Figures just released by HMRC under the Freedom of Information Act show that many more EU nationals have a tax record in the UK than official estimates of their population would suggest. Jonathan Portes says the reason is unclear, but that the Office for National Statistics needs to investigate the discrepancy urgently. The number of EU migrants is clearly higher than previously thought.
For much of the last year I (along with Michael O’Connor) have been pressing HMRC and DWP to release more data on how many National Insurance numbers issued to EU nationals are actually in use. Last week, we edged closer to an answer. HMRC, after much procrastination, have responded to our FOI requests with a fascinating release on the general topic of the income tax and NI contributions paid by EU nationals, as well as the amounts of tax credits and child benefits paid. Michael has given an initial take here and there is more to come.
However, in this post, I want to focus on one number alone. This is HMRC’s estimate, contained in Table D1, that in 2013-14 there were 2,540,000 individuals who “had a tax record” in 2013-14 and were EEA nationals at the time they were first issued an NI number. Having a “tax record” in this context does not necessarily relate to the actual payment of income tax or NI, but, as HMRC puts it, “relates to all individuals who have a live “employment” record in the PAYE system for the tax year or have to submit a Self-Assessment return for the tax year.” Broadly, this means that they were in employment at some point during the year.
How does this compare to other data? Well, Table 8 of the official Labour Market Statistics for May 2014 shows that, as measured by the Labour Force Survey (LFS), over the course of 2013-14 the number of EU nationals in employment fluctuated between 1.45 and 1.62 million; the number of people who were born in another EU member state was slightly higher (reflecting that some subsequently acquired UK citizenship) was between 1.63 and 1.75 million. The 2013 Annual Population Survey – also based on the LFS – estimated that the total number of EU-born residents of the UK aged 16-64, including those who were not in employment, was 2.15 million. Although employment rates are high for this group, typically 75-80%, that again suggests a number in employment of about 1.6-1.7 million. In other words, we are talking about a very large discrepancy.
Now, as I’ve explained before, there are some good reasons why the number of EU nationals who were in employment at any one time, as measured by the LFS, would be expected to be lower than the number who came into contact with the tax authorities at any time in the course of a tax year (and the HMRC data also include nationals of other EEA countries, although this number is relatively small). There will be some normal labour market “churn” as people move in and out of employment, so the LFS snapshot will miss some who do have a job at some point. But employment rates for EU nationals are very high anyway, so this limits the potential error here. More importantly, the LFS doesn’t count people who aren’t resident (usually meaning that they’ve been here 6 months or intend to stay that long), so will miss short-term migrants. Recent ONS analysis explains that short-term migration, especially from the EU for work, has grown substantially in recent years. But, as Figure 7 here shows, that is still nowhere near enough to explain the difference.
So what does this mean? Maybe I’m missing something, But if not, it means that we have substantially more evidence to support what I wrote earlier:
It seems implausible the LFS numbers are correct. I think there clearly are more recent EU migrants present and active in the UK labour market than suggested by the official statistics.
And the same goes for the population statistics. The number of migrants born elsewhere in the EU resident in the UK may be significantly higher than we think. By how much, we don’t know. Nor do we know precisely why. But it is important. Labour force and population statistics matter – a lot (rather more, indeed, than headline immigration statistics, despite the latter’s political significance). The ONS, and the government as a whole, need to look into this as a matter of urgency.
This post represents the views of the author and not those of the Brexit blog. It was first published on the NIESR blog.