The response to the Ukip surge has reached the panic stage. Just as British business and academia chorused the economic benefits of Union in the final stages of the Scottish referendum campaign, now their refrain is of the economic benefits of immigration. A letter from ten chief executives in the Financial Times pronounced that unimpeded immigration from Eastern Europe is highly valuable. The previous week economists estimated that immigration from Eastern Europe had contributed £20 billion net in taxes.
But Ukip supporters are no longer overawed by businessmen and dons, so what is to be done? Within the accepted rules of English social hierarchy, the tempting implication for the rest of us is condescension. Ukip supporters are from the less advantaged classes, but not sufficiently wretched for the status of disadvantaged. Ill-educated and prejudiced, despite their numbers they are politically marginal because they are spatially dispersed. Hence: ignore them. This would be a terminal error. Instead, we should try honesty.
On the need for foreign workers, too much has gone wrong in British business for chief executives to have retained the respectful attention of an admiring populace. Of course British business finds it cheaper to hire ready-trained and motivated Hungarians than to train and motivate British youth. Similarly, the City finds it cheaper to hire tax-privileged non-doms. Britain’s disastrous record of low labour productivity reflects this hire-cheap-and-don’t-train approach. It is clearly not coincident with the national interest.
As to tax, the £20 billion short-term gain brandished in the headlines is less indicative of the fiscal consequences than the longer-term £114 billion fiscal loss from overall immigration. Even these numbers are misleading. The impact should be estimated from the perspective of the life cycle. Over a lifetime the average person will pay in tax what they get out in public spending. Those whose lifetime income is below average are net beneficiaries: they get more from the state throughout their lives than they pay in taxes. The opposite is true of those above average: they are are net contributors. Immigrants can only be net contributors if they are atypically prosperous, which is unlikely.
More fundamentally, this discussion of jobs and tax diverts attention from the important issues. In truth, the economic effects are trivial: a decade of fast immigration has changed average wages by around half-a-percent. The important effects are long-term and social. They work predominantly through the size and diversity of the population.
The issue of population size is, I think, relatively straightforward. England is the most crowded country in Europe, our transport infrastructure and our housing stock are under severe stress, and environmental concerns are gaining popular traction. So there is a strong case for stabilising the population. What this implies for immigration depends upon what we do on child benefits. Since 1997 there has been a huge increase in child benefits, which has predictably increased the birthrate to above replacement levels. Were this to persist, the target for net migration would need to be negative.
Child benefits not only provide incentives, they set norms. Benefits, though modest from the perspective of those accustomed to English levels of income, can seem munificent to people from much poorer societies, and may delay the adjustment to current norms of family size. So there is a case for revising child benefit, perhaps capping it at two children while protecting provision for existing larger families.
Diversity is a more complicated issue. Social science can tell us that some diversity is better than none, and that there can be too much diversity as well as too little. It widens variety of choice and can be a stimulus to new thinking. But at some point adverse effects set in: diversity undermines cooperation and generosity. Immigration reduces the willingness to pay for benefits, and particularly undermines the acceptability of targeting them — currently the favoured approach to shrinking the welfare bill. We should therefore aim for a happy medium on immigration. The question, of course, is where this happy medium lies.
Different groups in society will reasonably have quite different views on where the happy medium lies. The affluent young benefit from diversity — they employ Polish plumbers and Swedish nannies — and so will want more of it. Whereas those on benefits or low pay, such as many Ukip supporters, will rationally fear diversity because it undermines generosity. But overall, it’s clear that a majority in England is uncomfortable even with existing levels of diversity: and England is where immigrants choose to settle.
A common narrative among the bien-pensant is that discomfort is reduced by exposure: host populations are supposedly more accepting in high-immigrant localities. This is an example of picking studies to suit values. The weight of the research evidence unfortunately suggests the opposite: further rapid immigration is unlikely to abate concerns.
So we should probably aim to stabilise immigration and the diversity it brings at around the present level. The speed of integration depends on policies. The official espousal of multiculturalism (meaning we encourage a diverse range of cultures) has implied slower integration, and so a lower immigration target for any chosen level of diversity. Other countries promote integration: Canada and Switzerland avoid concentrations of immigrants; the Netherlands and Norway have compulsory language programs. It would help if ‘English’ ceased to be an ethnic identifier and became the accepted identity of everyone reared in England, just as the SNP promotes an inclusive definition of ‘Scottish’. As the referendum revealed, ‘British’ is too weak an identity to induce much allegiance.
What are the implications of such immigration targets for Britain in Europe? Chancellor Merkel has said that rather than abandon the principle of free movement of workers, she would accept British exit. John Major has responded that insistence on free movement would raise the risk of Britain leaving to 50 per cent. These are the opening shots in a great game of chicken.
In understanding how this game might play out, we should first consider what drives the ‘European Project’. At root it is old men’s fears and dreams. Of course, this does not resonate in Britain: we won the war. The old men’s fears are ridiculous, but no less potent. This is why European integration has been festooned with symbolic dreams of statehood: a common currency, free movement of labour, a parliament, a president. All of these symbols are often detrimental to the real business of Europe, which is cooperation for mutual benefit.
The common currency, for example, is inadvertently dismantling the economies of southern Europe. Free movement of workers is inadvertently dismantling Romania’s rural health system as its doctors flock to Paris. A European parliament is inadvertently a gift to populist nationalism. As to the president, of that which we cannot speak politely, we must perforce be silent. Fortunately, Britain has avoided the worst effects: we are in neither the eurozone nor Schengen. What can reasonably be predicted is that, as the old men die and the consequences become yet more inconvenient, the symbols of statehood will gradually be sidelined by the mundane but important process of negotiating mutual benefit. Time is on our side.
The meat of the EU is its increasingly integrated market for goods and services. In the event of exit we could negotiate some reciprocal access, but we would face persistent commercial hostility from Brussels without an effective means of neutralising it. I would rather stay in and wield a veto. We won’t be at the heart of Europe, but we will have purchase on a different part of its anatomy.
But would this condemn Britain to uncontrolled immigration because of the sacrosanct nature of free movement? I don’t think so. Immigration from Old Europe is not really an issue: over the longer term inflows and outflows should just about balance. New Europe does not threaten us with the prospect of ever-rising diversity because, even were rapid inflows to persist, its peoples are fairly easily integrated. In the longer term their economies will catch up and immigration will slow, just as Turkish immigration to Germany is no longer significant.
Meanwhile, there is plenty that we can do on immigration within EU rules. We can redesign our welfare system so as to align better with the rest of old Europe where benefits are based on past contributions rather than current need: why are immigrants queuing at Calais? With a little bureaucratic ingenuity there is considerable scope for impeding European benefits seekers. Nick Clegg, the Commission-insider, has suggested that we should pay benefits to EU immigrants at the rate paid in their home country. Or Brussels could set a floor rate of pan-EU benefits. Necessarily this would be at roughly the level of those prevailing in the lowest-benefit country, but it could be used for payments to all EU immigrants.
Alongside the redesign of benefits, we need better enforcement of our employment and residence laws. Old Europe has identity cards and registers of residence: with neither we have become a haven for anonymity. Similarly, we might also pilot temporary controls. A brake is warranted during periods of severe macroeconomic misalignment, such as wide differences in unemployment rates. From time to time, any member might find such a provision valuable.
It is dangerous and wrong to dismiss concern about immigration. Inchoately, many people sense that ever-rising population would threaten our environment, while ever-rising diversity would threaten our cohesion. Trotting out exaggerated claims of the economic benefits of immigration talks past these concerns. In doing so, it plays into the corrosive populist idea that political elites are disconnected from reality. Only if proper concerns are accepted can bogus ones be credibly dismissed.
We do need better controls on immigration, though not for the reasons advanced by Ukip. Immigration is not economically ruinous, but a threat to trade would be: Brexit would be economic folly. Fortunately, it is unnecessary. We can control immigration without leaving the EU if we have the nerve to try.
Sir Paul Collier is a professor at the Blavatnik School of Government, Oxford University. He is the author of Exodus: Immigration and Multiculturalism.
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