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Keywords:

  • migration;
  • fiscal impact;
  • welfare state
  • J61;
  • H20

Abstract

This paper assesses the fiscal consequences of migration to the UK from the Central and Eastern European countries that joined the European Union in May 2004 (A8 countries). We show that A8 immigrants who arrived after EU enlargement in 2004 and who have at least one year of residence, and are therefore legally eligible to claim benefits, are 59 per cent less likely than natives to receive state benefits or tax credits and 57 per cent less likely to live in social housing. Furthermore, even if A8 immigrants had the same demographic characteristics as natives, they would still be 13 per cent less likely to receive benefits and 29 per cent less likely to live in social housing. We go on to compare the net fiscal contribution of A8 immigrants with that of individuals born in the UK, and find that in each fiscal year since enlargement in 2004, irrespective of the way that the net fiscal contribution is defined, A8 immigrants made a positive contribution to the public finances despite the fact that the UK has been running a budget deficit over the last few years. This is because they have a higher labour force participation rate, pay proportionately more in indirect taxes and make much less use of benefits and public services.