More Tory embarrassment over Europe

Conservative LogoIn the space of less than 24 hours, the Conservatives have suffered two major embarrassments, both related to the European Union.

Firstly came the immigration statistics. The 2010 Conservative manifesto pledged to bring net immigration down to below 100,000 by the end of this Parliament. Immigration data for the year up to September 2014, published on 26th February, showed that no fewer than 624,000 people came to the UK but only 327,000 left it.  Net migration, in other words, amounted to almost three times the numbers the Conservatives promised and 98,000 more than the previous year.

This is not just an EU-related issue. Migration from outside the EU, over which the Government has some control, rose significantly, with 190,000 more people from the rest of the world arriving than leaving. However, the arrival of a further 108,000 EU citizens is something which David Cameron can do nothing about and he has been forced, in as many words, to admit it. His putative talks of trying to restrict freedom of movement as part of the proposed UK renegotiations were dismissed out of hand by other EU heads of state and the European Commission almost as soon as he raised the subject.

Meanwhile, the smoke and mirrors game played by George Osborne regarding the Government’s response to the £1.7 billion extra surcharge inflicted on the UK by the EU last year has been exposed by a Committee of MPs. There was never any chance that our spineless government would have told the EU to get stuffed, but Osborne told Parliament that he had succeeded in reducing it by half. However, the Treasury Select committee said: “The suggestion that the £1.7bn bill demanded by the European Union was halved is not supported by published information.” In other words, Mr Osborne has been telling porkie pies. That would certainly be a reasonable paraphrase of the comments made by Chris Leslie, the shadow Chief Secretary to the Treasury, who said, “He must now apologise to taxpayers for making this completely false claim.”

Some hope! However, at a time when opinion polls are pointing to a slender Tory lead and a decline in UKIP support, once again EU-related issues have flared up with a vengeance. The Conservatives’ failures over Europe have been laid bare once again and may well cost them dearly at the ballot box next May.

Migration, the deficit and the recovery

Anthony ScholefieldOne of the matters I raised at a meeting in the House of Commons on Tuesday 16th December was:

The effects of mass immigration are now so large
that they are impacting on the economy as a whole and, specifically,
on the deficit, the debt and the ‘recovery’

The ‘Recovery’ and the Deficit are linked

– The import of a large migrant workforce has inevitably added to total GDP so nearly one per cent of growth of total GDP p.a. can be put down to simply having more workers and consumers. Those enthusing over the ‘recovery’ should be aware of this.

It is standard economic theory that immigration transfers income from newly plentiful factors to newly scarce factors, that is, from labour to capital. What is not noticed, however, is that much capital in the UK is now foreign owned so the transfer also is in part from British workers to foreign capitalists. Foreign capitalists get dividends and capital gains tax free. Moreover, due to the tax regimes in Ireland and Juncker’s Luxembourg, a great deal of foreign corporations’ profits in the UK are, effectively, lost to the British tax system under ‘freedom of capital’.

– The way the tax system for workers is now set up means that low earners (and migrants are overwhelming so) pay little tax and actually get tax refunds. Additionally, of course, they place demand on the existing ‘public services’ such as schools, hospitals, etc.

– Further out there are plans and projects for more public capital spending on transport, housing, schools, etc., as well as, unseen, capital diversion to provide the private sector tools and assets that migrants require: factories, office blocks, shops, houses, etc.

It should be noted that there is a great difference between employing existing natives who already have their ‘social capital; in the form of housing, roads, dams, etc., and migrant workers who require equipping with appropriate capital items from the ground up. The capital both extra native and migrant workers need (and this need is common) is for ‘the tools of production’: factories, equipment, office buildings, etc.

– The electorate are aware, even if the political class is not, that migrants send much of their savings abroad. There is no proper counting of this; it all relies on Office of National Statistics (ONS) speculation and guesstimates as is admitted, but it is several billion pounds a year.

In any case annual savings by migrant workers or their employers are far too small to provide the capital they require to operate and live in the British economy (less than 1% p.a.). This phenomenon means that the capital to equip migrants has to be found mainly by natives either by taxation or by capital diversion.

– All of this means, therefore, there must be appropriation from the taxpayer to fund extra current expenditure and the extra capital requirements of the public sector. These expenditures count as GDP growth but, of course, do nothing for the incomes and wealth of native workers. Actually they reduce both.

– Therefore, the ‘recovery’ with high inward migration may mean a statistical increase in aggregate GDP but produces little tax revenue either from workers or capitalists and places extra demand on public sector investment and current spending on the public services. Migration also diverts capital investment from natives to equipping migrants by the process of capitalists re-ranking the profitability of investments as the economy changes shape. In this way capital intensification is reduced for native workers; therefore reducing their income. It is not just the political catchphrase, ‘pressure on the public services’, it is pressure on the private sector and on capital formation. Instead of capital intensification for natives, there is capital diversion to equip and supply migrants.

– By not taking strong steps to rein in migration, the government is making its task of reducing the deficit much harder to achieve and makes the ‘recovery’ a statistical mirage with little effect on native income. It also is deceiving itself, as much ‘capital investment’ adding to GDP statistics is simply a means of equipping more workers in the economy.

When considering the ‘recovery’, it is also worth noting that the GDP deflator has been rebased and effectively reduced since 2008. A reduction in the GDP deflator means that ‘real GDP’ is statistically increased. Thus a further part of the ‘recovery’ is also a statistical mirage.

Another point on the GDP deflator is that the fall in crude oil prices will, for about a year, mean a higher GDP deflator as price falls in imports add to the GDP deflator and, therefore, increase the statistical overall ‘growth’ or real GDP and the ‘recovery’.

The Debt

– In addition to the massive increase in government debt, the off balance sheet liabilities for state pensions and healthcare are mushrooming all the time and have not been recalculated since 2010. To enthuse over GDP growth, but not calculate off balance sheet liabilities, is living in a fool’s world.

Even the hoariest of all false factoids, that immigrants are needed to pay for British pensions, keeps returning. For example, in the New Statesman on 5th December 2014:

“There is a truth that no politician will utter: if Britain is to maintain a welfare state … its current economic model demands more immigration.”

Yet every study by the UN, OECD or the Home Office, has always come to the conclusion of Chris Shaw, the government actuary, writing in 2001:

The single reason why even large constant net migration flows would not prevent support rates from falling in the long term is that migrants grow old as well.”

The UN calculates that, to maintain the UK worker/dependant ratio, the UK would have to support 60 million immigrants by 2050 and, by then, migration would be running at 2.2 million per annum, and increasing.

This is a dead-end in thinking.

– The accumulated, to date, off balance sheet liabilities for state old age pensions (not including public sector retirement pensions) were last calculated in 2010. They had then increased from £1.3 trillion in 2005 to £3.5 trillion in 2010 according to the Department of Work and Pensions. With the guaranteed 2.5% increase in pensions per annum, even in times of low inflation, the off balance sheet liabilities since then are increasing alarmingly. The fall in interest rates may also have a massive effect as the ONS states, “For example, reducing the discount rate to 4 per cent leads to a 31% increase in total pension entitlements (by £1,174 billion)”.

In 2010 the ONS used, in alignment with Eurostat, a rate of 5 per cent (nominal) for its discount. The rate is based on high quality corporate bonds yield. Rough calculations are that discount rates for corporate bonds are now in the region of 3.5 per cent. This means that the off balance sheet liabilities for state pensions at 2010 have risen to the area of £5.3 trillion – and this does not make any provision for the rises since 2010 or those built into the Coalitions’ pension promises.

Quite evidently, pension promises are quite out of control. Adding more lower paid migrants is adding to the liabilities with little contribution to the costs.

The Future

One can therefore forecast that:

  •  Capital employed per head will be static or reduce
  • Native incomes will remain static at best.
  • The ‘recovery’ will only partially reduce the deficit.
  • Taxes on capital and labour will fall short of projections.
  • The deficit will persist.
  • Debt and off balance sheet liabilities will continue to mushroom.

Blair policy to undermine national homogeneity

The Derby Telegraph – Tuesday, June 11, 2013

Edward Spalton Roy Wheatley asks “What is the purpose of large-scale immigration when we have so many people out of work? Why rely on migrants if millions are out of work?” (Derby Telegraph, May 30).

 The answer is simple: it was a deliberate government policy to “undermine national homogeneity”. It used to be the duty of government to protect the native population from invasion and colonisation. Now they have stood that duty on its head.

Andrew Neather revealed that New Labour boosted Third World immigration with the deliberate intent of causing irreversible demographic change – the government was electing a new people which would be more likely to vote Labour.

Peter Sutherland, former EU Commissioner, former head of the World Trade Organisation, former chairman of BP and Goldman Sachs multi-millionaire, told the House of Lords last year that the EU should undermine the homogeneity of native populations.

He criticised the modest restriction imposed by the present government, saying it had no basis in international law.

As the contents of our jails show, the advent of multiculturalism has not been an unmixed blessing. What is the point of importing unskilled people to a country with high unemployment, if not simply to force down wages? That may well suit Goldman Sachs. Add a highly attractive system of welfare payments, much more generous than in the Eastern member states of the EU and we can expect many more coming to live off us as well.

They will have a right to do so, as long as we remain in the EU. This government favours staying in the EU and Turkish EU membership. This will bring a huge influx from that country.

The Blair government commissioned a study on British identity by the Runnymede Trust. Their report asserted that the terms “British” and “English” were so laden with racist overtones that they should be avoided where possible.

The native British people are wedged between the ideologues of the Left, who despise us, the EU, which wants to destroy our national identity, and the vested interest of corporate capital, which wants to use these forces to help the prosperity of Goldman Sachs and friends, making their investments more profitable by forcing down wages.

British public fed ‘myths’ about immigration

Vivienne Reding

BRITISH ministers are stoking fears about European Union migrants, according to a top Brussels official who wants to see a “United States of Europe”.  

Viviane Reding, the vice-president of the European Commission, has said it is “simply not true” that there is an “invasion of foreigners” stealing jobs and draining welfare and health resources in the UK. During a webchat on European citizenship, Reding said that most of the things that the British public are told about Europe are “myths” and “have nothing to do with reality”. She claimed that political leaders in the UK were adopting populist tactics simply to win votes. “I’m mostly frustrated about the political leaders,” she said. “What is leadership if you just try with political movements and political speeches to gain votes? You are destroying the future of your people, actually.”Reding, who is the longest serving Brussels commissioner, insisted that EU immigrants to Britain contribute far more to the country’s coffers than they take out, claiming Britain’s GDP has risen by three to four per cent because of the input of working Europeans coming to the country. “It’s just a myth to speak about an invasion, this invasion is just not taking place,” she added. 

In the Daily Telegraph, Bruno Waterfield says the idea that a United States of Europe could have any popular appeal illustrates “the distant remoteness of the world that is planet EU”. Reding’s vision, which is shared by many in the European institutions, would transform the EU into a “superstate” relegating national governments and parliaments to a minor political role equivalent to that played by local councils in Britain, he says. If voters are offered a choice of “more Europe”, they will vote against it in droves, he adds. Reding has emerged as Nigel Farage’s best friend, as “the more she speaks out, the more votes Ukip will be able to bank”. •

First appeared in the Telegraph

 

Incentives for Polish Migration

Summary

1. There is a significant financial benefit for Polish nationals to migrate to the United Kingdom in search of work. Even modest savings would allow Polish workers on the minimum wage in the UK to save what they would earn in an entire year at home. The much higher benefits for families in the UK compared to Poland will also act as a significant pull factor.  Poland is the major source of migrants to the UK but similar considerations apply to the other new Eastern European members of the EU, known as the A8.  Any significant increase in A8 migration would undermine the government’s efforts to reduce net migration to the ‘tens of thousands’ by the end of this Parliament.

Polish Population in the UK

2. Following Polish accession to the European Union in 2004, a large number of people migrated from Poland to the UK in search of work. The new EU nationals were free to come to the UK to work as a result of the previous government’s decision not to impose transitional controls; only the UK, Ireland and Sweden opened their labour markets immediately. The Annual Population Survey estimated that in 2010 there were 550,000 Polish born residents in the UK1 In 2004 there were just 95,000.2

3. The vast majority of Polish nationals who migrated to the UK did so in search of work. The profile of A8 migrants shows that they are disproportionately young compared to the UK population, they are relatively highly educated, and have higher rates of participation in the labour market.

4. Unemployment in Poland at the time of accession was close to 20%. Following accession the unemployment rate fell quite rapidly to about 10% in 2006. Those who migrated to the UK in 2004 must have been influenced by high unemployment but that will have been a less important factor after 2006.  Although unemployment has risen somewhat in Poland since the onset of the recession, it remains at about 10%, just below the EU average.3

Incentives for Polish Migration

5. This reduction in unemployment suggests that a major driver of more recent Polish migration has been the considerably higher standard of living in the UK and the potential to make savings in the UK which translate into significant sums of money in Poland. Anecdotal evidence suggests that single workers often live in multiple occupancy housing as a means of keeping costs down; most migrants from the A8 plan to stay in the UK for less than four years and do not see their move as permanent.4

Financial Incentives of Migration to the UK for Single Workers

6. In the UK, a single person earning the minimum wage will take home £254 per week after tax but including benefits. (See Annex A) This is an annual income of just over £13,200. If Polish workers were to make a modest saving of 20%, they would be saving about £50 per week. Yet this weekly saving is the equivalent of around 250 Polish Zloty at the current exchange rate – roughly what a worker would earn in a week in Poland on the minimum wage. (See Annex B)

Financial Incentives of Migration to the UK for a Family of Four

7. An individual in the UK who has a dependant spouse and two children, earning the minimum wage would receive a weekly income, including benefits, of £543, or annually just over £28,200. (See Annex A) Again, if a Polish family made a 20% weekly saving, this would equate to around £110 which is worth 540 in Polish Zloty. In Poland, a person in the same circumstances would have a weekly income of 375 Zloty (after tax and including benefits). (Annex C) Thus, if they could save 20% of their earnings in the UK, they would be saving almost one and a half times what they would have earned in Poland.

Higher standard of living in the UK

8. Aside from the savings that can be made in the UK which translate into significant sums of money in their native Poland, a family is able to enjoy a far better standard of living in the UK than at home. In order to compare wages across countries, Purchasing Power Parity (PPP) data has been used which allows for the different costs of living. (See Notes)

9. In Poland a family on the minimum wage would have a weekly income of 375 Zloty. Once the differing costs of living have been accounted for, this is the equivalent of around £145. In the UK, the same family on the minimum wage would have a weekly income of £543 which is almost four times what they would earn at home. Even a family which had been in the favourable position of being on the average wage in Poland would still be able to increase their standard of living significantly. At home they would have a weekly income of around 615 Zloty. Once the differing costs of living have been accounted for, this is the equivalent of around £235. In the UK however, their income on the minimum wage would be £543 or almost two and a half times as much as they would receive at home. (Annex D)

Annex A

Minimum Wage Household Incomes in the UK 

GBP Total household income at min. wage
SinglePerson CoupleTwo Child
Gross earnings Income Tax National Insurance

213

18

11

213

18

11

Net weekly income

184

184

Working Tax Credit Child Tax credit Child Benefit

17

0

0

53

99

34

Total direct benefits

17

186

Housing BenefitCouncil Tax Benefit

53

0

161

12

Total housing benefits

53

174

Total Income per week

254

543

Total Annual Income 13218

28241

Savings of 20%Zloty

51

251

109

540

Source: DWP Tax Benefit Model

DWP Tax Benefit Model is based on a selection of hypothetical families. The family lives in a local authority or privately rented property appropriate to its size and pays average amounts of rent and council tax for the 2010/2011 financial year.

Annex B

Household Income of a Single Person in Poland on the Minimum Wage in Polish Zloty and converted to £s 

Single Adult on Minimum Wage in Poland after Tax and including Benefits
Polish Zloty
Annual    Weekly
Gross IncomeMinus Income TaxMinus Social ContributionsHousehold Net Income

18061

801

3879

13381

 

 

257

Household Net Income in £s

£s

2699 52

Based on exchange rate

Annex C

Household Income of an individual with a dependant spouse and two children in Poland on the Minimum Wage in Polish Zloty and converted to £s

Individual with Dependant Spouse and Two Children on Minimum Wage after Tax and including Benefits
Polish Zloty
Annual Weekly
Gross IncomeMinus Income TaxMinus Social ContributionsPlus Family Benefit

Plus Housing Benefit

Household Net Income

18061

3879

1908

3390

19480

 

 

 

 

 

375

Household Net Income in £s
3930 76

Based on exchange rate

Annex D

Comparison of household incomes in Poland and the UK

Total Household Income of a two child sole worker family After Tax and Inc. Benefit

Working in Poland

Working in the UK
Net Polish Zloty

Converted to US$

using PPP

Converted to £s using PPP

£s

Average

Wage

Minimum

Wage

Average

Wage

Minimum

Wage

Average

Wage

Minimum

Wage

Minimum Wage
AnnualWeekly 32017616 19480375 17976346 10937211 12169234

7404

143

28241

543

Sources:

Based on Purchasing Power Parity for Actual Individual Consumption Data from OECD, 2010: Poland – 1.781125 UK – 0.676954

Exchange Rates (OANDA, as at 29/3/2012):£1 = 4.95731 Polish Zloty €1 = 4.15008 Polish Zloty

Eurostat data on minimum wage earnings

Average Wage Earnings, Polish Statistics Authority

Tax and Benefit Data extracted using OECD Tax-Benefit Calculator

Notes

Polish Household Incomes

The OECD Tax-Benefit Calculator has been used to calculate the approximate take home pay of an individual in two scenarios in Poland, a single worker with no dependants and a worker with a dependant spouse and two children. Calculation is based on a salary of 18,061 Zloty, due to restrictions with OECD Calculator. The minimum wage, derived from EUROSTAT data, is slightly lower at 16,756 Zloty.

Purchasing Power Parity

Purchasing Power Parity (PPP) data adjusts for the differing costs of living in two countries which simple exchange rate mechanisms cannot account for. PPP therefore compares household incomes in different countries after taking account of the different costs of living.

OECD Data

Data from the OECD Tax-Benefit Calculator is based on data from 2010 and is the latest available.

1 Office for National Statistics, Population by Country of Birth and Nationality, April 2010 to March 2011, Table 1.3, URL:  http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-235204

2 Office for National Statistics, Population by Country of Birth and Nationality, 2004, Table 1.3, URL:http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-219257

3 Eurostat News Release 176/2011, 30 November 2011, URL:http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-30112011-BP/EN/3-30112011-BP-EN.PDF

4 International Passenger Survey, Table 3.17 Intended Length of Stay by country of last or next residence.