Uncertainty On Migrant Numbers Is Hampering Rate Policy

The Times November 01, 2006

Uncertainty on migrant numbers is hampering rate policy
By Gary Duncan, Economics Editor

Flaws in census mean we do not know size of population, says Bank Governor

THE huge influx of migrants from Eastern Europe has compounded the problems for the Bank of England in gauging the size of the population created by inadequate census figures, the Banks Governor said yesterday.

Mervyn King said that the combination of great difficulty in measuring numbers of migrants arriving into Britain and flawed 2001 census material was hampering the Banks ability to steer the economy.

Mr King told the House of Lords Economic Affairs Committee that reliable population figures were essential to the Bank of England, since it needed to know the size of the workforce in order to assess the slack in the jobs market and so inflationary pressures. The Governor said the problems were compounded by the thousands of extra migrants to Britain coming from the new European Union member states in the past two years.

This had made efforts by the Office for National Statistics (ONS) to track population changes through its international passenger survey insufficient. Its just not adequate as a basis, he said. We need to know both those coming in and going out. Even on the best guesses of the ONS, the increase in the population arising from net migration is two to three times that of the natural increase in the population from births and deaths. Its become in the last two to three years a quantitively more important phenomenon.

We just do not know how big the population of the UK is. Because the comparisons and the split between different groups of workers young and old, migrant and ordinarily resident has changed in recent years, the statistics may not be that accurate.

John Reid, the Home Secretary, this month ended the UKs open-door policy on European migrants by imposing restrictions on Romanian and Bulgarian workers, when their countries join the European Union next year. About 20,000 unskilled and 1,800 skilled workers from the two countries will be allowed work permits, under the proposals.

Dr Reids move marked a significant hardening of the Governments immigration policy. Migration to Britain from the countries that joined the EU in 2004 has far outstripped the numbers predicted by the Government.

Mr King said that the shortcomings of the 2001 census, which came under heavy fire after its findings were extensively revised, meant that we do not have at present a way to measure accurately the size of the population.

He said: We need to know how big the population is, and how large the number of migrant workers is, in order to help us form a judgment about the pressure of demand on capacity.

We have always relied on the national census, but there were difficulties in the last census.

The Governor said that it was crucial that sufficient extra funding was put into the next census, due in 2011, to ensure that the Bank had proper information on which to base its interest-rate decisions. We need a good estimate of the total population. That means ensuring that, when we carry out the next national census, it is adequately resourced.

The importance of population and workforce numbers in recent years has increased as surging oil prices have put the Bank on alert for any signs that record energy costs, combined with a tight jobs market, might fuel wage inflation.

Mr King said that the Bank would watch the next pay round for any signs that present high levels of inflation on the retail price index, which hit 3.6 per cent last month, had fuelled inflationary wage settlements.