Economics of Independence

Positive migration can generate £65.3 billion bonus for Scotland

Written by Michael Gray

Students--generic-1410446Independent evidence from a range of economic sources confirms that a Scottish migration system can improve Scotland’s fiscal balance by over £65 billion. This is because migration – and the demographics that it affects – is a crucial factor in economic growth and increasing tax take.

This means that the ability to increase and incentivise immigration, especially from rUK and diaspora connections, is one of the most powerful economic tools than an independent Scotland will gain.

Based on cumulative totals sourced through previous Institute of Fiscal Studies research on Office for National Statistics levels, this research has the potential to change the economic debate on Scottish independence. A system of positive migration can vastly enhance Scotland’s economic position.

Today polling released by the Scottish Green Party found that a strong majority of people in Scotland – 66.3% – supported a migration policy for Scotland. Only 20.8% of people were opposed.

This means that the independence referendum presents a choice of two futures on immigration policy. The Westminster system is increasingly anti-immigration. This is damaging Scotland’s economy, universities and businesses.

It’s clear that Scotland requires an independent approach to migration which suits Scotland’s needs and interests. Policy designed for the economic interests and social concerns of London and the South East will not allow Scotland to prosper.

There are many reasons for an independent approach.

Facts: migration improves the economy

Age breakdown of migrants

A study of UK demographics established that immigration makes a “substantial” contribution to public finances. Immigrants – for social reasons – are disposed to improve the economy. This is because they are more likely to be of working age and be highly educated. Therefore migrants generate more taxes.

Migrants from within the European Economic Area provided a surplus of 45% more in taxes compared to UK residents. Migrants from outside the EEA provided a surplus of 13% more in taxes compared to UK residents.

43% of non-EEA migrants have university degrees. 32% of EEA migrants have a degree. Both vastly surpass the UK average: only 21% of people in the UK have a degree.

Prof Christian Dustmann from University College London said that “the UK has benefited fiscally from immigrants from EEA countries, who have put in considerably more in taxes and contributions than they received in benefits and transfers.”

Emigration has cost Scotland dear

Migration trends scotland

Source: Annual Review of Demographic Trends 157th Edition

An economic model focused upon London and the South East has damaged Scotland across the last century. Scotland’s population growth has been far slower than rUK’s. In fact from the 50s to 90s Scotland’s population was stagnating or shrinking.

Many of Scotland’s brightest and best graduates left Scotland creating a substantial ‘brain drain’ within the Scottish economy.

popchangeThis trend has been reversed, but the structural impact has only been mitigated. Since 2005 Scotland’s economy has developed on a number of measures and Scotland’s population has grown. This has not rectified the decades of outward migration which proceeded it.

In fact Scotland’s population was 5.2 million in 1980. So in over 30 years it has hardly grown. In contrast the population of England and Wales rose by 3.7 million in just the last 10 years.

Independence is a huge opportunity to transform Scotland’s economy

Migration impact

This chart is based on IFS figures. Figures 3.1 from ‘Fiscal Sustainability of an Independence Scotland’ which compares ONS rates of migration.

The Institute of Fiscal Studies report on Scotland’s economic future highlighted the opportunities of an independent immigration policy.

The report stated that economic projections would be “substantially affected by the policies chosen by the government of an independent Scotland“. Migration policy would have a huge impact. If an independent Scotland followed an ONS ‘high migration’ figure (26,000/year) rather than a low figure (9,000/year) its fiscal position would be vastly enhanced.

The IFS found that over 50 years this single policy would improve Scotland’s borrowing accounts by 45.05% of its Gross Domestic Product. Scotland’s GDP is currently £145 billion, and therefore 45.05% amounts to £65.3 billion (on a simple calculation that excludes future inflation rates).

A migration policy which encourages skilled workers, investors and those with family connections to Scotland to return would transform Scotland’s economic position within a lifetime.

Scottish Government Support

0056582-380

The Scottish Government White Paper agreed with this IFS analysis and made it clear that an independent Scotland would seize the opportunity of attracting more young, skilled workers to Scotland.

The White Paper says that Scotland can “provide incentives to migrants who move to live and work in remoter geographical areas – assisting with community sustainability, or adding new categories of skills” and “We plan to lower the current financial maintenance thresholds and minimum salary levels for entry, to better align them with Scottish average wages and cost of living.” An independent Scotland will also reintroduce the visa system which encouraged talented people to further their education in Scotland. (pg. 267-271)

There is no shortage of opportunities. Scotland has a historically under-utilised diaspora, close cultural connections across Britain and Ireland, as well as membership of the world’s biggest economic trading block.

International embassies will allow Scotland to reconnect with communities across the USA, Australia, Canada and New Zealand that still associate with Scotland.

Incentives and campaigns can promote migration from rUK and Ireland, which will continue to be the most common form of migration to Scotland. 100,000s of Scots may be interested in returning to Scotland. While Westminster turns its back on Europe, Scotland can also engage to its own economic and political benefit with opportunities for trade and investment within the EU.

Public support for immigration in Scotland

migration tagA recent Oxford University report found that people in Scotland are far more supportive of immigration than the rest of the UK. In Scotland support for immigration has a 10% lead over opposition. In England and Wales negative views of immigration were 14% ahead of positive views. 60% of people in Scotland support decisions on immigration being made in Scotland rather than at Westminster.

A Herald editorial on the 10th of February  recognised the economic and popular sense of promoting skilled migration to Scotland: “Scotland has a rapidly ageing demographic and needs to increase its working age population. An influx of skilled and highly educated incomers from overseas is also likely to be important to boost Scotland’s tax base and productivity”.

Most recently, the Scottish Green Party found that a strong majority of people in Scotland support an independent migration system. 66.3% of people polled were in favour with only 20.8% against.

International students in Scotland

_58192189_uni_students
One example of both the economic benefits of migration and the need for Scottish independence is the experience of the university sector.

Scotland attracts over 40,000 students from across the world. These students are net contributors to the economy during their studies (£779 million annually), but too often students decide to leave Scotland to return home after completing their studies.

An independent Scotland could provide greater incentives for skilled international students to live and work in Scotland after completing their studies. Such bursary systems already work effectively in the case of NHS workers.

Both Universities Scotland and the University College Union Scotland have criticised Westminster’s draconian approach to immigration and student visas. The student visa overhaul has harmed Scotland’s universities and the economy.

It makes no sense to train experienced and educated graduates in Scotland only to fail to encourage those people to stay in Scotland after graduation.

Furthering the economic and social case for immigration

Bh9CAx1CMAAgZxpThe economics demonstrate that inward migration benefits the economy. This is because the majority of migration brings skills, determination or affluence. This is the case for a number of reasons.

1) Economic migration is dominated by skilled workers moving between developed countries and workers with skills moving from developing countries to developed countries. These individuals have the financial capital to travel a long distance and therefore have the means and skills to meet financial maintenance thresholds.

2) As many migrants move to work, they are likely to be young or have a family. This means that they bring wealth into their community by paying tax and adding to social and economic networks.

3) Immigration can often be a strenuous process for an individual or family. It can involve leaving your home, family and community. It is rarely taken lightly. As opposed to some media inaccuracies, immigrants have many reasons to invest in a new community and to build a new and better life in the place they have moved to.

History and the social case

Scotland’s economy has benefited from immigration. Over the centuries various communities have settled in Scotland. Families from Ireland, England, Pakistan, Poland, India, Lithuania, Italy and many others have brought skills and culture to Scotland, establishing businesses and bringing up families. Trading links between Scotland and Eastern Europe – based upon immigration – date back to the 16th century and was the basis of a successful Scottish merchant class.

The economic benefits of immigration sit alongside this process of social and cultural enrichment, which has made Scotland a more diverse and better place to live and work.

Maintaining the Common Travel Area

Ireland and the UK have independent immigration policies while sharing a common travel area. This allows each country to make its own decisions and benefit from the free movement of goods and labour. It is in the mutual interests of England, Wales, Ireland and Scotland to maintain this relationship.

Ireland has its own structure for work permits, green cards and student visas to benefit its own economy. For example, people from Bolivia, Fiji, Lesotho, Malawi, South Africa, Taiwan and Venezuela do not require a visa to travel to Ireland, but they do if they were to visit the UK.

Ireland is currently considering reforms to its immigration policy. Gerry O’Connor, the Communications Officer for the Immigrant Council of Ireland, points out that there has never been any border posts between Northern and Southern Ireland despite separate constitutional arrangements. These differences in migration policy have co-existed with the Common Travel Area.

Conclusion

This evidence presents a strong case that Scotland’s economy can thrive with an independent migration policy, which prioritises Scotland’s economic interests. This can provide a long-term financial boost of £65.3 billion and reverse demographic decline.

There is a political challenge to persuade those who lack information on the benefits of this policy direction. With a move away from a political culture which readily demonises immigration towards presenting this economic case, Scotland can benefit from the opportunities of independence.

Join Business for Scotland – Sign our business declaration or follow us on twitter

About the author

Michael Gray

Michael is Head of Research with Business for Scotland.

A graduate from the University of Glasgow, he has carried out a series of interviews with academics, politicians and the public in Denmark, Iceland and Ireland. Michael's on twitter @GrayInGlasgow.

7 Comments

Leave a Comment