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Slower immigration could lop 11% off UK economy, says study

Monday, 23 December 2013 - 4:21pm IST Updated: Monday, 23 December 2013 - 4:23pm IST | Place: London | Agency: Reuters

A pledge by Britain's government to slow immigration could make the economy 11% smaller by 2060 and taxpayers would have to fund higher public spending, a study by a leading research institute said on Monday.

Immigration has become a hot issue ahead of elections in 2015 and the end of restrictions on workers from Romania and Bulgaria on January 1. Prime Minister David Cameron promised in the run-up to the last election in 2010 to slash net migration to the "tens of thousands" by 2015, down from the 200,000 a year expected under current trends.

But a halving of net migration over the period to 2060 would have "strong negative effects" on the economy, said the new study, published by the independent National Institute of Economic and Social Research. "The level of both GDP (gross domestic product) and GDP per person fall during the simulation period by 11.0% and 2.7% respectively," it said.

Furthermore, lower numbers of immigrants, who tend to be young, would add significantly to public spending, as a share of the economy, in order to care for a generally older population. "To keep the government budget balanced, the labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario," the report said. That meant net wages would be 3.3% lower in 2060 than if immigration flows remain unchanged, it added.

Under pressure from the anti-immigration UK Independence Party (UKIP), Cameron has said he wants to restrict the relocation of migrants from poorer European Union (EU) states to richer ones, challenging one of the central tenets of the EU.

On Sunday, Deputy Prime Minister Nick Clegg, whose Liberal Democrats share power with Cameron's Conservatives, said curbing immigrant numbers would damage the economy.

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