Foreign workers could prevent 'further UK tax rises and spending cuts'

Higher-than-forecast net migration is expected to boost labour supply by 2026

Immigration and passport control, Terminal 2, Heathrow Airport, London, United Kingdom. Alamy
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A higher number of foreign workers could save Britain from “even bigger tax rises and deeper spending cuts”, think tank bosses have said.

The Office for Budget Responsibility said higher-than-expected forecasts offering a “larger contribution from net migration” was “offsetting slower growth in productivity”.

Its predictions for the level of “labour supply” by 2026 was 0.1 per cent higher than expected in March, as a result of factors including “higher population growth”.

The budget watchdog is now assuming net migration to the UK — the difference between the numbers of people coming to the country and those emigrating — will be higher than previously forecast for next year and from 2026 onwards.

“We now assume net migration declines from 224,000 a year in 2023 to settle at 205,000 a year from 2026 onwards,” the report said.

“This compares to 136,000 and 129,000 in those years in our March forecast.

“This upward revision reflects evidence of sustained strength in inward migration since the post-Brexit migration regime was introduced.”

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The figures, understood to be accepted by the government, are based on existing plans rather than any forthcoming growth plan.

Think tanks hailed the assessment as a sign foreign workers are saving Britain from bigger tax rises and deeper spending cuts.

The forecasts could prompt a headache for ministers under pressure from some for better control of Britain’s borders after the Conservative Party’s 2019 manifesto pledge to reduce net migration.

James Kirkup, director of the Social Market Foundation, said higher net migration “underpins” the OBR’s growth forecast and added: “Without these workers, Britain would face even bigger tax rises and deeper spending cuts.

“Having accepted this economic reality, ministers must speak honestly to voters about economic benefits of immigration.”

Sam Dumitriu, head of policy at Britain Remade, which campaigns to promote economic growth, said: “The OBR are forecasting that higher than expected net migration over the next five years will push [gross domestic product] up and reduce the need for further spending cuts/tax hikes.”

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When resigning from her initial appointment to the role, Home Secretary Suella Braverman lashed out at then-prime minister Liz Truss and accused the government of “breaking key pledges” including on immigration policy amid signals rules could be relaxed as part of a mission to boost growth.

Madeleine Sumption, director of the Migration Observatory at the University of Oxford, said the OBR revision of the long-term projection for net migration is “no surprise” and the earlier figure “now looks implausibly low, based on what we now know about immigration patterns post-pandemic”.

“That earlier estimate was based on the assumption that the post-Brexit immigration system would substantially reduce migration,” she said.

“In fact, the post-Brexit system does appear to have reduced EU net migration: in the most recent official estimates, EU citizens were making no contribution to the growth in the UK population at all.

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“But non-EU migration has also been rising due to a combination of the Ukraine and Hong Kong humanitarian schemes, skilled workers and international students. The result has been that a higher projection of overall net migration in future is now plausible.

“Of course, projecting future net migration levels is actually incredibly difficult and there’s large scope for error. Over the past couple of decades, official projections have often turned out to be too low.

“Stepping back, the higher net migration projection makes life easier for the Treasury, because with higher net migration it is easier to make the fiscal sums add up.”

Updated: November 17, 2022, 11:10 PM
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