Data published this week shows a surge in foreign nationals claiming benefits, while the bulk of Britons leaving the country are middle income grafters, not bonus-chasing bankers. These trends are economically and socially debilitating – we need to keep the British strivers, and send the benefits tourists home.
Between 2008 and 2012, foreign nationals claiming benefits rose 41% to 406,900, falling slightly this year. For all the furore over European immigration, two-thirds of foreign national welfare claimants come from Asia, 24% from Africa and only 16% from the European Union.
Let’s be clear: foreign nationals comprise just 7% of the total claimant count. As a result of this government’s controls, net migration is down a third since its 2010 high. Equally, while the government has brought total welfare claimants down, from its 2009 peak, at 5.7 million we are still grappling with a major welfare dependency problem – and it is predominantly home-grown. Nevertheless, the foreign claimant count costs us close to £2billion each year, so it should not be ignored.
The long-term answer should be to introduce a contributions-based system for welfare, in place of the current means-testing, as advocated by former Labour Minister Frank Field MP and operated in Germany. As well as cutting the welfare bill, it would be far less vulnerable to benefits tourism.
Strikingly, the rise in foreign welfare claimants coincides with the ongoing exodus of middle class Britons. Although emigration dipped last year, a Boeing 747 of Britons still left the country each day, while 79% of ex-pats say they don’t intend to return (up from 60% two years ago). According to a 2011 World Bank report, Britain has the highest share of its population per capita living abroad than any other developed country.
Traditionally, the ex-pat lifestyle was viewed as the preserve of diplomats, and those working for big multinationals or in financial services. However, a new survey of 5,000 ex-pats by relocation company, Global Visas, found 39% are skilled technical workers, with another 23% self-employed. Only 8% work in financial services. 87% earn £50,000 or less, with just 3% on six figure salaries.
The ‘squeezed middle’ are increasingly amongst those searching for a better life abroad. That is economically draining, because they are net contributors of tax, and provide skills the economy needs. Equally, the hollowing out of the middle class risks exacerbating the social divisions of an hour glass economy. What can we do about it?
Over half those surveyed by Global Visas cited job prospects or economic outlook as reasons for leaving. The coalition is rightly focused on driving the recovery and boosting employment. Stimulating the private sector to create jobs is the best way to strengthen our economic magnetism.
The cost of living and tax burden are also common gripes.
With 79% of those relocating saying they are better off abroad, families need to see more of the fruits of their labour. The coalition has assiduously taken 2 million of the lowest paid out of income tax. But, we also need to overhaul marginal rates of tax for middle-income families, so hard-work pays off for them too.
Likewise, government must spend far less, so we can cut the taxes inflating the cost of living – from the green subsidies on our energy bills to fuel duty. Tighter monetary policy will also be required sooner rather than later, to prevent inflation continually pushing up living costs, and eating away at savings.
The way to curb benefits tourism and retain home-grown strivers is to stick closer to the basic meritocratic principle: the more you put in, the more you get back.