Home Office estimate – Firstpost

The UK economy may take a hit of up to £10.8 billion ($14.4 billion) over the next five years as a result of new restrictions on legal migration, according to a Bloomberg report, citing a Home Office impact assessment released this week.

The analysis estimates that the cumulative monetised cost of the government’s planned changes — first outlined in a May white paper — will fall between £2.2 billion and £10.8 billion.

The proposals include limiting Skilled Worker and Health and Care Worker visas to graduate-level applicants, raising the salary threshold for visa eligibility, and banning the recruitment of overseas social care workers.

Most of the measures came into force in July, following a surge in net migration, which reached nearly 1 million in the year to June 2023. The spike intensified public concerns about strain on housing and public services and helped boost support for Nigel Farage’s anti-immigration Reform UK party.

However, the latest impact assessment, published more than six months after the government announced its clampdown on legal migration, is likely to fuel criticism that Prime Minister Keir Starmer’s crackdown on legal migration may have been rushed.

Economists warn that while the policies aim to curb numbers, they could ultimately undermine the UK’s long-term economic prospects, reported Bloomberg.

The Home Office said the potential cost to the UK of the immigration system changes, estimated at a base case of £5.4 billion, would be balanced by “potentially significant unquantifiable benefits.”

“The measures set out in the white paper, part of which are enacted in these immigration rules, form part of a broader government policy to get people back into work,” according to the impact assessment.

It added that the “rationale for these changes is to incentivize upskilling of the domestic workforce,” and that “if these changes have an impact on productivity this effect is very important and likely to outweigh many or most other impacts.”

Economic hit

The projected economic hit includes up to £800 million in lost public sector revenue from lower visa fee and immigration health surcharge income, alongside an estimated £9.5 billion drop linked to reduced income tax receipts and added pressure on public services.

“These figures portray a significant loss to the UK’s workforce, with domestic workers somehow expected to fill in the gaps ASAP,” Bloomberg quoted Dora Olivia Vicol, chief executive of the Work Rights Centre, which supports migrants and disadvantaged Britons with employment issues, as saying.

She warned that “losses are almost certain: older people and disabled people will find it harder to get care” and that the government stands to forfeit billions in tax revenues.

The UK initially loosened visa rules for social care workers in 2022, responding to severe staffing shortages following Covid-19 and Brexit.

However, concerns over exploitation in the system later pushed Starmer’s government to ban most foreign care workers from entering the country. The Home Office acknowledged the shift could have “an impact on specific households” if care providers need to raise prices.

Care companies are also likely to face significant strain, the assessment noted, as they may be forced to halt hiring or replace overseas staff with costlier domestic workers.

With inputs from agencies