisure services would be cut by 90%, skilled trades occupations would be reduced by a little less than half, and about a third of managers and directors would be prevented from migrating to the UK long-term for such work.

Figure 1

Many sectors can expect to see a significant reduction in the inflows of EU workers (Figure 2). Some of these sectors include roles designated as key workers during the Covid-19 crisis. Compared to existing policies, the points system is forecast to prevent 70% of future EU social workers, close to 80% of EU care workers, and more than 90% of EU warehouse and transportation staff from accessing the UK labour market. For more information about the impacts of post-Brexit migration policies on key workers, read the Migration Observatory report Locking out the keys?

Figure 2

As discussed above, the proposed new policies also reduce the skills and salary requirements for some non-EU citizens planning to work in the UK, making 151 middle skilled occupations eligible to employ non-EU staff. This can be expected to increase non-EU work immigration, but it is not clear from the impact assessment which sectors are expected to see the largest increases.

Impacts on different regions of the UK

The Impact Assessment forecasts that London – the region with the UK’s largest migrant population and the most EU residents in employment – will be the least affected. Because of London’s higher wages, the share of EU migrants who will be prevented from migrating there to work long-term will be lower than elsewhere in the country. An estimated 60% of potential EU inflows into London will be affected by the new rules, while the share is more than 80% in lower-wage areas such as Yorkshire and The Humber, Northern Ireland, and the Midlands.

Figure 3

The regional impacts of the reduced salary and skills thresholds for non-EU workers are not considered in the document.

Where does this leave us?

These estimated impacts are only projections, and are highly uncertain. In particular, they do not consider the implications of Covid-19, which has the potential to significantly affect the UK labour market and higher education sector – at least in the short term.

The Impact Assessment paints a picture of modest overall impacts, mainly reducing numbers of lower-skilled EU workers and EU students, but acknowledges its limitations in stating that decisions to migrate are complex, and migration flows are influenced by several factors other than policy. As such, this and any other future estimates, should be interpreted with caution.

With thanks to CJ McKinney of freemovement.org, for providing valuable feedback on an earlier draft.

The Migration Observatory’s work on post-Brexit immigration policy is supported by the Joseph Rowntree Charitable Trust