Tories' anti-immigrant Rwanda plan is 'sunk cost fallacy' that will help bring about the UK's inexorable economic decline – Stewart McDonald

With an ageing population and a declining birth rate, the UK needs immigrants to ensure it has a functioning economy in the years ahead

The Prime Minister is famed for his love of spreadsheets and his grasp of economic details. He, of all people, should know all about what economists call the “sunk cost fallacy”: the phenomenon whereby someone refuses to change or abandon course because they have invested too much, even when it becomes clear that abandonment would be more beneficial.

There is perhaps no phrase that better captures this government’s monomaniacal obsession with deporting migrants to Rwanda – a scheme that has become so politically toxic that even Rwanda’s foreign minister has waded into the fray with a warning that the partnership could not continue “without lawful behaviour from the UK”.

We are now at the stage where even the most anti-migrant zealots among the Conservatives must be long past the point of pretending that the Rwanda plan offers any kind of benefit to the country. It has torn apart the governing party less than a year out from a general election, brought about the resignation of the UK immigration minister and is set to cost UK taxpayers £290 million before the first refugee has set foot on a plane.

Rishi Sunak is under fire from the right and the left over his plan to send asylum seekers to Rwanda (Picture: Leon Neal/pool/AFP via Getty Images)

Migrants contribute billions to Exchequer

The UK has signed up to pay for British judges to preside over a newly established appeals process, as well as to cover the costs of all legal fees of anyone appealing their deportation to Rwanda, and – tucked away in clause 16 of the Rwanda Bill – pledged to resettle refugees from Rwanda itself. What Conservative can look at this and think “yes, more of this please”?

But as I have written before in this column, neither politics nor economics seem to be strengths of the Conservative party today. I accept the moral argument around immigration is contested, but the economic case is well established. The University of Oxford’s Migration Observatory published research in 2020 which found that migrants contributed £22.6 billion in net tax revenue to the UK in 2019-2020, despite accounting for just 14 per cent of the population, a positive contribution attributed to their higher employment rates and willingness to fill labour shortages in various sectors, including healthcare, education, and hospitality.

Immigrants contribute more in taxes than they receive in public revenue. Immigrants fill acute labour shortages in key shortage areas such as the care sector. Immigration helps to address the UK’s ageing population and declining birth rate, ensuring a steady supply of workers and a functioning economy in the years to come. These are the facts.

A world with open borders

Human beings, however, are not creatures of pure economic rationality. We trade in feelings just as much as facts, with Angela Merkel’s political legacy serving as a cautionary tale to those who would forget this in the immigration debate. The former German Chancellor was lauded throughout the world when she opened Germany’s doors to refugees fleeing the war in Syria, against popular opinion in her party and the country at large.

I still believe she did the right thing, and that Germany’s long-term economic prospects will be healthier for it, because of the reasons above. But Merkel is now gone and Germany’s anti-migrant party, Alternative for Germany, is now polling at over 30 per cent in every East German state outside Berlin. What is economically beneficial is not always politically palatable, and good political leaders need to be able to bring the public with them while marching at the front. They need to be able to listen as well as lead – a delicate tango that is easily fumbled.

An article in the Economist, written in the months after the 2016 Brexit referendum, has long stuck with me. It highlighted a recent paper from Dr Michael Clemens, senior fellow at the Centre for Global Development in Washinton DC, which showed that a world with open borders – one with complete freedom of movement – would be $78 trillion richer than it is today. Dr Clemens argued that this scenario would represent an unqualified and unmitigated good for a capitalist, global economy, in that it would allow the factors of production – labour, capital, entrepreneurship – to flow freely across international borders to those locations where goods and services could be provided and procured for the cheapest price and highest quality possible.

Positive economic case for immigration

Clemen’s argument, of course, is nothing more than a thought experiment. But his sketch makes explicit a choice which we have made more or less unconsciously: that we would rather live in a world of sovereign states and controlled national borders than one almost twice as wealthy. We, as creatures of emotion more than cold economic rationality, make decisions like this almost every day of our lives.

Governments can – and do – do the same. From the UK’s exit from the European Union to the Conservative party’s obsession with driving down the number of immigrants coming to this country, democratically elected governments are fully entitled to make political decisions that are not in the economic interests of their citizens.

The current crisis is that successive UK Governments are not willing to be honest with British citizens about the trade-offs that are being made in their name. Whilst my party will continue to make the positive economic case for immigration that is so critical to driving up living standards and securing Scotland’s long-term economic prosperity, it is completely untenable for the Conservative and Labour arties to keep making the political argument for Brexit and for reduced immigration without being honest about the costs that these decisions entail. Any person can choose to shoot themselves in the foot – but the person handing them the gun must be honest about the pain that their actions will cause. Until Keir Starmer or Rishi Sunak can face that uncomfortable reality and be honest with the public about the damaging decisions being taken in their name, the United Kingdom looks doomed to continue its path of inexorable economic decline.

Stewart McDonald is SNP MP for Glasgow South