The NIESR blog is a forum for Institute research staff to provide an informed, independent view on current economic issues and recent NIESR research. The views expressed here are those of the authors, and are not necessarily those of the Institute.
A large section of the public would like to see significant restrictions on free movement whatever the result of the EU referendum. Employers have a particular interest in the outcome and have joined the debate but there has been little independent assessment of their position on the issue. Our research, out today, aimed to help fill this gap through research with employers in three sectors – food and drink, hospitality and construction.
The Treasury analysis of the economic impacts of Brexit, published yesterday, has already been extensively examined.
The Office for Budget Responsibility (OBR) published their macroeconomic forecast today. The outlook is one of continued, albeit moderate, economic growth but more subdued than in their November 2015 forecast. This implies the OBR expect the nation to be around 1½ per cent poorer than they had previously thought by the end of this Parliamentary term. The bulk of the downgrade is explained by domestic factors: a downward revision to potential productivity growth and investment volumes.
Today – after much chivvying by the UK Statistics Authority – DWP have finally replied to my Freedom of Information Request of December 4th last year. This simply asked them to explain some of the assumptions they’d made to get to the Prime Minister’s deeply dubious assertion that
We now know that, at any one time, around 40 percent of all recent European Economic Area migrants are supported by the UK benefits system
Just as the referendum debate begins in earnest, tomorrow sees the publication of ONS’ Quarterly Migration Statistics. As ever, the headline numbers for net migration will be closely scrutinised, and in particular flows from the EU. Forecasting migration numbers is even more of a mugs’ game than economic forecasting in general, so I won’t even try, but here are some things to watch out for:
Within the rules of the club, Prime Minister Cameron achieved as much as could be expected on Economic Governance from the European Council negotiations. But the gain in flexibility may turn out to be rather less significant in practice.
The agreement recognises two quite different visions for the European Union. Eurozone nations seek closer economic and political union, while UK negotiators wish to safeguard its current economic and political sovereignty.
On the same day that the Prime Minister was negotiating his “emergency brake” on the payment of some in-work benefits to EU migrants, the Treasury answered a Parliamentary Question asking how much EU migrants actually claimed in benefits, and how much they paid in tax. The response: “The information is not available”.
For some time opinion polls have shown that the public sees immigration as one of the most important issues facing Britain.
The government’s partial and selective release of some data on EU migrants and in-work benefits has been widely reported. What has been released is enough to make it still more obvious that the Prime Minister’s claim that 40 percent of recent migrants were “dependent on benefits” was, at best highly misleading.
The Economic Governance reforms sought by the Prime Minister seem anodyne next to red cards and emergency breaks. Yet the issues raised in the negotiations go right to the heart of the UK and EU problem. The immediate aim is to pacify Euro sceptics, but the coherence of the arrangements will eventually be judged on financial markets.
The President of the European Council, Donald Tusk, wrote today to the members of the Council (EU Heads of Government) setting out his proposals for a "new settlement for the UK within the European Union". What does the proposal mean for free movement of workers in the EU, immigration to the UK, and our in-work benefit system? My very quick (apologies in advance for any inaccuracies or oversimplifications) are as follows.
The Grand Old Duke of York had nothing on the Prime Minister’s European “renegotiation”. The Prime Minister floated an “emergency brake” on free movement more than a year ago. But the proposal was quickly ditched, because, as the Financial Times said, the rules are supposed to deal with situations such as acts of war or volcanic eruptions, not the movement of fruit pickers from eastern Europe.
Two months ago the Prime Minister claimed that “around 40 percent of all recent European Economic Area migrants are supported by the UK benefits system.” It was immediately obvious that this number was cooked up in Number 10, not by a statistician but rather by special advisers. The UK Statistics Authority forced DWP to publish, very hastily, a deeply unconvincing post-hoc
The Financial Times (£; free reg) has just published its annual survey of UK economists’ views of prospects for the year ahead. As ever, before looking at what we think might happen this year, it’s worth looking at what we said last year. My answers in full from last year are here. The headline one on growth was this:
Immigration statistics sound like a dry subject - and they ought to be one. However, anyone who regularly writes or comments about immigration in the press is aware that there is a small but vocal minority who think that the government has been lying to us for years about the true scale of immigration, that the country is awash with millions of uncounted illegal immigrants, etc. Of course, this is nonsense. There is also a much larger group who, while not sharing this paranoia, don't trust government numbers on this topic.
The health of the public finances is a topic of growing interest in Scotland, as confirmed by the establishment of an independent fiscal watchdog – the Scottish Fiscal Commission. Although the discussion of fiscal matters often has a very short-term focus, which is partially explained by the limited duration of any administration, the effects of the population ageing require a long-term view and are likely to become increasingly acute for Scotland.
The Prime Minister’s claim that “around 40 percent of all recent European Economic Area migrants are supported by the UK benefits system” has been widely criticised (see my brief explanation here) and the UK Statistics Authority has made clear that it is very displeased that Number 10 chose to use unpublished (and inconsisten
The current fiscal mandate’s target is an absolute budget surplus by 2019-20, maintaining this surplus for each subsequent year. In the Office for Budget Responsibility’s (OBR) forecast, published today, this target is met, with public sector net borrowing (PSNB) reaching £10.1bn (0.5 per cent of nominal GDP) in 2019-20.
Achieving this target implies a fiscal consolidation this parliament broadly equivalent to that experienced in the last, of roughly 6 per cent of GDP, although the composition is somewhat changed.