The Immigration Minister, Liam Byrne, pledged a 'new balance in migration policy' during a speech to public servants in Essex today. The speech came on the publication of a new report 'The Economic and Fiscal Impact of Immigration', presented to both the House of Lords Select Committee on Economic Affairs and the Migration Impacts Forum. The Forum is a new initiative by the Government, aiming to help build the evidence base for the effects which migration is having on communities and public services throughout the United Kingdom and on how these challenges can best be met.

Mr Byrne said: "In 12 months time our immigration system will have changed out of all recognition. From next year, a points-based system, modelled on the success of Australia, will ensure that only people Britain needs can come here to work and study.

"Three quarters of the World's population will need fingerprint visas: a system which gives us tougher checks abroad. A single border force with new powers will deliver tougher policing at our ports and airports and we'll start to count people in and out of the country. ID cards for foreign nationals will start to make sure that migrants can prove who they are, and help us safeguard access to work and benefits.

"We will attack the root cause of illegal journeys, which is illegal jobs, with big new fast-track fines for employers turning a blind eye or breaking the rules. Those who sponsor migrants to come to Britain will need a licence to do so.

"Driving these changes forward will be the new Border and Immigration Agency, operating with freedom from central Government with a new powerful regulator and with much stronger links to the communities it serves."

The Minister was speaking as the Home Office published a comprehensive cross Government report on the fiscal and economic impact of migration.

Mr Byrne said:"Today we begin to strike a new balance in Britain's migration policy, weighing the economic benefits with frontline feedback about wider impacts.

"We know migration added about £6 billion to our economy last year, but we know of wider impacts too. What we need to do is strike the right balance for Britain's national interest, starting with the decision on Bulgarian and Romanian workers a little later this year."

A summary of the findings of the report 'The Economic and Fiscal Impact of Immigration' can be found below.

THE ECONOMIC & FISCAL IMPACT OF IMMIGRATION

NUMBER OF MIGRANTS & TRENDS

Over recent decades the numbers of people world-wide who live abroad has increased markedly, and the UK has shared in this increasing migration. Over the last ten years there has been a steady increase in the number of people coming to live in the UK. Most recently, this trend has been supported by the accession of Central and Eastern European countries to the EU. Data for the year to mid-2006 show that:

• 574,000 migrants to came to live in the UK on a long-term basis;
• 385,000 people left the UK on a long-term basis;
• There was therefore a net inflow of 189,000, a 28 per cetn decrease from 262,000 in the year to mid-2005.

The National Statistician has established an inter-departmental task force on migration statistics.

THE ECONOMIC & FISCAL IMPACT OF MIGRANTS

The rate at which migrants are employed has risen steadily since 1997. The majority of employers find migrants reliable and hard-working. And often they have high levels of skills - higher, on average, than the UK natives. By working here they therefore make a very important contribution to the economy. By increasing the numbers of people of working age in recent years they have helped the economy to grow. We estimate that in 2006 new migration added about £6 billion to economic growth - around one-sixth of the total growth in the economy in that year.

The more output produced per person in the country, the wealthier we are as a nation. The odds are that migrants add to wealth because:

(a) migrants earn more on average than UK natives, suggesting that they are more productive on average (they earned £424 per week in 2006, compared with £395 for the UK-born);

(b) by complementing the skills of UK native workers they are likely to make those workers more productive directly; and

(c) by underpinning essential services that the economy needs they leave other workers free to concentrate on what they do best, thus raising productivity indirectly.

Because migrants earn more, it is likely that they will, on average, pay more tax than their UK native counterparts - for example income tax and VAT. What the Government in turn pays out to migrants depends on their personal characteristics - for example whether those migrants have children; their state of health; and whether they are employed. In fact, in 2003-04 it is estimated that migrants contributed 10 per cent of Government revenue - more than their share of the population (9.6 per cent) - and by contrast only used up 9.1 per cent of Government expenditure - less than their population share might suggest.

MIGRANTS AND THE LABOUR MARKET

(i) Employment

The idea that there are only a fixed number of jobs to go round is so conclusively refuted by economic history that it has its own label - "the lump of labour fallacy". UK experience over the last decade bears this out:

• the proportion of foreign-born workers in the UK labour market has risen from around 7½ per cent to 12½ per cent; whilst;
• employment is up by 2.7 million; and
• the unemployment rate (ILO measure) is down by 1.8 percentage points to 5.4 per cent.

Academic research provides little or no evidence that migrant labour has had a significant impact on employment prospects for native workers. Detailed analysis by the DWP provided no discernible statistical evidence that A8 migration has resulted in an increase in claimant count unemployment since May 2004.

(ii) Earnings

The Low Pay Commission has commissioned research relating to migrant flows in the period 1997 to 2005. It finds that:

• on the one hand, immigration slightly increases the rate of wage growth for those at the top and middle of the wage distribution;
• on the other hand, immigration leads to a modest dampening of wage growth for native workers at the bottom end of the earnings distribution. Despite this effect, lower-paid workers still recorded strong wage growth between 1997 and 2005. The National Minimum Wage helps to protect lower-paid workers from the impact of immigration;
• viewed overall, the research finds a small positive effect of immigration on the wages of native workers. The average hourly wage for non-immigrants increased by 29 pence per year between 1997 and 2005 (in real terms). Of this figure, immigration contributed around four per cent.

In addition, research from DWP focused on A8 migrants shows no discernible relationship across Local Authority districts between earnings growth and the concentration of A8 migrants.

(iii) Sectors

Employers use migrant labour for a variety of reasons. In particular sectors - for example construction - migrant labour provides an effective means of meeting skill shortages. Agricultural employers view migrant labour as crucial to the survival of their businesses.

MIGRANTS AND DEMOGRAPHIC CHANGE

As the UK workforce ages, the dependency ratio - the ratio of children and older people to those in work - rises. Under GAD's principle projections, the dependency ratio rises from 61 per cent in 2007 to 74 per cent in 2056. But without any migration, it is estimated that the ratio would reach 82 per cent in 50 years time, implying a greater burden of taxation on those in work.

CONCLUSION AND POLICY STANCE

There is a range of evidence that suggests that, overall, the economic impact of migration is beneficial for the UK. In recent years migrants have made a more positive contribution to the public finances than native workers; have often been highly skilled and accordingly captured higher labour market rewards in terms of earnings; have very little discernible negative impact on labour market outcomes for native workers; and in all probability have made and will continue to make an important contribution not only to economic growth but also wealth.

Given current difficulties with data, a policy response that recognises not only the benefits of migration but also the presence of "known unknowns" is appropriate. In particular:

(i) the new Points-based system (PBS) will provide more clarity on the available entry routes and, in conjunction with a test of labour market need in some cases, ensure that the migrants admitted are those who might sensibly fill labour market shortages;

(ii) A Migration Advisory Committee (MAC) will be established by Autumn 2007, and be fully operational from April 2008, to advise the Government on how migration may help fill identified shortages. The MAC will be accompanied by the Migration Impacts Forum (MIF), which will focus on the wider impacts of migration experienced by local areas.