HMRC released a new publication today about taxes paid and benefits received by EEA nationals. This covers the tax year 2016/17 and is the fourth annual instalment so we can look at continuing trends
Observations by me on the publication for 2013/14 can be found here, here and here, for 2014/15 here and 2015/16 here. Like last time, I’m dividing first three ways into Eastern Europe (the 2004 accession countries and Romania and Bulgaria), Southern Europe (Greece, Italy, Portugal and Spain) and Northern Europe (everyone else in the EU14).
All previous cautions apply, in particular that we are only looking at income tax and National Insurance and not any other taxes like VAT or excise duties, but also not looking at any other benefits like Housing Benefit or JSA that are paid by DWP, nor looking at the cost of providing any public services. So any comparison between the taxes and the benefits in the publication cannot be described as net fiscal contributions (and when HMRC previously did so, the UK Statistics Authority told them not to).
So with those caveats, here’s the basic picture of totals received and paid out. Over the four years for which we have data, the amount of income tax and NICs paid has noticeably increased for all three country groupings, the overall increase being around 45%. The absolute amount of tax credits and child benefit hasn’t gone up as much though, increasing by only around 15%.
However, there are very different numbers of people involved. The Northern and Southern groupings are about the same size, but the Eastern grouping is as big as the two put together. The difference between taxpayers and NICS-payers is a broad indication of numbers who though working did not earn enough to pay any income tax. This may be because their work was very low-paid, or they only worked part-time or they only worked in the UK for part of the year.
Over the period we can look at, the ratio of income taxpayers to people paying only NICs has declined slightly for all three groups.
Of course, the different size of the groupings means that average amounts paid per person are very different. Here it should also be clear why a three-way split is informative. The average amounts of income tax paid per taxpayer have decreased a little for Northern and Southern taxpayers compared with the previous year, and slightly increased for Eastern taxpayers. Average NICs payments have crept up. But the very stark differences between the groups and haven’t really changed at all over the last year or the whole period. Eastern European taxpayers continue to bump along the bottom, barely averaging £2,000 in income tax each. Southern taxpayers average over three times that amount, and Northern taxpayers seven times. The differences in average payments of NICs are not as large as NICs rates tail off to only 2% for higher-rate taxpayers, but Southerners and Northerners still pay on average nearly twice and three times as much respectively as the amount that Easterners do. For comparison, working-age income taxpayers overall paid something over £6,000 a year income tax in 2016/17, so Southern Europeans are paid around the average, Northern Europeans more than twice that, and Eastern Europeans well under half the average.
And here’s the picture for income tax country-by-country. By and large it is not a picture of much growth and indeed some countries have seen noticeable drops. The consistent year-on-year fallers are Greece, Italy, Bulgaria and Romania. These nationalities have seen growing inflows over the period, and the clear implication is that they have been entering nearer the bottom of the labour market. For context, income tax paid on average across the whole taxpayer population in the UK rose by 10% over this period from £5,162 to £5,675.
Comparing ins and outs, remember as above that any comparison is not as such a measure of net fiscal contribution. Here are tax credits paid as a percentage of income tax received for people from individual countries. At the two extremes, Slovakians get back nearly as much in tax credits as they pay in income tax, while French and Greeks only get back a teeny 3% or so. Notably, there isn’t a complete disjunction between ‘Old’ Member States and ‘New’ Member States as Netherlands and Portugal are on the higher-receiving side of this tale of two halves.
The starkness of these differences derive from differences in earnings, the likelihood of being in a family with children, and how recently people arrived in the UK. Broadly, it can be inferred from the data that while recent arrivals (those arriving in the four years previous to April 2017) earn less, they are by and large very much less likely to have children. Thus the overall balance above is influenced compositionally by the proportion of recent arrivals in each country’s population in the UK.
Looking at country by country differences in the amount of income tax paid by recent arrivals and previous arrivals, almost without exception recent arrivals pay much less tax than earlier arrivals. It isn’t possible to distinguish the extent to which this is because of pay going up with longer residence (e.g. career progression) ornfrom differences in cohort characteristics.
Anyway, today’s release shows a very consistent picture over the four years for which data have now been published i.e. of consistent differences in the fiscal outcomes on these measures from two rather different populations in the UK that aren’t dramatically shifting on this timescale. The implication is that the fiscal outcomes would probably not change much without significant changes in the source of inflows to the UK (or rather less likely, in their job destinations in the UK!)
In this context, HMRC have also published matching data for non-EEA nationals this year. This follows a lengthy campaign by me to get such stuff under the Freedom of Information Act which HMRC resisted tooth and nail until ordered to do so in very strong terms by the Information Commissioner. However, these data are rather harder to interpret because nationality at the time of issue of National Insurance number is not anywhere near as closely correlated with migrant status as for people from the EEA. However, it’s probably reasonable to compare the data for ‘recent arrivals’ as people in the taxpayer population who arrived in the four years up to April 2017 aren’t very likely to have arrived as children and then acquired UK nationality before they were issued with a NINo. I’ll be looking into this more, but for now it’s interesting to see how the distribution of taxpayer income differs for different groups. The median taxpayer income for recently-arrived non-EEA nationals is a good third higher than for equivalent EEA nationals, and the mean income nearly two-thirds higher. A key reason for this will be that whereas anyone from the EEA can come and try their luck in the UK labour market, entry for work from the rest of the world is rather more tightly controlled and subject to meeting salary and skills thresholds.
So that’s a brief look at some of the key points in today’s release. It really is quite a rich source of data and one would hope that Ministers and officials thinking about post-Brexit immigration policy would have a keen eye to this sort of thing. Unfortunately, they’ve never shown any sign of doing so, and certainly there’s not much at all about the evidence base in the present White Paper. The White Paper was of course informed by the Migration Advisory’s Committee’s report on the impacts of immigration, but (to my mind quite bizarrely) the MAC took no account at all of the published HMRC data on which this series of blogs has been based, nor of similar DWP data. Just another of those things that make you go Hmmm….