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Immigration in Wales and the Immigration Health Surcharge

6 December 2023

Wales Fiscal Analysis has conducted a review of data regarding the economic impact of immigration in Wales and how the Immigration Health Surcharge might create negative incentive’s for the immigration of skilled workers and overseas students.

The UK visa system is categorised into general applications and the points-based system. To work or study in the UK, an applicant requires an institutional sponsor and proof of income. After a sharp decrease during the Covid-19 pandemic, there was a 43% increase in work sponsorship institutions from 2021 to 2022. The total number of work visas and extensions reached 370,959 in 2022. Among Wales residents, currently 215,429 individuals are born outside the UK.

Immigrants in Wales
The foreign-born population in Wales is diverse and contributes significantly to the region’s demographic dynamics. With its ageing population, immigrants in Wales tend to fall within the 20-44 age bracket and have more children than the native population.

Economic migrants are also more likely to have more years of formal education given the requirements imposed by the Home Office on the points-based system. In addition, they are only allowed to enter the country with a minimum salary, which has ensured that their income has met the same income levels of British workers in Wales.

Evidence on the effects of economic migrants in Wales and the UK as a whole has demonstrated a positive consequence on the skills shortage, an increase in the talent pool and shared skills coming from abroad, an increase in the overall population growth, and more diffuse cultural and economic benefits. On the other hand, businesses that requires low-wage labour and small businesses are not able to benefit from immigration policies, and those who have not faced a skilled shortage have been neutral on the issue. Integration of immigrants is also a problematic issue often with increased racist violence.

The Immigration Health Surcharge
The IHS is charged along with the visa and is proportional to the time spent in the country by the individual. It began in 2015 as a £200 annual charge to access NHS services levied on immigrants from outside the European Union. The fee was doubled to £400 for general applicants in December 2018, before being increased again in October 2020 to £470 per year for students and children and £624 per year for adults.

In July 2023, it was announced by Prime Minister Rishi Sunak that visa charges and the IHS would be increased, with the latter being raised to £1,035 for most applicants and to £776 for child/student applicants, to fund public sector pay rises. The total received from the IHS by the United Kingdom and distributed to Welsh Government amounted to 0.4% of the NHS budget for Wales in 2022-2023.

The presence of economic migrants and overseas students has undeniably shaped Wales’ economy and society. Their contributions extend beyond filling labour market gaps; they also enrich cultural diversity and stimulate economic development. As such, it’s crucial for immigration policies to be continually reviewed and adjusted to ensure they align with regional needs and priorities.

However, these policies are not devolved, and Welsh Government needs to make lateral moves to seek solutions that combine immigration, skills shortages, and an ageing population. Taking into account that economic migrants are in fact paying double to access the NHS, paying income tax, National Insurance, and the IHS and that there have been measures removing this charge to facilitate the entry of overseas workers in the country, a possibility that is available to Welsh Government is to refund the sum from the IHS to economic migrants who settle there.

It is a delicate matter given the controversial topic that immigration has become in the UK, particularly in the last few days, but immigrants play a vital role in Wales’s economy. Their contributions are significant and multifaceted, impacting various sectors and aspects of Welsh life and important for the future of Wales.

Read the full briefing here.