The Case Against UK Visa Fees (Or, How I Learned to Stop Worrying About Cross-Subsidization And Love Outside Options)

Merry Christmas! Here’s 1,700 words on visa fees. Note that this is an argument rather than a summary of the existing literature, so it is not a part of the migration living literature review.

The UK has high visa fees relative to other countries.

While the total fees vary by type of visa and size of family, it can cost up to £21,000 in fees for a family of four to immigrate to the UK. This is 22 times the international average for researchers, and well above the costs to migrate even to richer nations like the United States.¹

Generally, the argument for high visa fees is as follows:

1. Fees prevent immigrants from being a net cost to the state. Indeed, the largest portion of the fee is the “Immigration Health Surcharge”, which is meant to cover the cost of providing the immigrant health care through the NHS. The Immigration Health Surcharge (IHS) is currently £1,035/person/year. This is much higher than it has been in the past - when it was introduced in 2015, it was just £200/year.
   
   (Note that paying this fee does not mean immigrants are exempted from paying income tax and national insurance contributions; they pay normal taxes meant to cover health care costs plus £1,035 per year. Indeed, visa fees are specifically set higher than needed to cross-subsidize other parts of the Home Office.)

2. High fees, in particular, select for only migrants that are able to pay such fees. If you are taking a low-wage job, or coming to join family, a high fee is a significant disincentive; one might think twice about moving. If you are coming to take a high-wage job, you can stomach the fees; £1,000 isn’t that much if you make >£100,000.

3. Even if the immigrants don’t like the high fees, they can’t vote to change them so really, there’s no (electoral) downside here.²

Unfortunately, I think this set of arguments fails to see the bigger picture.

I think it is plausible that high visa fees are, on net, losing the UK money. This may be true even if you ignore the effects of immigration on innovation - that is, enough immigrants choose not to come to the UK because of the fees that the UK will lose more in tax revenue than it gains in fee revenue.

This is because the supply of immigrants varies by source country.

To a first order, a rich country will receive as many migrants from poor countries as are allowed to migrate there.³ High visa fees may deter any individual low-wage migrant, but that migrant (to a first order) can be replaced with a similar immigrant.⁴ The stock of people who would like to move to a rich country is simply much larger than the number of people who can.

The same is not necessarily true of the supply of immigrants from other high-income countries. There are far fewer people from countries with similar incomes to the UK than there are from countries poorer than the UK. Furthermore, they have fewer incentives to move to the UK, because they can probably make just as much at home.

As examples, let us consider several different immigrants. All three immigrants have the option to stay in their home country or move to the UK; all have job offers and expect to stay for three years.

A Nursing Assistant From India

Let’s say they are unusually skilled for a nursing assistant; actually, they’ve been working as an entry-level nurse in India.⁵ They make a normal wage for an entry-level nurse, around 30,000 rupees per month. This is about £240/month. Income tax is low, so they bring home about £2,352 a year.

This person gets a job offer in the UK. The job pays just the minimum salary to qualify for a visa, and it’s not a full nursing job, but it still pays £25,000. Their take-home pay will be £21,521, or £1,793 a month.

Even accounting for the much higher cost of living in the UK, they should be willing to crawl over broken glass for this salary increase. And since they work in health, they don’t even have to pay the IHS.⁶ Getting a visa only requires paying a £304 fee. They do need to have £1,270 in their bank account at the time of application, which isn’t easy on a £2,352/year income, but it will clearly be worth it. They are making more than seven times more than they otherwise would.⁷

They should take out loans, borrow from friends and family - anything to make that happen. Even after fees, it is possible they could save more than they’d otherwise make. The gains from moving are simply so large that there is virtually no disincentive that would make migrating not worth it.

The same is not true for migrants from higher-income countries. Let’s consider two other examples: a researcher from France and an executive from the US.⁸

A French researcher

A French researcher is offered a postdoctoral position at a Russell Group university. They also have an offer at a lower-ranked French university.

The average UK postdoc makes £37,530. This is equivalent to a net pay of £2,545 per month, or around €2,913 per month. A French postdoc salary might be €3,000 gross or €2,400 net. They’d be a bit better off in the UK, but France is a bit cheaper.

Prior to Brexit, they likely would have taken the UK offer. It’s higher ranked; it would set them up better for the rest of their career.

In 2025, the choice is harder. They would definitely qualify for a Skilled Worker visa; they might qualify for a Global Talent Visa. If on a Skilled Worker visa, it’s possible that their employer will pay the fees, though it depends a lot on the institution.⁹ If they come on a Global Talent Visa, there is no sponsor and therefore it is much less likely that they will be reimbursed for fees incurred. Either way, a three-year visa will cost around £3,875 up front - and they’ll have to front that in addition to the cost of moving to the UK.¹⁰

It’s this researcher’s first postdoc, so they’ve previously been a PhD student. Not that many PhD students have €4,400 in savings - or, if they do, it’s all their savings. Maybe they’ll just stay in France…

Perhaps it’s not surprising that the director of the Crick is giving interviews about how the visa system is the UK “shooting itself in the foot”.

An American executive

This is the category the British state should be most worried about driving elsewhere. The median American on a Skilled Worker visa had PAYE income of £112,100 in tax year 2023-2024. At this income, the median American would pay £40,452.60 in tax (£34,692.00 in income tax and £5,760.60 in National Insurance).

The median UK wage in 2023-2024 was £31,892. That is: the median American skilled worker paid more in tax than the average British worker makes - by a significant amount. Though there are relatively few such people, they are clearly enormously valuable to the Treasury.

Is the UK getting them? To date, probably yes; the UK has been particularly good at attracting immigrants with high labor income. But this statistic was derived when fees were much lower; the ever-increasing visa fees may make the UK less attractive.

Most people who make £112,100 do have other job options; one gets that kind of salary by being in demand. Given that we are discussing migrants, it is often the case that they have job offers in multiple countries.¹¹

So let’s say you have a job offer for £112,100 in London and one for $150,024 in New York.¹² You’re sorting through the paperwork. Taxes are higher in the UK, but the cost of living is lower. But also you have to pay more than $4,000 in fees up front to take the London job.¹³ And that’s assuming you’re single. If you have a spouse - as most people who are old enough and established enough in their careers to make £112,100 do - it’s more than $8,000, and it scales upwards with children.

You’re quite a valuable employee; perhaps your employer will pick up the check. But that money has to come from somewhere, and that somewhere is probably your TC offer. And it’s also just… annoying. Like, really?

You decide to go work in New York instead.¹⁴ The UK is £121,356 worse off over the next three years because you didn’t feel like paying $4,000 in fees.

This scenario doesn’t have to happen all that often for the visa fees to not be worth it. If about 2.5% of high-earning immigrants decide they’d rather not move to the UK because of the immigration health surcharge,¹⁵ the UK will be worse off.

Conclusions

Perhaps losing high-skilled immigrants would be worth it for the British state if the fees did dissuade the immigrants they want to dissuade. But as I argue above, I don’t think they are particularly likely to do that.

It is true that they do increase the fiscal contributions of lower-wage immigrants, and there are many more lower-wage immigrants than there are Americans making £100k. But visa fees are small relative to lifetime tax contributions or lifetime welfare costs. A high-wage immigrant will have net fiscal contributions of well over £500,000; a low-wage immigrant costs perhaps £100,000 over the course of their lifetime.¹⁶ +/- £5,000 per person just doesn’t make that much of a difference to the overall fiscal impact of immigration.

So: why have incredibly high visa fees? It seems:

• The fees are unlikely to dissuade low-wage migrants - or rather, it is likely that low-wage migrants who are dissuaded can be replaced by other similar migrants who can get the fees together.¹⁷

• They may actually dissuade high-wage migrants and researchers.

• They don’t actually raise that much money.

As a policy tool, that doesn’t seem amazing. Maybe this is not the best idea the UK government has ever had?

1. This is true even if one includes the price of hiring an attorney in the US.

2. To quote Lord Vetinari, “taxation, gentlemen, is very much like dairy farming. The task is to extract the maximum amount of milk with the minimum amount of moo.” Non-citizen immigrants’ ability to moo is limited.

3. One of the pieces of evidence that I think is strongest here is Beam, McKenzie and Yang 2014. They find that the limiting factor for international migration is recipient border restrictions, not anything on the sending country side.

4. Some people may assume that this is a negative reflection on immigrants from poor countries, that they would in general like to move to a richer country. I don’t think this follows. Perhaps I am too American for this, but “ambitious person would like to move to opportunity” does not reflect badly on them.

5. This is a not uncommon story for immigrants; underemployment after migration is relatively common.

6. This requires a Health and Care Worker Visa. While eligibility for health and care worker visa has been significantly restricted, SOC code 6131 (nursing auxiliaries and assistants) is still included.

7. For instance, anyone who would like to offer me 7.5x my current salary: please send all job offers to lagilbert@gmail.com.

8. Yes, these are stereotypical careers. They’re also not entirely untrue. India was the largest single source of health & care worker visas in 2022. Americans are the highest earning nationality in the UK, so they are likely to overproduce execs.

9. Generally the highest ranked and best funded ones. If you are at Oxford, they’ll reimburse. If you’re at Queen’s University Belfast, you may be out of luck.

10. This is assuming they are single and have no children. As noted earlier, this scales with the number of people in the household. Since it’s likely that a household with two adults also has two earners, but I don’t know what the other adult’s likely earnings/savings would be, I’ve chosen to focus on one-person households here.

11. I have!

12. This is a conservative estimate; most US jobs have considerably higher compensation than UK jobs at a similar level, as any American in the UK will tell you after they’ve had a beer or two. Often at great length.

13. Assuming a three-year visa; £1,035 * 1.32 * 3 = $4100

14. As a bonus, your new Brooklyn apartment has a dryer that doesn’t take four hours to dry clothes.

15. Assuming revenue from visa fees = £3,000 per person, tax revenue from a successful immigrant: £120,000, with total value if immigrant comes: £123,000. Total value if immigrant doesn’t come: £0. The breakeven with visa fees vs. no visa fees is: (100 - X) * £123,000 = 100 * £120,000, X = 2.44.

16. Based on the overall fiscal impact calculations by visa type in the new MAC report, table 1.3.

17. I do not evaluate here if you actually want to dissuade low(er)-wage migrants from coming to the UK. I have argued elsewhere that the UK should perhaps Taking A Chill Pill about migration in general, and even at £25,000 per annum, I think it’s likely that the example nursing assistant will be either breakeven relative to benefits received or produce a fiscal surplus for the UK. The OBR estimates an average-wage migrant (~£30,000) is a significant net fiscal contributor; I think at £25,000, they’ll probably be near-ish the breakeven point but probably above it. The MAC estimates the average H&C main applicant contributes £54,000 more than they will receive in benefits.