Immigration decline costing UK economy billions, says think tank

Meeting government targets on immigration means £12bn hit to public finances, say Global Futures

Peter Stubley
Monday 16 July 2018 13:45
Immigration after Brexit: What's it going to look like?

The fall in immigration since Brexit is already costing the UK more than £1bn a year, according to new analysis by an independent think tank.

Global Future, which promotes the benefits of openness, calculates that the loss to the public finances is the equivalent of more than 23,000 nurses or 18,000 doctors.

It also claims that meeting the government’s immigration target of “tens of thousands” will also cost Britain £12bn a year by 2023 – which represents 60 per cent of the funds promised to the NHS by Theresa May as part of a so-called “Brexit dividend“.

The figures are based on forecasts by the Office of Budget Responsibility (OBR) of the effects on net borrowing and debt under alternative scenarios of high and low migration.

These estimates suggest a surplus of £16.9bn if net migration fell from its peak of 336,000 in the year ending June 2016 to 185,000 by 2021, compared to a surplus of £5.2bn if it fell to 105,000 by 2021.

Global Futures used these estimates to devise what it called a “ready reckoner” of a cost of £150m for every reduction of 10,000 in net migration.

The latest migration figures are due to be released on Monday but net migration had already fallen to 244,000 in the year ending September 2017.

This translates to a cost of £1.35bn every year if net migration remains the same, with even greater losses if it is reduced to less than 100,000 per year.

“Cutting immigration hits our public finances hard,” said Peter Starkings, Global Future’s director.

“The British people may decide that they are happy to pay a bit more tax or see lower investment in our NHS and other public services in return for a reduction in immigration, but that’s a debate we have simply never had.

“What we do know is that the public think immigration has been good for our economy and our culture, and when offered the choice, they routinely choose economic stability over reducing immigration.

“As the government draws up its plans for a post-Brexit immigration policy, they must be honest about the trade-offs at the heart of this debate. This analysis, based on OBR forecasts, shows that lower immigration means lower public investment, higher borrowing, or higher taxes – and meeting the government’s self-defeating target to reduce net migration to tens of thousands a year would blow a giant multi-billion pound hole in the public finances.

“At a time when crucial sectors like our health service are reporting staffing shortages, government should think very carefully about what a restrictive immigration system will do to our country.”

The OBR forecasts assume that migrants and non-migrants will make the same net contributions to public finances if they have the same age and gender.

Other studies reached different results after attempting to take into account other factors such as increased costs to public services and displacement of British workers.

Migration Watch UK, an independent think tank which supports a reduction in immigration, estimated in May 2016 that immigration was costing the UK nearly £17bn a year, although £15.6bn of this was accounted for by non-EEA migrants.

Both Theresa May and her predecessor David Cameron included the pledge to reduce net migration to the “tens of thousands” in their respective Conservative manifestos but failed to hit the target.

Sajid Javid, the home secretary, recently hinted that the UK government may scrap its pledge at a parliamentary panel on immigration.

“I’m not going to get into numbers,” he said. “Clearly the government has been working towards getting net migration down to more sustainable levels, and that objective continues and will continue in a new immigration system as well.”

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