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2014 04 AUG

Reducing immigration would slow UK economy and lead to tax rises

Reducing immigration into the UK will have strong negative effects on the economy and would result in an income tax hike, a new study predicts.

The projections, contained within a paper published on Monday by the National Institute of Economic and Social Research (NIESR), are the result of academics modelling the current Conservative party migration target to reduce net migration "from hundreds of thousands to tens of thousands". The research estimates that by 2060, UK GDP would be 11% lower than it would be otherwise.

The thinktank wrote: "Achieving [the Conservative] target would require reducing recent net migration numbers by a factor of about two ... The results show that such a significant reduction in net migration has strong negative effects on the economy. By 2060 the levels of both GDP and GDP per person fall by 11% and 2.7% respectively. Moreover, this policy has a significant impact on public finances. To keep the government budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario."

The paper was part of a series of studies on the economics of migration that it says follows "recent policy changes [that] have made it significantly more difficult for skilled and highly-skilled workers, students and family members from outside the EU to migrate to the UK". Anna Rosso, a research fellow at NIESR, added: "The result has been a reduction in the pool of talent available to businesses in the UK. The long-term consequences are likely to be damaging."

The projections also coincided with migration expert, James Hampshire, arguing that the EU's principle of free movement of people – which allows workers from one member country to freely emigrate to work in another – is too fundamental for it to ditch.

Writing in The World Today, the publication of another thinktank, Chatham House, Hampshire said: "It is so central to the single market, and thus the European project as a whole, that undoing it would be the undoing of the EU ... However, the EU free movement directive makes clear that the right to move and reside freely is not absolute. In theory, after three months an EU national without a job has no right to remain in another EU country unless they have sufficient means not to become an 'unreasonable burden' on the welfare state".

Despite the latest academic papers lauding the benefits of immigration, restricting it to the UK is increasingly looking like a potent political weapon.

The rise of the UK Independence party as a political force is widely attributed to the parties' views on immigrants while, writing in The Daily Telegraph last week the prime minister, David Cameron, said he had "a long-term economic plan to secure a better future for Britain – and controlling immigration is a vital part of it".

Voters blame immigrants undercutting employment terms and conditions more than anything else for worries about their own economic uncertainty. According to a Guardian/ICM poll in June, 46% cite concerns about immigration, although worries about the level of wages and concern about unreliable and dead-end jobs also feature.


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