A multi-billion pound Migration Dividend Fund – focused away from thriving big cities– could help bring Britain together and harness our full potential

Two-speed Britain: Britain is run like a two-speed nation. In one lane parts of our country thriving under globalisation are rich in opportunity, investment and political attention. In the other, a more neglected Britain is often characterised by ageing communities, quiet high streets, lack of opportunity, and inadequate investment both public and private. In recent years, those towns and small cities have begun to rise up the political agenda but transformative policy is yet to follow.

Polarised Britain: This spatial inequality has contributed to an increasing polarisation in political attitudes, particularly stark when it comes to immigration, and most easily understood in the context of the Brexit referendum. Urban centres mostly voted for Remain, whilst smaller towns and coastal areas tended to vote to Leave. Opposition to immigration was a central part of the campaign, and a large motivator for many Leave voters. That opposition is often tied most closely to economic circumstances, not local levels of immigration.

Britain will continue to need immigration: The problems that contribute to a two-speed Britain are not caused by immigration, and in many cases lower immigration will make things worse. EEA migrants make a net contribution of £4.7 billion a year to UK public finances, and our NHS and care sector both heavily rely on migrant workers. Britain is ageing and without immigration there will be fewer of us paying tax to support older people and children, meaning more cuts or higher taxes.

So Britain is too unequal and spatial inequality is a serious problem. Public concern about immigration is often highest in the least affluent, least diverse areas. Yet cutting immigration will not solve the problems at the heart of that inequality. In fact in many cases it could make things worse.

These problems weren’t caused by foreign nationals, foreign governments or the EU. The causes lie within the UK, and so do the solutions.

Government should introduce a genuinely substantial fund to distribute investment to towns and small cities. A fund equivalent to the annual contribution of EEA migrants to the UK budget (£4.7bn a year) would allow the positive effects of migration to be rendered meaningful and visible for residents in these areas.

£4.7bn Migration Dividend Fund

The areas most in need of support are those communities which score poorly for deprivation and lack the civic and community assets to respond. We propose targeting 400 wards initially with £120m each, with funding allocated according to decisions made locally, not in Whitehall. The fund would cover six crucial areas:

• Improving skills
• Ensuring access to opportunity
• Regenerating public space
• Attracting investment
• Encouraging innovation
• Creating transport links

Principles of the fund:

• Directed towards small cities and towns: Whilst some inner-city boroughs face deep deprivation, they typically enjoy higher levels of social mobility and access to opportunity.
• Backed by genuinely significant and long-term investment, rather than small pots of money: We suggests setting this fund at around the level of EEA migrants’ annual contribution to the exchequer – £4.7 billion – thus more fairly distributing the benefits of immigration across the UK.
• Not defined by local levels of migration: Addressing the real problem: a lack of opportunity in large parts of the country.
• Long-term not flash in the pan: ten years of dependable investment.
• Managed and administered by local people: not mandated from Whitehall.

Though the investment may be repaid in part through tax returns, it could initially be funded through a reversal of the planned cut to Corporation Tax. The planned cut from 19% to 17% is estimated to cost £6.2 billion per year by 2022-23.

Communicating the fund

Ensuring the migration dividend is felt as a reality in towns and small cities, rather than viewed either as a myth or something that exclusively benefits major urban centres, is a crucial step in decreasing geographical polarisation.

The Migration Dividend Fund will change attitudes in two ways:

• Redressing geographical inequality: Addressing people’s sense that British society has stopped working for them will give people and places a greater stake in the future.
• Making benefits concrete: By supporting transformative, locally-led projects, the Migration Dividend Fund makes immigrants’ contributions feel real, in a way that billion-pound statistics do not.

This research was supported by the Paul Hamlyn Foundation.