Image by Foreign and Commonwealth Office (via Flickr)
The Office for Budget Responsibility (OBR), the government’s independent forecasting body, conducted an analysis in which it discovered that unless net migration projections were revised, George Osborne, the Chancellor of Exchequer, would not be able to reach the desired budget surplus by 2019/20.
According to OBR’s estimation, if inward migration projections are not changed from 105,000 people a year to 185,000 the change in positive output would be insignificant. Consequently, the budget surplus would drop to zero and additional cuts in spending and higher taxes would be the only alternative to achieving a surplus by2020.
Osborne’s claim about the economy growing ‘robustly’ every year, the rising living standards and the ‘millions of extra jobs’ being created rests on OBR’s further findings:
Osborne’s assertion of 1.1 million increase in employment is mostly because of upward revisions to net migration.
The upward revision to GDP growth’ by 2016/17 would be because of growth in population due to high net migration and the government’s decision to implement fiscal tightening policies at a slower rate.
There is a high proportion of people of working age among the immigrant population, who improve the employment rate, GDP, potential output and tax receipts.
Despite these findings, Osborne made no mention of immigration in his spending review and autumn statement last week. The treasury, on the other hand, only referred to migration in terms of ‘foreign students’.
A 2014 report by OBR also mentioned that inward migration adds more to government income than to expenditure on services like school and health. The report also found higher inward net migration may improve the UK’s long-term fiscal position.
Labour MP John Mann accused Osborne of failing to acknowledge that bringing down the annual deficit could only be achieved by increasing the number of new jobs and finding migrants to fill them.
The chancellor responded saying the increase in jobs over the next five years would be taken mainly by Britons.
Osborne said: “People can enter the labour force for many reasons. They can be school leavers, graduates or people who are currently economic inactive and not currently in receipt of benefits. I’m not sure I follow the logic of the questions. But when it comes to migration, we are not trying to stop migration we are just trying to get it down to manageable levels."