Playing the Numbers

Is Whitehall finally being honest about the economic impact of immigration?

Towering columns

For the Financial Times, Martin Wolf examines the Spring Budget, concluding that the Government still lacks a comprehensive plan to improve economic performance.

In the fourth quarter of last year, real gross domestic product per head was 28 per cent below what it would have been if the 1955-2008 trend had continued. In other words, if growth had continued as before, GDP per head would now be 39 per cent higher. This does, of course, explain why standards of living have stagnated, pressure on public spending has been so powerful and, however much the chancellor may wish to conceal it, the ratio of taxes to GDP, already higher than at any time since the 1940s, is forecast to jump by a further 0.9 per cent of GDP between 2022-23 and 2028-29.

In all, this is a disaster. The chancellor is right that performance elsewhere has been rather bad, too. But his tendency to fall back on favourable comparisons with the growth of GDP in other large European countries flatters to deceive. As he knows well, the UK’s relatively good performance in this respect largely reflects immigration, which has been exceptionally high, not least in 2022 and 2023. The more relevant comparison is on GDP per head. The UK’s performance is not at the very bottom, but only a few significant countries, notably Canada and France (apart from those hit hard by financial crises), fall below it.

Given this record, what one would want from a serious policy process would be a government-wide strategy for transforming economic performance. What we have instead is a long list of ideas, some good, such as expensing corporate investment, and some rather less so. But none of these have (rightly) persuaded the Office for Budget Responsibility to change its view of the economic future in any significant respect. Its forecast for productivity growth between 2024 and 2028 remains at a (relatively optimistic) 0.9 per cent a year. The outcome could be worse.

For The Telegraph, Miriam Cates supports the Chancellor’s move towards family-friendly taxation, starting with reforming the High Income Child Benefit Charge.

This tax cut, along with other changes announced in yesterday’s budget, means that a single-earner couple with two children on a salary of £62,000 will be better off by £3,500 a year. This is no small sum for families facing simultaneous pressures of mortgages, inflation and all the costs associated with raising children.

Even more promisingly, the Chancellor committed to moving towards a “household system” to end altogether the penalty for families where one parent earns significantly more than the other. Under such a system, child benefit would not be withdrawn until total household income reaches a certain amount, so that couples are not disadvantaged for the choice they make in how to split their earnings.

This opens the door to a move away from our internationally unusual system of individualised taxation to a model that much better reflects how household finances really work. Indeed British families can pay as much as 30% more tax than families in many comparable countries, because couples are unable to combine their tax free allowances and receive little or no support for raising children through the tax system.

For The Times, Iain Martin criticises the political class for not taking into account the economic costs of an ever growing population driven by mass migration.

Might there be a connection between some businesses underinvesting in machinery, automation, all the productivity-enhancing stuff, and the ever expanding pool of relatively cheap labour that has been made available by the politicians who preside over the immigration system?

In the latest OBR analysis, there is a potential clue to what might be happening. Not only are parts of the native workforce “not participating”, overall hours worked went up in 2023 (0.4 per cent) yet potential output was slightly lower (0.5 per cent). More hours, lower output, lower productivity and little growth. We’re shipping in more people and GDP per capita (growth per person) is flatlining. This blows a hole in Whitehall’s assumption that we need ever more immigration to drive growth — and surely counts as a major failure of national policymaking.

Someone who deserves credit for predicting this is Lord Green. When the former diplomat founded Migration Watch more than 20 years ago he was dismissed as a racist and mocked for saying that we might have to prepare for an increase in population of two million per decade. If, as a country, we wanted to do this, he said at the time, politicians should be honest with voters about the implications of adding to the population a number equivalent to a city the size of Birmingham every few years.

On his Substack, Neil O’Brien exposes how officials are removing data relating to nationality that can usefully inform the immigration debate.

HMRC used to publish data on the amount of tax paid by nationality (together with data on tax credit and child benefit claims). In fact I have used this data in previous posts. At the start of December I emailed HMRC asking when the data for 2021 would be published. I got an email back from HMRC today, saying it won’t be: in fact it has been discontinued, and won’t be published again…

…This follows on from a separate DWP decision to stop publishing data on welfare claims by nationality. Those statistics had been published each year for a long time - they were certainly being published a decade ago. I asked why these statistics are no longer going to be available…

…You might also want data on people’s current nationality (which I don’t think is published either). But it is also perfectly reasonable to want data broken down by original nationality. However, officials don’t want you to have that option. I have not succeeded in finding out which minister (if any) signed off this data deletion. So there are two big areas, tax and welfare, where the data we need to make sensible decisions is being discontinued, not improved.

For The Times, Matthew Syed says we have been debating the social and cultural impact of immigration for decades, with predictions from the 1970s now coming to pass.

I think both Powell and Miller were right, in their own ways. Powell was prophetic in spotting the dangers of parallel lives. The scholar Patrick Nash has written about Islamic communities “concentrated in small geographical areas spread across a few streets or nearby neighbourhoods where there is little need or opportunity to have much to do with wider society or practise the English language”. This has been a disaster for the UK and, indeed, for these groups whose children (particularly daughters) have not experienced the rich opportunities Britain has to offer.

But Miller was right — so very right — when he talked about the contribution made by immigrants who have integrated: Muslims, Hindus, blacks, browns. When I look at modern Britain, I see this writ large. It is strange that some talk about endemic racism when every report reveals that we are one of the most successful societies on earth and where people from ethnic minority backgrounds lead the government, the home office, the BBC and more.

Perhaps the key question, then, is: what facilitates integration? What leads to a nation pulling together and shaping the future? And here I think we need to dig a little deeper into history to glimpse an answer. Christianity and Islam are arguably the two religions that have most shaped the world in the past millennium and a half. These creeds differ in theology and iconography but a key difference is in marriage practices.

In The Critic, Michael Lind considers how humanities departments in Britain and America have been degraded into pseudo-sciences by the Left.

What science and engineering faculties and the pseudo-scientific departments of social science and liberal arts and “studies” programs share is a common opposition to tradition. In the case of the sciences and engineering, anti-traditionalism is justified; the latest breakthrough in physics or materials science may render irrelevant what has come before.

But that kind of intellectual progress does not exist in a literature department or a history department. In the arts and humanities, anti-traditional innovation is more like iconoclasm on the part of a new religion, which smashes the idols of the old before erecting new idols and imposing a new orthodoxy of its own. What passes for scientific discovery in pseudo-scientific ideologies such as Freudianism, Marxism, feminism, and anti-racism is mere “unmasking”. The ideologue unmasks the apparent reality and reveals the hidden truth.

At first glance, this may look like science. After all, doesn’t physics tell us that apparently solid objects are made up of atoms and sub-atomic particles separated by space? But unlike genuine scientific theories, ideologies cannot be tested or refuted by evidence. Indeed, to criticise an ideology is to demonstrate inadvertently that you suffer from false consciousness or unconscious bias — that you yourself need to be unmasked.

Wonky thinking

The Legatum Institute has published a set of proposals to promote economic growth that can be actioned quickly and without primary legislation ahead of the general election. ACTION THIS DAY: Ten things the Prime Minister can do for prosperity, right now by Fred de Fossard sets out the clear advantages of secondary powers and their potential to reduce migration, unwind EDI, cuts taxes and regulation, and build more houses.

When Parliament passes an Act of Parliament, the new law often confers on Ministers the power to take other actions, create rules or regulations, or make more detailed orders in the form of Statutory Instruments (SIs). These are secondary powers allowed by an Act of Parliament, which is the primary power.

Acts of Parliament often contain a broad framework of powers which allow ministers to deliver policies in the future in a more flexible and responsive manner. These allow the government to update rules and regulations in areas of changing technological development, like medical devices or financial services, for example, and ensure the state is able to be nimble and efficient. Around 3,500 SIs are made each year, about 1,000 of which actually need to be considered by Parliament.

Unlike Primary Legislation, which requires multiple stages of debate, scrutiny, amendment and votes in both Houses of Parliament, SIs are unamendable, and are only voted on in the House of Commons. Parliament almost never votes down SIs. In the 65 years to 2016, for example, Parliament has only rejected 17 SIs out of nearly 170,000.

These are not without criticism, of course. The respected House of Lords body, the Delegated Powers and Regulatory Reform Committee, has referred to the growth of the use of SIs in recent years as “government by diktat”, particularly regarding the way the Government legislated during the coronavirus pandemic, when extreme measures were taken to impose restrictions on the public, often with little more than a moment’s notice. The pandemic was an exceptional event, of course, but it highlighted the sheer breadth of the powers available to Ministers, in this instance apparently, under the Public Health Act 1986, to act in an emergency. This Act is no exception, and broad powers to deliver policy swiftly exist throughout the statute book.

The way in which SIs come into force vary according to the parent act under which they are allowed. In general, they are presented to the House and after being voted on – or not voted against, depending on procedure – can take effect in law after a period of 28 or 40 days. This offers an opportunity for any government which wishes to take action quickly, and deliver new policies in a short time.

Nick Timothy carried out an in-depth look for The Telegraph at how the campaign to discredit criticism of Islam or Muslims has changed the nature of British politics and fragmented communities. The Israel-Gaza protests and election of George Galloway indicate that Britain has reached a dangerous inflection point.

Many organisations use our liberal system to achieve anti-liberal ends. Yet drawing these linkages and exposing the truth is, according to the definition of Islamophobia and its published examples, Islamophobic. Which very neatly demonstrates how the whole exercise is a modern-day witch trial. We can choose to accept a definition of Islamophobia, which amounts in effect to a one-religion blasphemy law and special protection for Islamists, or we can reject it – and be found automatically guilty of an offence for which some extremists would threaten to kill us.

This is a significant danger. Three-quarters of live MI5 cases follow subjects motivated by Islamist ideology. We know terrorists are sometimes sparked to action by perceived insults to their faith and kindred. David Amess, the late Conservative MP, was murdered by an Islamist. Then as now MPs did what they could to avoid reality, and chose instead to blame a culture of incivility on social media.

Our institutions and public spaces form the battleground. The shows of strength through protest on the streets – and unchallenged hatred and criminality by many protesters – are tactics used in the struggle. So too are the mass Islamic prayers held on the streets, and the fights – in schools and colleges and elsewhere – for space to be given over for ritualistic prayer. As Ed Husain explains in his book The Islamist, the “total Islamization of the public space at college (open prayers, Islamist posters, women in hijab)” is an expression of power and intimidation, of staff, other pupils and other Muslims. In schools, colleges and universities, across the public sector and now even in Parliament, the story is one of co-ordinated intimidation met with surrender. 

We must fight back. Ministers should stop being coy and make the intellectual case against the Islamophobia definition. They should be more explicit about their policy of non-engagement with the MCB, and name extremist organisations so others know who to avoid. They should update the Muslim Brotherhood Review of 2015 with a new report. They should invite leaders and moderate religious figures from the Middle East and at home to play their part in a kind of counter-reformation against the Salafist and Deobandi spirit that has radicalised much of Muslim life worldwide.

And they should lead with word and deed. Thoughtful, intelligent speeches matter to leadership. Ministers should begin a conversation with British Muslims about what it means to live as a citizen in modern Britain while remaining true to their faith. But ministers must do so honestly, and stop compromising with the Islamists and grievance peddlers who seek to dominate this conversation.

Book of the week

This week we recommend The West and the Rest: Globalization and the Terrorist Threat by Sir Roger Scruton. Published in 2002, shortly after the 9/11 terror attacks, Professor Scruton examines the Western tradition and its success in establishing the primacy of secular law through the nation state, which is being undermined by hyper-individualism and globalisation, and is in tension with radical Islamism.

What exactly is Western civilization, and what holds it together? Politicians, asked to define what we are fighting for in the "war against terrorism," will always say freedom. But, taken by itself, freedom means the emancipation from constraints, including those constraints which might be needed if a civilization is to endure. If all that Western civilization offers is freedom, then it is a civilization bent on its own destruction. Moreover freedom flaunted in the face of religious prohibitions is an act of aggression, inviting retribution from those whose piety it offends.

Islamic civilization involves a common religious belief, based on a sacred text whose law may be misapplied but never altered. It defines itself in terms not of freedom but of submission. Islam, salm, and salaam—"submission," "peace," and "safety"—all derive from the verb saltma, whose primary meaning is "to be secure," "unharmed," or "blameless," but which has a derived form meaning "to surrender."2 The muslim is the one who has surrendered, submitted, and so obtained security. In that complex etymological knot is tied a vision of society and its rewards far different from anything that has prevailed in modern Europe and America.

Western civilization also grew from a common religious belief and a sacred text, and, like Islam, originated in a religious movement among Semitic people—albeit people living under an imperial yoke, for whom submission was already a day-to-day reality. Western civilization has left behind its religious belief and its sacred text, to place its trust not in religious certainties but in open discussion, trial and error, and the ubiquitousness of doubt. But the odd thing is that, while Islamic civilization is riven by conflict, Western civilization seems to have a built-in tendency to equilibrium. Freedoms that Western citizens take for granted are all but unheard of in Islamic countries, and while no Western citizens are fleeing from the West, 70 percent of the world's refugees are Muslims fleeing from places where their religion is the official doctrine. Moreover, those refugees are all fleeing to the West, recognizing no other place as able to grant the opportunities, freedoms, and personal safety that they despair of finding at home.

Equally odd, however, is the fact that, having arrived in the West, many of these Muslim refugees begin to conceive a hatred of the society by which they find themselves surrounded, and aspire to take revenge against it for some fault so heinous that they can conceive of nothing less than final destruction as the fitting punishment. Odder still is the fact that those Muslims who settle down, integrate, and acquire some kind of loyalty to Western insti-tutions and customs often produce children who, despite being brought up in the West, identify themselves in opposition to it—an opposition so fierce as again to verge on the desire for annihilation.

A superficial response to these disturbing facts is to put the blame on Islam—to argue, with an undeniable degree of plausibility, that Islam is a medieval fossil, unadapted to modern conditions, and unable to adjust to the enormous social, economic, and demographic changes that have shaken our planet. But then "modern conditions" are precisely those conditions which result from the global outreach of Western technology, Western institutions, and Western conceptions of political freedom. Why blame Islam for rejecting them, when they, in their turn, involve a rejection of the idea on which Islam is founded—the idea of God's immutable will, revealed once and for all to his Prophet, in the form of an unbreachable and unchangeable code of law?

Quick links

Former Prime Minister Theresa May is standing down from Parliament at the next General Election, having represented Maidenhead since 1997.

Lost pay growth is likely to last a total of almost 20 years, according to the Resolution Foundation, with the average wage not regaining its 2008 level until 2026.

OBR figures show that additional migration of 200,000 a year increases GDP by 1% but reduces GDP per capita by 0.4%.

A member of the OBR Committee gave evidence to the Treasury Committee suggesting that net zero will not contribute to growth and that migration may not prove fiscally net positive.

The Chancellor has not been boxed-in by the OBR, but he has been constrained by bleak underlying fiscal and economic conditions.

Tax and benefit changes since 2019 have helped people aged under 45 more than those aged over 65 on incomes.

Home Office data shows that 116,577 people have crossed the Channel in small boats since 2018, which is more than the population of Dover.

The Energy Secretary will not move forward with the “boiler tax” to avoid £120 price increases from energy companies.

Returns for UK equities over the past ten years reached 14-24%, which is significantly lower than the 210-228% returns for US equities.

Two-fifths of the £1.3 billion of private investment in new builds came from American funds on Wall Street such as Blackstone.

The great wealth transfer could give the average person born in the 1980s twice as much as their 1960s counterparts…

…and Lord Willetts has called on Ministers to introduce a £10,000 “citizens inheritance” to tackle intergenerational inequality.

The Shale revolution has transformed American energy security, allowing the US to go from being a net importer to net exporter unlike Europe and China.

The Church of England has welcomed a report calling on it to apologise for spreading the Christian faith in Africa.

Diversity Lead at the Department for Work and Pensions, Mohammed Shafiq, was filmed campaigning for George Galloway.

President Biden’s State of the Union address fires the starting gun for the US presidential election.