Theresa May’s policy of reducing UK immigration to the tens of thousands will impose a potentially ‘huge’ cost on the UK economy, suggests a new report from the Cebr.
The Cebr report projects that if migration to the UK is rapidly cut to less than 100,000, then by 2025 the UK economy will be between 4.1 and 5.7 per cent smaller than it would have been.
The report also says that government borrowing will be £15.6 billion higher by the mid-2020s, as a result.
Douglas McWilliams, founder of Cebr said: "If the UK cuts off migration without making adjustments to boost productivity, especially productivity in the public sector, the scale of the economic damage could be huge.”
But maybe what really matters is not so much the hit to the economy, but the cost per person. After-all, if the UK economy is smaller, but the population smaller, then a superficial analysis would suggest that it does not really matter.
Cebr said that GDP per capita would fall by between 1.9 and 2.7 per cent.
It is just that when the government carries substantial debt, the overall size of the economy does matter. According to the Office of Budget Responsibility an 80,000 a year drop in immigration would equate to a £6 billion a year increase in government borrowing.
Last year, Jonathan Portes, former director of The National Institute of Economics and Social Research wrote: “We can calculate that. . . the impact of migration on the wages of the UK-born [in the semi-skilled service sector] since 2004 has been about 1 per cent, [of growth] over a period of 8 years. With average wages in this sector of about £8 an hour, that amounts to a reduction in annual pay rises of about a penny an hour.” Take into account the overall hit on the economy, a cost of a penny an hour seems somewhat trivial, and something the government could easy counteract by using the receipts it generates from immigration to provide some kind of tax credit.