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1 December 2016

Immigration may now have peaked – but at a cost

The anticipated fall in newcomers to the UK will hit the public finances. 

By George Eaton

Unlike some of her cabinet colleagues, Theresa May believes in the government’s net migration target. But throughout her time as Home Secretary, the aim of reducing numbers to “tens of thousands” a year was never met. After her arrival in Downing Street, the numbers are little changed. Today’s ONS figures show that net migration stood at a near-record high of 335,000 in the year to June 2016. Though the government cannot control immigration from the EU, it was, as usual, non-Europeans that accounted for the bulk of the total (196,000).

For some, such figures, are proof that the net migration target should be put out of its misery. After May entered Downing Street, Home Secretary Amber Rudd and Boris Johnson both argued for the abandonment of the pledge (the latter is reported to have told EU ambassadors that he still favours free movement). But May, borrowing a line from Samuel Beckett, intends to fail better. 

There are signs that she may get her wish. To migrants, post-referendum Britain appears a less attractive destination. The number of new National Insurance registrations has fallen among foreign workers, including a by 17 per cent among those from eastern European. International student numbers have fallen by 30,000 to 163,00, the lowest total since December 2007. 

Jonathan Portes of the the National Institute of Economic and Social Research has predicted that EU immigration could fall to 60-80,000 a year, levels last seen in 2009-12. The pound’s depreciation (which makes British wages less competitive), reduced vacancies and increasing anti-foreigner sentiment are likely to be the main deterrents. 

But reduced immigration will come at a price. The OBR recently forecast that lower migration would cost £6bn a year by 2020-21. As well as reflecting weaker growth, reduced immigration is likely to reinforce it. Migrants pay far more in tax than they claim in benefits, with a net contribution of £7bn a year. An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent.

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In recent history, there has only been one reliable means of reducing net migration: a recession. Newcomers from the EU halved after the 2008 crash. Should the UK suffer the downturn that historic trends predict, it will need immigrants more than ever. Voters may yet only miss them when they’re gone.