Optimising for our Openness: The Economic Effects of Visa Auctions in the UK

In this innovative paper, Duncan McClements (King’s College London Mathematics School) and ASI Fellow Dr Bryan Cheang (Assistant Director and Research Fellow at the Centre for the Study of Governance & Society at King’s College London) explore the application of a visa auction model in the UK.

Executive Summary

•  The current UK visa system is complicated and inefficient, contributing to anaemic growth, stagnant living standards, and a rising tax burden;

• Employers should be allowed to buy visas for prospective workers from overseas by auction, selecting the immigrants who will bring the greatest benefit to Britain;

• Work visa auctions are the most efficient way of admitting any given level of immigration, but some visas could be reserved for professions with high social value, small businesses or particular regions if deemed necessary, and separate routes would be left open for students and family.

• This could hold the overall level of immigration constant while raising £59 billion in direct government revenue (equivalent to a 11p in the pound reduction in the basic rate of income tax) and an additional £27.4 billion in additional tax revenue that would compound for each year the scheme was implemented;

• We also suggest the Tier 1 visa be revived in auction form. We find the revenue maximising quantity of visas to auction to be 338, leading to forecast annual revenue of £73.5 million;

• Finally, we put forth a novel proposal to trial issuing 1000 visas every year by exam to boost innovation and productivity;

• All of these policy proposals are modular – and could be implemented separately or in conjunction. 

Prices not points: A post-Brexit immigration solution

• As the UK prepares to leave the European Union in 2019, the government must create a new policy for immigrants from EU-member nations. It should also rethink its policies regarding non-EU immigrants as well. 
   
• In recent years, UK immigration policy toward non-EU migrants has prioritised highly skilled workers. Free-movement migrants from within the EU have generally held low- or semi-skilled jobs and had strong labour force attachment. 
   
• UK immigrants have higher education levels than natives, on average, and while the largest economic gains typically come from highly skilled immigrants, less-skilled immigrant workers make economic contributions as well. 
   
• The empirical evidence indicates that immigration has had a negligible overall effect on natives’ employment, unemployment, and wages in the UK. However, a few studies conclude that the labour market prospects of less-skilled native-born workers have been harmed by immigration.
   
• Reducing immigrant inflows, particularly of highly skilled immigrants, would create considerable economic costs in the short and long run. Admitting more highly skilled immigrants, from inside or outside the EU, is particularly vital to long-run economic growth. 
   
• Auctioning employer permits to hire foreign workers would maximise the economic benefits of immigration and increase government revenue. 

Read the full paper

The Border after Brexit: How technology can secure Britain’s borders

• Britain’s Border Force is not equipped to quickly, accurately and securely monitor passengers in and out of Britain. After Brexit it will become even more important for Britain’s borders to be secure.

• The Warning Index and Semaphore systems the Border Force uses are years out of date, and at times 7.5% of high risk flights have not been properly screened, which if representative of the whole year would translate into over four thousand high-risk flights not being met. This has allowed known terrorists to leave the country without being detained properly.

• The Border Force operates a slow service at peak times: during the summer of 2016, an average of three out of four Heathrow Terminals every month failed their target wait times for non-EEA passengers through passport control.

• After sovereignty, polls have found control of the UK’s borders to be the second most important driver of voting for Brexit, and many voters desired sovereignty itself in order to control who comes in and out of the country.

• Public trust in the UK immigration system, and its key enforcer, the UK Border Force, is crucial in order for the UK to have a sensible immigration policy.

• The Border Force is only collecting data from the Advanced Passenger Information System for 86% of passengers, making a mockery of “exporting the border” claims.

• Some past collaborations with the private sector, like the Raytheon project, have turned out badly, but these involved heavy governmental micromanagement; decentralised private companies like AirBnb prove that the private sector can create high trust, heavily-vetted systems.

• The government must thoroughly modernise the force and deliver a new, realtime database and biometric scanning system, collaborating with the private sector to deliver a technological solution and paying for results, not trying to build its own system from the ground up.

Read the full report here.