Migration Advisory Committee publishes report on the family migration route

The Migration Advisory Committee (MAC), which is independent of the UK Border Agency, has today published a report on the minimum income requirement for sponsorship under the family migration route.

In July 2011 the government asked the MAC to consider the following question: 'What should the minimum income threshold be for sponsoring spouses/partners and dependants in order to ensure that the sponsor can support his/her spouse or civil or other partner and any dependants independently without them becoming a burden on the State.'

According to BBC News, MAC's recommendation that the figure should be between £18,600 and £25,700 before tax could cut family visas by up to two-thirds.

The report is available  here and see below for an excerpt from the report, with MAC's conclusions and recommendations:

Analysis of the Points Based System Review of the minimum income requirement for sponsorship under the family migration route

Migration Advisory Committee
November 2011

[...]

5.1 Conclusions and recommendations

5.1 The Government asked us the following question:

"What should the minimum income threshold be for sponsoring spouses/partners and dependants in order to ensure that the sponsor can support his/her spouse or civil or other partner and any dependants independently without them becoming a burden on the State."

Partner or spouse

5.2 In this report we have presented a number of options for calculating the income threshold. As shown in Chapter 3, the majority of family route migration involves a lone spouse/partner joining a sponsor and so in Chapter 4 we first consider the options for calculating the income threshold that should apply in this case:

• The 'pay approach' (options 1-3 in Chapter 4) involved benchmarking the income threshold to levels of pay in the UK. It is simple to calculate and to understand, but does not directly relate to the question we were asked. Furthermore, there is no clear basis in economic terms for selecting one particular threshold over another.

• The 'benefits approach' (options 4-8 in Chapter 4) involved setting the income threshold with reference to the benefits system. It is more complex but, insofar as the interpretation of the 'burden on the state' issue is restricted only to the benefits system, this approach directly tackles the question we were asked. However, it draws an arguably arbitrary distinction between the costs to the state of benefit payments and those associated with providing other services.

• The 'net fiscal approach' (options 9-10 in Chapter 4) is based on an estimation of potential net fiscal impacts. This uses a broader interpretation of 'burden on the state' and so has robust economic justification. However, to carry out such an approach comprehensively is informationally demanding and requires a number of strong assumptions. Therefore, we instead considered a relatively crude proxy approach, based on mean household earnings.

5.3 On balance, we believe that the benefits approach and net fiscal approach are superior to the pay approach. On that basis, we note that:

• the lowest possible maintenance threshold under the benefits and net fiscal approaches is £13,400 per year (option 6, assuming a one-adult household); and

• the highest possible maintenance threshold under those approaches is £40,000 per year (option 9, assuming a two-adult household).

5.4 This suggests a potential range for the maintenance threshold of between £13,400 and £40,000 per year. This relates to gross income received in the UK by the sponsor only, without deducting housing costs. This is a wide range, so we consider our favoured options within it.

5.5 Our preferred threshold using the benefits approach is £18,600 per year (option 7, two-adult household). This figure was calculated by making the following assumptions, which we believe to be reasonable:

• Because the question above asks us what the income threshold should be to ensure that the sponsor's family does not become a 'burden on the state', the threshold is set at the point at which the family is not entitled to receive any income-related benefits (including Tax Credits).

• The amount of rent that the sponsor's family pays is equal to the unweighted average of the Local Housing Allowance amounts for a one-bedroom property for Great Britain, because this is likely to best represent the 'typical' family.

• The household consists of two adults, to compensate for the relatively narrow interpretation of 'burden on the state' under this approach, and to capture the impact in terms of benefit entitlement of the addition of an adult to a household.

5.6 Our preferred threshold using the net fiscal approach is £25,700 per year (option 9, one-adult household). This figure was calculated by making the following assumptions:

• The threshold is set equal to mean household income, to capture the approximate point at which a household might reasonably be expected to make a neutral net fiscal contribution.

• The household consists of one adult, because we have assumed that the income of the spouse/partner is not taken into account when calculating the sponsor's family's income.

5.7 Options 7 and 9, as discussed above, can be viewed as providing the upper and lower bounds of our favoured range. Therefore, we recommend that the income threshold to sponsor a spouse or partner be set between £18,600 and £25,700 gross per year. Again, this range relates to gross income received in the UK by the sponsor only, without deducting housing costs. This recommendation is based on economic considerations alone and is not made with reference to wider legal, social or moral issues.

5.8 It is important to emphasise that the discussion above relies on the assumption that the income of the sponsor's spouse/partner is not taken into account when calculating the sponsor's family's income that is to be assessed against the threshold. We would be happy to explore with the UK Border Agency and Home Office how the approaches and information presented in this report could be used to calculate the income threshold if the income of the sponsor's spouse/partner were to be included in the calculation.

Dependants

5.9 We also considered two methods for calculating the income threshold to account for the number of dependent children. The first method involved accounting for any income-related benefits that a family would derive from their dependent children. This method relates to the question that we were asked in that it takes into account the effect that dependent children have on a family's entitlement to income-related benefits. It cannot, however, be applied to all of the options we have discussed in this report, but only those based on the benefits system. Resulting thresholds are provided in Table 4.4 of Chapter 4.

5.10 The second method for calculating the income threshold to account for the number of dependent children involved adjusting the income threshold that would apply in absence of any dependants using an equivalence scale. This method can be applied to any of the options set out in this report. Because the purpose of equivalence scales is to adjust income to allow comparisons of standard of living between households to be made, this method does not directly relate to the question we were asked, but it provides a transparent and practical metric. Implied conversion factors are provided in Table 4.6 of Chapter 4.

5.11 We also considered how the income threshold might be calculated to account for other dependants. The approach we identified is equivalent to the second method for adjusting for dependent children described above. Implied conversion factors are provided in Table 4.7 of Chapter 4.

Comparison with the current maintenance requirement

5.12 The current maintenance requirement assesses the post-tax income after housing costs of the sponsor's family against an income threshold based on Income Support. As outlined in Chapter 2, the income threshold (post-tax after deducting housing costs) for a two-adult family, representing the case where a lone spouse/partner joins a sponsor, is £105.95 per week.

5.13 In order to compare the range for the income threshold that would apply when a lone spouse/partner joins a sponsor that we recommended above with the threshold under the current maintenance requirement, it is necessary to make a number of assumptions:

• In the calculation of the sponsor's family's income under the current maintenance requirement, other sources of income, including any third-party support, are included, while in Chapter 4 we assumed that only the sponsor's earned income was included in the calculation. We assume that the sponsor's family's income consists only of the sponsor's earned income.

• In the current maintenance requirement, housing costs are deducted from the sponsor's family's income, while in Chapter 4 we assumed that no such deduction was made. We make two assumptions regarding housing costs, which are:

o first, that housing costs are zero; and

o second, as in Chapter 4, that housing costs are £119 per week (i.e. £100 per week in rent plus £19 per week in Council Tax).

5.14 In addition, because we have assumed that the sponsor's family's income consists only of the sponsor's earned income, we convert from post-tax to gross income by applying the standard rates of income tax and National Insurance for 2011/12.

5.15 Combining the assumptions given above allows us to compare the range for the income threshold that we recommended above with the threshold under the current maintenance requirement:

• Under the assumption that housing costs are zero, the equivalent current gross income threshold would be £5,500 per year.

• Under the assumption that housing costs are £119 per week, the equivalent current post-tax income threshold is £224.95 per week (i.e. £105.95 plus £119). The equivalent current gross income threshold is therefore £264 per week, or £13,700 per year.

5.16 It is important to note that the comparison in this section of the range for the income threshold that we recommended above with the current maintenance requirement relies on the assumptions that we have outlined here and in Chapter 4.

5.2 Potential impacts

5.17 To estimate the impact of applying an income threshold at a certain level, we have used the data on sponsor's post-tax income presented in Chapter 3. The data described in that Chapter relate to sponsors of applicants in the 'spouse or partner' category described in Chapter 2. Figure 3.4 shows that the vast majority of visas issued to those in the 'spouse/partner' categories are to those in the 'spouse or 'partner' category, while relatively few are issued to applicants in the 'spouse or partner (indefinite leave to enter)' category, also described in Chapter 2. Here we make the assumption that these data are representative of sponsors of applicants in both these categories. Under the further assumptions outlined in Chapter 3, we can estimate the proportion of spouses/partners that would not meet an income threshold at a certain level.

5.18 Earlier in this chapter we recommended that the income threshold to sponsor a spouse/partner be set within a range of £18,600 to £25,700. According to Figure 3.10, at the lower bound of this range, 45 per cent of applicants would not meet this level of income threshold, while 64 per cent would not be able to meet the upper bound of this range.

5.19 It is important to note that these estimates are based on the assumptions outlined in Chapter 3. In particular, because of the sampling strategy used to construct the data on sponsor's income, they are not representative of all sponsors of applicants granted a visa in the 'spouse or partner' category over the period that the data relate to. Our estimates also rely on the assumptions outlined in Chapter 4: in particular, that the income of the sponsor's spouse/partner is not taken into account in the calculation of the sponsor's family's income.

5.3 Other MAC work

5.20 We recently submitted to the Government an analysis of settlement rights to migrants in Tier 1 and Tier 2 of the Points Based System (PBS) (Migration Advisory Committee, 2011d), and a review of the transitional restrictions on access of Bulgarian and Romanian nationals to the UK labour market (Migration Advisory Committee, 2011e). These reports were published in November 2011.

5.21 The Government has also commissioned us: "To research the labour market, social and public service impacts of non-[European Economic Area] migration; and to advise on the use of such evidence in cost-benefit analyses of migration policy decisions." We are, at the time of writing, due to report to the Government on this commission at the end of November 2011. Through our external research programme we have commissioned six research projects into the impacts of economic migration that will feed into this report. Work is being carried out on our behalf into the impacts of migration on crime, transport and congestion, housing, provision of public services, the consumption of education- and health-related services, and social cohesion and integration. Where possible, these projects will focus on the specific impact of economic migration from outside the European Economic Area. The completed reports will be published on our website later this year.

5.22 We have also commissioned a research project that seeks to identify skills that might be considered strategically important to the UK economy. At the time of submitting this report to the Government the project was at an advanced stage. It will be published on our website during 2011.

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