Economic Impacts on London and the UK of Regularising Irregular Migrants

1. Economic Impacts on London and the UK of Regularising Irregular Migrants Ian Gordon and Kath Scanlon LSE London research centre London School of Economics Asylum, Refugee and Migration project group, London Funders 7th September 2009

2. The Study • Rapid review for GLA to inform Mayor's thinking • Scheme: regularisation after 5 years/no crime • Brief: • to review lessons from international experience • to estimate numbers eligible for such a scheme • to identify/quantify likely economic and fiscal effects

3. The Context • Build up around 2000 of large irregular population – most now unlikely to be deported • Tightening of immigration control: • points system • more rapid processing of asylum requests • improved border controls and stronger removal powers • Planned ‘path’ to earned citizenship, limiting rights of regular migrants until full citizenship achieved

4. The Subject • Who are 'irregular residents'? • Failed but unremoved asylum seekers (appeals exhausted) • Illegal entrants who evaded border controls or entered on false papers • Overstayers • UK-born children of two irregular migrants • Not included: Legal migrants in breach of visa conditions

5. Caveats • In theory irregular residents included in census figures, but • overstayers and illegals not directly countable • little data about distinctive characteristics/behaviour • Situations vary greatly → big disparities in degree of ‘irregularity’ and thus difference that regularisation would make • Study involves indirect inferences, assumptions and interpretations from statistical sources and qualitative studies/ informants • therefore only best estimates

6. Estimating Numbers • Three possible approaches: • Bottom-up estimates for particular categories • Only feasible for failed asylum-seekers • Informed judgements about numbers from particular communities • Information inconsistent and patchy

7. Estimating Numbers (2) • 'Residual method': Compare two estimates from official statistics • Census-based total (de facto) migrant population stock • Flow-based estimate of legal numbers • Basis of Home Office estimates for 2001 • Yields range of figures – assuming 80-100% of irregulars counted in Census

8. Updated National Estimates as of end-2007 (000s)

9. London Estimates as of end-2007 (000s)

10. Numbers Eligible for Regularisatioin • Single criterion: 5 years residence • UK – 412,000 (range 273,000 – 583,000) • LONDON – 294,000 (range 194,000 - 425,000) Remember: only best estimates

11. Issues about Scheme Design • Overseas experience • Mediterranean countries, USA • context often quite different • little systematic evaluation • Issues include: • eligibility (e.g. what kind of crime disqualifies – and then what?) • permanence/conditionality of residence granted – and what happens to those who lapse ? • what additional rights/entitlements (and obligations) follow • fraud – a major problem even in US schemes

12. Economic Impacts of Regularisation • Biggest positive effect: better use of labour skills • impacts on social welfare – migrants’ own security, social cohesion and GDP • Scale of impacts depends on • how regularisation changes migrants’ position • how it modifies their behaviour • knock-on effects in housing/labour market and community • Little hard evidence available

13. Labour Market and GDP • Labour market • Little evidence on labour-market position of irregulars in UK • Are they disadvantaged in labour market? • Does disadvantage stem from irregularity? • Cannot assume all/most are outside formal economy • Inferences from Labour Force Survey suggest • earnings 30% lower than other migrants • employment rate 50% to 75% of that of other migrants – but gap reduces to 6% after control for other sources of ethnic/social disadvantage • GDP • Eliminating these differentials could raise UK GDP by £3 bn (0.3%)

14. Social Housing and Social Cohesion • Social housing • Short-run: Regularised not entitled • Long-run: demand for more than 70,000 extra units • Unlikely to be supplied; effect then would be greater competition for access • Social cohesion • Impacts depend on extent of current integration with local community • Reduced victimisation; greater conformity with the law • Greater competition for scarce public resources, notably social housing

15. Public Sector Costs • Administrative costs of implementing the scheme • Additional demands on public services • Potential increases in benefit payments to eligible households • Estimates based on publicly available statistics plus interview programme concentrated in London

16. Administrative Costs • Direct costs based on current UK Border Agency ‘legacy’ programme: £300m • Costs might be higher if programme incentivises additional migration • However the scale of this depends on how well the new border controls are implemented

17. Public Service Costs: Issues • What services do irregular migrants currently use? • Do public-service providers distinguish between irregular and regular migrants? • Are irregular migrants afraid to use public services? • How might regularisation change their behaviour? • Would the regularisation scheme lead to ILR or the 'path to citizenship'?

18. Local Services • Education: all children 5 - 16 entitled and directly funded – even if irregular • For many local services only status check is address (e.g. nursery schools and social care) • For such services any change in cost would come from regularised migrants feeling more able to come forward

19. Local Services (2) • Little/no change in cost for many local public services (e.g. fire; environment; planning; culture and leisure) • Police and ambulance services could see costs fall if fewer irregular migrants become victims or need Accident and Emergency services

20. Health • Many irregular migrants do not seek health care/seek only in emergency: costs are higher • Little evidence of exclusion from primary care • Hospital care: irregular migrants less likely to seek treatment (e.g. pregnancy, cancer) • Communicable diseases: TB, HIV/AIDS -- regularisation might reduce costs

21. Housing and Welfare • Those 'subject to immigration control' have no access to social housing/housing benefit/local housing allowance • Status is checked • With ILR/citizenship, costs could rise--many households have low incomes and are currently inadequately housed • Most other benefits, including social security and tax credits, not available until the resident has ILR

22. Public Service Costs • Interview evidence/financial data suggest immediate increase in public service costs of around £410m in the UK , £240m in London • Once residents are eligible for social security, tax credits and housing benefit, costs could rise to about £1bn in the UK, over £700m in London • These are only estimates/inferences

23. Tax revenues • Migrants whose status shifts from irregular to regular might then contribute 15% of weekly earnings to the tax take – around £1,450 per adult p.a. • This could rise as employment opportunities improve to perhaps £1,720 per adult p.a. • This implies an increase in revenue of some £846mn p.a.

24. Summary (central estimates) • Nearly 620,000 irregular residents in the UK; of which some 440,000 are in London (70%) • Of these perhaps two thirds might be eligible for regularisation – some 410,000 in the UK and 295,000 in London • With supportive policies, over the long-run GDP might increase by £3bn (0.2%)

25. Summary (2) • Increased tax revenue would be around £850m p.a. • Immediate increase in public service costs something over £400m p.a. • As migrants become eligible for welfare benefits costs could rise to over £1bn • In addition there are one-off administrative costs of around £300mn • Figures for London are £600m tax revenue; £240m public service costs rising to £710m plus with welfare costs; and £210m one-off administrative costs

26. Summary (3) • Figures are estimates; actuals will depend on precise provisions of scheme and who takes up • Potential incentive effect of a successful scheme? Effect unlikely to be large • Making a regularisation scheme work would require careful design; integration with other initiatives; and complementary policies to address equal opportunities and the informal sector