Guest blogger Andrew Hunt looks at the economic tradeoff from our refusal to get to grips with immigration

After years of criticism and a populist campaign, the OBR have at last acknowledged that the quality of immigrant, and how long they stay, matters more than the quantity.

And the results are startling. A 'low value' migrant (such as a dependent or unskilled worker) will be a net drain on the British state if they stay till aged 80. By contrast, British-born workers and high skilled migrants make large net contributions.

Unfortunately, the OBR’s modelling thereafter falls into the lazy usage of net migration to create best- and worst-case scenarios. That does not give the accurate picture; because immigration cohorts look very different to emigration cohorts. To get a true picture, we need to drill down into the comparative economic quality of those arriving and those leaving.

As Karl Williams has shown, around 90-95% of immigration is low value. That is low wage workers, students, dependents and unskilled migrants (often with poor English and high rates of criminality). The much-vaunted post-Brexit surge of surgeons and tech entrepreneurs has not been forthcoming, nor has it saved the NHS. Only 2.8% of visas were have been awarded to doctors or nurses: hence immigration is an enormous drain on the NHS. Given that we have been handing out over a million visas a year to low-end migrants (at a cost of half a million each if they stay), the bill is already eye-watering.

Then there is the emigration side. As the media is widely reporting, the UK is undergoing a brain drain. We are the OECD’s largest exporter of doctors and are forecast to lose more millionaires than any other country (we are already only just behind China).  In other words, emigrants look to be mostly net contributors.

None of this should be a surprise. Given that low end migrants can expect £500k in freebies by staying, simple hedonic modelling suggests they are unlikely to emigrate and other countries will be reluctant to take them. 

Meanwhile high-end migrants and skilled British nationals can expect to pay c. £300-900k in net contributions. That is a good motivation to emigrate. Not least, because a growing number of countries (including EU nations) are offering preferential tax rates and visas to attract high end/low-cost migrants.

Thus, if we plug in the OBR’s assumptions, the worst-case scenario is terrifying. Assuming the OBR’s 400k net migration is composed of 900k low-end migrants each year (adding £450bn to long-term government spending), and 500k quality emigrants leaving (costing over £150bn in lost contributions), That is £600bn (20% of GDP) in liabilities every single year! Remember, this is coming on top of all our existing liabilities, like debt and unfunded pensions.

Any country that runs up liabilities at that rate will be as broke as Zimbabwe or Lebanon when the bills come due. It may not take that long because markets are anticipatory. If they can see we are heading for crisis, they will panic early.

However, what if we got migration right? Let’s say we attracted 400k high-value immigrants each year, through a simplified visa system only for very high-end workers who leave at the end of their visa. That could add around £120bn in tax contributions for the Chancellor every year.

Moreover, what if we could halve the number of migrants who would be a net drain on the Exchequer? That would require political bravery, as it would involve more deportations of criminals, offshoring asylum seekers, paying costly migrants to leave as Sweden is doing, and not issuing another low-end visa or visa extension. That could save the Chancellor around £200bn every single year.   

Thus, an optimised migration system could add £320bn (c. 10% of GDP) annually. 

The difference between these scenarios is 30% of GDP every year!

Wow! Even Nigel Farage has underestimated how important immigration policy is. It really is the difference between us being Switzerland or Venezuela in ten years’ time.

Fixing immigration is consistently polling as the top issue for all voters, and especially those on the right. The political prize is huge and the economic prize is even bigger.

Bring on Popular Conservatism!