Add foreign-worker employer NI surcharge: calculation note

Central fiscal result

-£2.5bn - Net fiscal impact in 2027-28

Low case: -£5.0bn. High case: +£1.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Employer NI on foreign workers rises to 20%.
• British workers remain on the standard employer NI rate.
• Health, care and very small firms are exempt.
• No replacement visa levy is modelled.

Affected population

• Affected units are employers and foreign-worker employee jobs.
• Exposure depends on payroll, nationality and exemptions.
• Domestic workers may benefit if substitution is possible.
• Consumers face higher costs in exposed sectors.

Gross impact

• Reform claimed about £4bn annual revenue.
• Central case scores £2.5bn after exemptions and behaviour.
• High case allows receipts loss from reduced employment.
• Output effects are shown separately, not fiscal-scored.

Fiscal build-up, central case

• Additional employer NI receipts: -£3.8bn
• Lower PAYE and NI from reduced employment: +£0.8bn
• Administration and compliance: +£0.3bn
• Exemption leakage: +£0.2bn

Central net impact: -£2.5bn in 2027-28.

Behaviour and pass-through

• Low case assumes high compliance and limited labour-supply response.
• Central case assumes some hiring reduction and exemption planning.
• High case assumes shortages reduce output and tax receipts.
• Prices rise where employers pass on the surcharge.

Phasing

• 2026-27: -£0.5bn. Preparation or partial implementation.
• 2027-28: -£2.5bn. Main scenario year.
• 2028-29: -£2.0bn. Behaviour and pass-through develop.
• 2029-30: -£1.5bn. Steady-state uncertainty persists.

Main source groups

• Dustmann and Frattini, "The Fiscal Effects of Immigration to the UK" (Economic Journal, 2014): UK immigrant fiscal effects vary by origin, age, employment and qualification mix rather than by a single migrant average; warns against assuming a uniform fiscal gain from deterring foreign workers.
• Migration Advisory Committee, "Migration Advisory Committee evidence base" (2024): Used to support the baseline, affected-population sizing or behavioural assumptions in the illustrative scenario.
• Reform UK, "The Cost of the Boriswave" (2025): Reform estimates a £154bn discounted lifetime cost for a medium Boriswave settlement scenario; party-side context, not official costing.
• Reform UK, "Our Contract with You" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.
• HM Revenue and Customs, "Direct effects of illustrative tax changes" (2026): Used to support the baseline, affected-population sizing or behavioural assumptions in the illustrative scenario.
• Manacorda, Manning and Wadsworth, "The Impact of Immigration on the Structure of Wages: Theory and Evidence from Britain" (Journal of the European Economic Association, 2012): UK immigration mainly affected wages of earlier immigrants, with little detectable effect on native wages; relevant to wage claims behind a foreign-worker surcharge.
• Kleven, Landais and Saez, "Taxation and International Migration of Superstars" (American Economic Review, 2013): Highly mobile high earners can respond strongly to tax differences across countries; supports caution for high-skilled recruitment and internationally mobile workers.
• Reform UK, "Our Policies" (2026): Reform pledges detention, deportation, treaty changes, no free housing or benefits, and stricter visas; current policy anchor.