Financial News

  • 15 January 2014, 7:57

Immigration Cap Bad For Economy, Govt Warned

A cap on immigration will make it harder for Britain to drive down the deficit, the Government's economic forecasters have warned.

The chairman of the Office for Budget Responsibility said immigration had been good for the country and boosted the nation's income.

Robert Chote told MPs on the House of Commons Treasury Committee that immigrants were less likely to claim benefits and state pensions or use healthcare.

He estimated there would be a significant impact on the economy if annual net migration were reduced to the "tens of thousands" goal set out by David Cameron.

Mr Chote said that if immigration was restricted to the level desired by the Prime Minister then over 50 years it would add around £300bn (20%) to Britain's debt.

He said: "Essentially speaking, inward migrants are more likely to be of working age than the population in general. They arrive after some other country has picked up the expense of educating them and in some cases - though not all cases - they leave the country again before you get to the point at which they are most expensive, in terms of pensions, healthcare and long-term care.

"In terms of the fiscal position, that is what drives the fact that higher net inward migration over this time horizon does tend to produce a more beneficial picture."

Mr Chote told the committee that were there a cap on the number of immigrants: "The direction would be clear enough, because obviously you would have† fewer net inward migrants, the fiscal position would be somewhat worse on those grounds."

He added that even if the extra spending demands on schools, hospitals and housing was taken into account, immigration was still boosting the economy.

Mr Cameron has repeatedly stated the Conservatives' ambition to reduce net migration - the number of people coming into the UK minus the number leaving each year - to less than 100,000.

However, the cap is fiercely opposed by Liberal Democrats and last month Deputy Prime Minister Nick Clegg warned the Home Secretary, Theresa May, that a cap on European Union migrants would be illegal.

Immigration continues to be a key issue for the Conservatives, with Mr Cameron introducing a number of measures designed to clamp down on migrants claiming benefits and using health care.

These included preventing EU migrants from claiming benefits for three months, only allowing them to claim benefits for six months, charging foreigners for emergency health treatment and deporting migrants caught sleeping rough.

It has sparked significant criticism from Europe, with the vice president of the European Commission, Viviane Reding, last week accusing the Prime Minister of peddling "myths" about a "foreign invasion" sparked by the relaxation of the rules allowing Bulgarians and Romanians to work and claim benefits in the UK.

In November, the European employment commissioner Laszlo Andor warned Mr Cameron that Britain risked becoming the "nasty country" of Europe.

A report by University College London last year found that immigrants had contributed £25bn to the country in taxes in that last 10 years.

It also found those who moved to the UK since 2000 were less likely to claim benefits or live in social housing than British people.

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