Treasury's growth goal banks on immigration
Sunday December 10, 2006
Treasury number-crunchers are banking on an influx of about 185,000 immigrants every year to boost the economy's long-term growth rate, despite Bank of England governor Mervyn King's warning that we 'simply don't know' how many people are arriving.
Gordon Brown increased his projection of the economy's trend rate of growth in last Wednesday's pre-Budget report, allowing him to pencil in an extra 15bn of revenues over the next five years.
But analysts said he could be relying too heavily on thousands more workers from the EU accession countries. In a 30-page document published alongside the PBR, the Treasury said it was assuming immigration in the years ahead would be 'broadly in line with the 2005 outcome,' when official statistics showed a net inflow of 185,000 people.
However, King has issued repeated warnings about the unreliability of immigration data, as the Bank has struggled to calculate how much slack there is in the labour market.
Danny Sriskandarajah, director of the migration programme at think-tank the Institute for Public Policy Research, said Brown's calculations also failed to take account of recent Home Office rule-changes, which will make it tougher for workers from outside the EU to come to Britain. 'Work permits are going to get tighter, and that's a big component of net migration,' he said.
Ministers have also responded to high recent levels of immigration by shutting the door to workers from Bulgaria and Romania, raising another question mark about the Treasury's assumptions. 'It's an example of un-joined-up government,' said Roger Bootle, the economic adviser to Deloitte and Touche.
Danny Gabay, of consultants Fathom, warned that if the economy slowed, the flow of migrants could dry up. 'They've come here to work – if we can't provide them with jobs, then they won't come,' he said.