Immigration is good for the economy – put that on the side of a bus

Only a government with a particular gift for mismanagement could contrive to combine a recession with a labour shortage, writes Sean O'Grady

Priti Patel at Imperial College London where she announced new immigration curbs (PA)

Some years ago, the Bank of England, reflecting in a slightly self-satisfied way about the (then) impressive progress of the British economy, estimated that increased EU migration after 2004, added about 0.25 per centage points a year to the growth in our national income. In today’s money, that equates to about £5bn per annum (and every annum), or around £100m per week.

Put that on the side of a bus, if you like.

As a result of the unprecedented movements of workers from eastern Europe (in particular) that the UK experienced, there was more money swilling around than would otherwise be the case. That money was keeping people in work and creating jobs (rather than “taking our jobs”), allowing businesses to recruit and expand, ensuring higher tax receipts for public services, and all the rest of it. Of course, all that was before the financial crash and the age of austerity, but the point still stands; migration tends to be good for economies, whatever state they happen to be in.

The reasons for this are well observed. Inward migration invariably attracts the young, the fit and the entrepreneurial, or, in other words – those who are able to work. Immigration helps to fix the demographics of ageing societies such as the UK. It does this by improving the ratio of workers to older, retired folk; and, more immediately, by staffing care facilities and homes.

Even now, with slowish growth, rickety public finances and the prospect of a Brexit recession, the UK’s labour market is, overall, very tight indeed. Employment is at record highs; unemployment at record lows. Something to be proud of, there. Now the government is planning to wreck Britain’s flexible labour market, to no great point.

I concede it is true that there are “left behind” towns where this is not the case, and there are many lower-paid jobs that people do not care to take. However, overall, there is no longer some vast pool of the unemployed, and even if there was, stopping immigration wouldn’t make much difference to their outcomes. After all, we had mass unemployment in the 1930s and 1980s, at a time when migration flows were far lower than now. Comparably, we had lots of jobs going in the 1960s and 2000s, when migration levels were historically higher. That is because a high demand for labour tends to attract migrants.

Restricting immigration, by whatever means, is a spectacularly silly thing to do for an economy that wants to unleash its potential. The UK needs more inward migration, not less, and at every possible level of the workforce. So-called unskilled workers are probably more needed than the PhD scientists and billionaires the government seems to have in mind. We need taxi drivers and baristas as much as Premier League managers and eye surgeons. The salary floor of £25,600 is utterly arbitrary, and will hit sectors such as hospitality, construction and social care very hard. Some firms will go bust; others will have to lay people off or cut wages or put prices up – completely needlessly.

Whatever happened to market forces? Whatever happened to putting enterprise and business first? Where will the tax billions be coming to pay for our public services and “levelling up” in an economy plagued by labour shortages?

I can listen, and to a degree respect, those who say that a new system is a price worth paying simply because they dislike migration, for whatever reasons. They at least admit there is a price to pay – for their parents or grandparents unable to find social care, for example – in return for the mystical wonders of unfettered sovereignty and taking back control of our borders.

What I cannot cope with is the people who tell us that restricting immigration will be good for the economy and good for everyone, especially after no deal Brexit. Far from it, as we will soon see. Only a government with a particular gift for mismanagement could contrive to combine a recession with a labour shortage, but that seems to be what we are heading for.