Doubling the health surcharge rate is expected to reduce visa applications but make major savings on public services.
On 8th January 2019, the Immigration (Health Charge) (Amendment) Order 2018 comes in to force. The impact of the changes outlined in this blog will be widespread with positive and negative consequences. Politically, they reflect the government’s commitment to bringing down the overall net number of migrants, with significant savings on public services and the freeing up of low-skilled jobs for native workers.
The first Principle Order relates to payments made in foreign currencies, merely stating that, ‘…the charge payable in the foreign currency is determined by reference to the Home Office Exchange Rate Policy applying on the date that the payment is made’. This is a sensible point of clarification.
The second amendment is to Schedule 1 (amount of the charge) of the Principle Order, which doubles the cost of the immigration health charge for several leave to remain applications. These are as follows:
(a) In the entry “application for entry clearance or leave to remain as a student, in accordance with the immigration rules”, for “£150” substitute “£300”;
(b) In the entry “application for entry clearance or leave to remain as the dependant of a student, in accordance with the immigration rules”, for “£150” substitute “£300”;
(c) In the entry “application for entry clearance as a Tier 5 (Youth Mobility Scheme) Temporary Migrant in accordance with the immigration rules”, for “£150” substitute “£300”;
(d) In the entry “all other applications for entry clearance or leave to remain”, for “£200” substitute “£400”.
This piece of Secondary Legislation for non-European Economic Areas (non-EEA) migrants coming to the UK for more than six months make a fair contribution to the cost of NHS services available to them. The governments Impact Assessment says that, ‘The increased rate of the Surcharge will better reflect the costs to the NHS of treating those who pay for it, whilst being below cost recovery level, in keeping with the ‘fair contribution policy’.
Analysis of the Impact Assessment clearly shows that doubling the health surcharge will directly lead to several negative consequences. By doubling the surcharge, the government’s assessment is that there may be a steep decline in the number of applications, resulting in lost surcharge revenue of around £4.9 million over the five-year appraisal period – just shy of £1 million per year. The fall in visa applications would also result in a loss of Home Office revenue, estimated to be £4.4 million.
Additionally, there may be significant knock-on effects, including lost tuition fee revenue, estimated to be around £63.2 million over the five-year appraisal period. The Impact Assessment points our however, that this is a worst-case scenario. Overall, a reduction in visas granted and therefore the number of migrants working and studying in the UK would result in a loss to the exchequer from fiscal contributions via direct and indirect taxes of around £58.6 million over the five-year appraisal period.
It is important to point out that (even though it is typically unfashionable and politically sensitive) that migrants do weigh on expenditure on public services. Therefore, the Impact Assessment estimates that the reduction in volume of migrants entering the UK or extending their visa, will lead to a £51.2 million saving on public expenditure on public services over the five-year period. This is calculated by applying the unit cost on expenditure for public services for different types of migrant groups. The Impact Assessment also goes on to say that the reduction in the volume of migrants will free-up low-skilled jobs for native workers. This would also serve to reduce capital flight from migrants who send salaries home.
This policy comes in to force only weeks after the Home Secretary revealed the details for his new immigration strategy, which seeks to reduce the number of low-skilled migrants whilst promoting the post-Brexit ideology of sourcing skilled labour from anywhere in the world, rather than favouring people from EU countries. This level playing field arguably makes sense in a new ‘global Britain’, particularly for industry sectors that cannot find the volume of talent from within the EU. For example, nurses and doctors from South Asia will be able to apply to work in the UK without prejudice and on an equal footing with EU citizens. This is a piece of Secondary Legislation that whilst on many fronts makes sense and may deliver popular outcomes, has a distinctively political flavour.