Immigration Health Surcharge: “Incentive needed” for highly skilled migration to Wales

Skilled migration is playing a vital role in offsetting Wales’ rapidly-ageing demographics, according to a new Wales Fiscal Analysis report.

The report, published by Cardiff University’s Wales Governance Centre, offers a comprehensive analysis of skilled migration patterns in Wales and calls on the Welsh Government to incentivise highly skilled workers and their families to stay in Wales, by considering rebates of the Immigration Health Surcharge (IHS).

The IHS is levied on immigrants to the UK and has been increased multiple times above inflation since it was introduced in 2015. It now stands at £1,035 for most applicants. Proceeds are transferred to the NHS and amounted to 0.4% of the Welsh NHS budget in 2022-23.

There are currently 37 occupation codes on the UK’s post-Brexit skills shortage list. The report finds that Wales’s vacancy rate in key sectors is the highest of any UK nation, with 25% of vacancies being unfilled.

The report notes that 215,429 overseas-born individuals call Wales home, contributing to the economy and shaping future demographics in an otherwise ageing nation. Newcomers to Wales mostly fall within the 20-44 age bracket, tend to be highly educated, and tend to have more children than the UK-born population.

Immigration is not devolved, and the Welsh Government’s ability to innovate in the area is limited. Yet devolved responsibilities include developing economic policies that interweave immigration, skills shortages, and an ageing population.

Since the pandemic, care workers and their dependents have been exempted from the IHS. But the report agues that because of the end of EU freedom of movement, the large number of GPs approaching retirement and a global shortage of healthcare workers, this decision would have been needed anyway.

The report suggests that the Welsh Government could consider addressing skills shortages and demographic ageing by repurposing funds received from the IHS by rebating applicants’ surcharge payments.

The lead author of the report, Dr. Larissa Peixoto Gomes, commented:

“Rebating the IHS could cost the equivalent of 0.4% of the Welsh NHS budget. In the context of the overall Welsh budget the amount of money to be rebated would be small, despite the known cuts to the overall budget. However, incentivising more skilled migration into Wales would help the future health of the Welsh tax base and the sustainability of public services.

“The report demonstrates that skilled migration is filling skills gaps in the Welsh economy, but vacancies on the UK Government’s skills shortage list remain very high and we don’t  know where those vacancies lie.

“Rebating the IHS has not been considered to date, but deserves further exploration as a policy option. Wales has the potential to be an attractive home to many workers and families, and this could show goodwill from Welsh Government in removing another financial obstacle from foreign-born taxpayers who want to contribute to Wales”.

Click hear to read the report.