Britain will pay for the costs of low-skilled migration for generations

OBR data suggests the post-Brexit wave of low-wage migrants will greatly strain the public purse

This has been the week that the Government’s fiscal watchdog let the immigration cat out of the Treasury bag. A report on the long-term outlook for the public finances from the Office for Budget Responsibility (OBR) confirms what people have long suspected: mass low-skilled migration is a financial disaster for Britain.
In past modelling exercises, the OBR varied the level of net migration (immigration minus emigration). The issue is not just overall numbers, though that obviously does matter, but who exactly they are.
This time, the OBR assumes net migration of around 400,000 a year for the next 50 years and instead varies the composition of those who arrive. One of the variables it tweaks is earnings, modelling three different types of legal immigrants.
The migrant in the middle is like the average Briton: they have the same average earnings, pay the same amount of tax and use the same public services. This type of migrant, it says, represents a decent deal for the taxpayer. They arrive aged around 25, so we haven’t had to pay for their education or upkeep. As such, they contribute to the economy for decades. And while they cost us money in the long run, they don’t become overall net recipients until they are very old.
Next, there are what the OBR calls “high-wage” migrant workers, on 30 per cent more than the UK average. Their numbers look much better: by the time they’re 81 (the average life expectancy for a 25-year-old), they will have paid in £767,000 net. So it’s clear that welcoming such people is good for the public finances.
Then the OBR models the fiscal profile of a “low-wage migrant worker”, on 50 per cent less than the UK average. This migrant is a net fiscal drain from the moment they enter the country. By the time they reach 81, they will have cost the taxpayer £465,000.
This is a striking admission. For years, economic orthodoxy has held that all migrant workers are contributors, which suggests that the more migrants Britain admits, the richer it will be. Still, the negative net cost only applies to one group. It’s hard to argue this is a total repudiation of Treasury thinking – unless the blend of migration we actually have skews overwhelmingly towards being low-skilled.
Some academics like to claim that the average migrant is pretty close to the average worker, in terms of salary. But the data we have casts severe doubt.
A recent Centre for Policy Studies report looked at how many visas were issued in 2022-23 for different job types on skilled worker routes and compared them with the salary data for those occupations.
This analysis suggested that around 72 per cent were likely to be earning less than the average UK salary. Fully 54 per cent were probably on just half of the average salary – the OBR’s “low-wage migrant”. Given another chunk were likely on around 40 per cent of the average salary, it appears that roughly three-fifths of workers on skilled worker visas are destined to be net recipients.
If we extrapolate these figures, then 242,000 skilled worker visas went to low-wage migrants in recent years and just 91,000 to high-wage, with another 115,000 spread in between. By the age of 81, for every £1 contributed to HMRC by the high-wage migrant group, the larger low-wage migrant group will have taken out £1.60.
The forecast becomes gloomier when you consider that the OBR has excluded dependents – overwhelmingly more likely to be a drain on public finances – from their analysis entirely. More dependents have been brought into Britain under skilled visa schemes than workers.
If there are so many issues with the “skilled” visa route, where a small minority seem to actually be net contributors, what about the larger picture? Of 3.6 million visas issued in recent years, just 12 per cent went to workers on the skilled route. Around three-fifths of those are probably in the lower wage bracket. This overall leaves 5 per cent of visas going to higher skilled migrants who may be net contributors.
The foundation for so many arguments in favour of mass migration crumbles away. Yes, Britain gets more scientists and engineers, but they make up only 0.6 per cent of granted visas. The NHS is indeed reliant on skilled overseas doctors, but they are just 0.8 per cent. Even the most basic consideration – will a new entrant overall contribute more to the country’s finances than they take out – is only true in 1 in 20 cases.
As things stand, this is deeply worrying. The massive post-2020 immigration wave – net two million and counting – could leave fiscal scarring that will last for generations.
Indeed, you can see this in the OBR’s calculations. In its baseline scenario of average-wage migration, the UK’s debt-to-GDP ratio rises to 274 per cent by 2074 – a dire prospect. But in its alternative low-wage migration scenario, that debt figure reaches 351 per cent of GDP. And given our actual migration mix, we are much closer to that even more catastrophic trajectory.
Belated changes made by the last government will help improve the migrant mix. But to make migration work better for Britain, we need to do far more to phase out low-wage, low-skill migration and shift towards a smaller number of higher-skill, higher-wage arrivals.
We’re unlikely to see any changes under the Labour Government, which remains ideologically committed to mass migration. Perhaps someone should point out that even the official long-term costs of low-skilled visas will dwarf Rachel Reeves’ supposed £22 billion black hole.