Higher UK immigration could cut deficit, states OBR

13 Jul 2012 | Posted by Carl Thomas

The Office for Budget Responsibility (OBR) has suggested the higher UK immigration and more people moving to the country on UK work permits over the next 50 years could help to reduce the budget deficit.

As Britain's native population ages, the pressure on future taxpayers and governments is set to grow, with an extra £17 billion worth of spending cuts and tax rises required to cut the national debt to 40 per cent of gross domestic product by 2062. This is in addition to the £120 billion worth of fiscal consolidation already being pushed through by chancellor George Osborne.

However, the OBR suggests that higher levels of immigration would ease this pressure by spreading the cost.

The analysis is based on the assumption that annual net migration over the following five decades will fall from the present levels of around 260,000 to something like 140,000. If immigration was to continue at current levels, by 2060 the UK's working age population would be in the region of 50.3 million. However, if annual migration flows were reduced to 140,000, there would be just 44.5 million people in the country of working age by 2060.

Unfortunately the suggestion comes just as the government is seeking to lower the number of immigrants coming to the UK from the hundreds of thousands to the tens of thousands.

A statement from the OBR read: "Higher net migration than in our central projection – closer to the levels we have seen in recent years, for example – would put downward pressure on borrowing and PSND [public sector net debt], as net immigrants are more likely to be of working age than the population in general."

There is an added factor in that people with UK work permits moving to this country tend to have a higher level of motivation to succeed, meaning that they are often more likely to build their own businesses or take work that eventually leads to a higher tax yield.