Labour’s immigration crackdown could cost the UK £4.4bn, Home Office’s own assessment admits
The Home Office’s review of Sir Keir Starmer’s sweeping reforms has conceded that Labour’s crackdown on immigration could leave Britain £4.4bn worse off.
The Prime Minister announced plans to reduce immigration in May, including a move to make it harder for foreign students to stay in Britain, and said settling in the country was “not a right but a privilege to be earned”.
Policies headlined by the white paper included reducing the length of time international postgraduate students are allowed to stay in the UK after completing their studies. The English language requirement for those on a skilled worker visa, which allows a person to come to or stay in the UK with an approved employer, will also be increased next year.
In a blow to businesses, the immigration skills charge – the fee paid by UK employers who sponsor overseas workers – will also be increased by a third.
Now a Home Office review Looking at the impact of these policy changes, the UK is likely to be £1.2 billion worse off over the next five years; There is a possibility that the negative financial hit could be as much as £4.4 billion. In a best-case scenario, the UK would gain £0.8bn from these changes.
The assessment, published last week, says this is mainly due to the loss of university tuition fees due to the tightening of the graduate visa route, as well as changes in the amount of money brought in by visa fees. There will also be an estimated indirect decrease in income tax due to fewer people continuing to work.
Experts have warned that politicians are failing to consider the wider impact when promising to limit immigration.
Jamie Arrowsmith, director of University UK International, said: Independent It said the assessment showed “real-world results in terms of growth and prosperity for communities across the UK”.
He added: “This is particularly worrying for universities. Our analysis shows that any benefits from a rise in UK tuition fees will be offset by other policy changes – and this latest government assessment does not include the cumulative impact of future changes, including the proposed introduction of an international student tax and tighter rules on visa compliance.”
“While we recognize the government’s priority in managing migration, it is important that we do not further undermine the UK’s ability to compete for global talent.”
Sunder Katwala, director of the Britain Future think tank, said: “There is little serious discussion about the real costs and benefits of immigration. Instead politicians are competing to promise the lowest immigration figures without considering the wider impacts.”
“More people coming to the UK to work or study can put pressure on housing and services, but they also contribute through taxes, university fees and NHS surcharges. Our debate needs to be much more honest about both these pressures and these gains.”
Net migration to the UK is now falling after a record high in 2023. Figures show 431,000 people will be added to the UK population in 2024, compared to 860,000 the previous year.
Sir Keir, who announced sweeping changes to immigration rules earlier this year, claimed the number of people entering the country was causing “incalculable damage”, prompting anger from unions, charities and his own MPs.
Sir Keir said Britain was at risk of becoming an “island of strangers” and later said he deeply regretted the statement. MPs criticized the language at the time, likening it to the words of British politician Enoch Powell in his famous Rivers of Blood speech.
Former Labor education secretary Alan Johnson later warned that Sir Keir’s crackdown on immigration could risk universities closing. Ministers said the government would be making a “huge mistake” if they thought they could address immigration concerns by targeting international students.
According to a Home Office impact assessment, between 11,000 and 15,000 students a year will not come to the UK due to visa changes. This will reduce the length of time a graduate can stay in the UK after completing their studies from two years to 18 months. These changes will come into force in 2027. Graduate visa applications are also predicted to fall by 16,000 per year by 2030. A record 172,000 graduate visas were issued in 2024.
The article says a rapid increase in sponsored work visas (visas sponsored by education providers for international students) at lower-ranked educational institutions has contributed to net migration rising to record levels. Officials found this was due to a rapid increase in the number of international students applying for postgraduate degrees in the UK.
Internal Home Office data cited in the article suggests UK visas for universities ranked between 601 and 1,200 globally have increased by 49 per cent between 2021 and 2023. Visas for the top 100 universities fell by 7 percent during this period.
The number of graduates staying in the UK after their studies has also increased, increasing Labor pressure on students.
While officials acknowledge the significant impact the changes will have on universities, they are unsure how businesses will adapt hiring. They said encouraging the training of British workers could bring additional benefits to the economy in the long term.
Under the plans, the High Potential Individual (HPI) route and the Global Talent route for skilled foreign workers will be expanded. The HPI route, expanded this month, allows a select group of graduates from elite universities abroad to come to the UK for two years. The Global Talent route allows outstanding workers in academia, arts, culture and technology to stay in the UK for up to five years. Changes to this route are expected in 2026.
A Home Office spokesman said: “We make no apologies for reducing net migration as promised and creating a system that protects British workers and wages while attracting only the best international talent, which will benefit our economy in the long term.
“Therefore, we have prepared a comprehensive plan to reorganize our broken immigration system.”
