Russell Lynch: Recession is only way to hit migration target

From the baristas to the builders, to the City suits who all make London tick, the overseas workers making our capital their home must despair at election time.

Living in a city that drives our economy with the help of more than three million foreign residents — and 600,000 EU-born workers — I know I do.

This week’s immigration “debate” has predictably descended into a race to the bottom. Theresa May is sticking to the Conservatives’ seven-year-old pledge of cutting UK net migration into the “tens of thousands”. Ukip’s floundering leader Paul Nuttall has gone one better and promised a “one in, one out” policy, as if he were some doorman at a Stoke nightclub.

It’s all the more baffling since Mrs May has shown signs during this campaign of flexibility elsewhere. Chancellor Philip Hammond — if he stays in the job — should get a freer hand for the Brexit era after the vote, amid hints that the brake on putting up major taxes could be lifted, as well as the expensive triple lock on raising pensions. But when it comes to immigration, the old “tens of thousands” line just can’t be abandoned for fear of stirring up a wasp’s nest on the Right and jeopardising the blue-collar voters abandoning Labour and Ukip.

Although you can’t escape the “strong and stable” Tory election mantra, the irony is that if the policy was ever actually achieved the state of the public finances would be anything but. But the number of politicians willing to argue the positive economic case for migration and put to bed common public misconceptions is alarmingly thin on the ground. Where the UK’s fiscal position is concerned, they would have a very strong case.

The Office for Budget Responsibility, the fiscal watchdog and forecaster headed by Robert Chote, sketched out some different scenarios for the UK’s public finances under high, low and zero net migration scenarios last year before the referendum. Because migrants are overwhelmingly here to work, they’re a positive for the national coffers. The numbers it crunched have obviously been superseded by the referendum result, but the principles remain the same.

It found that under a “high” scenario — where net migration is at 265,000 by 2021, the UK’s potential output and GDP were 0.8% higher, roughly £15 billion. The “low” scenario, where migration falls to 105,000 (and still just missing the Tories’ pledge) has potential output and GDP down by the same amount, as well as a 1.3% fall in house prices. Under the zero net migration scenario the population is 1.5% lower, GDP nearly 2% lower and house prices 3% down to boot.

THE long-term picture is little better. In the watchdog’s January fiscal sustainability report the low migration scenario of 105,000 a year and an ageing population sends debt as a share of the economy up more than 30% higher than the OBR’s central projection by 2066-67. The watchdog already predicts a deficit of around £156 billion by then, or 8% of GDP. Low migration scenarios just make the damage worse.

As the OBR put it: “If a government succeeded in reducing net inward migration from what would otherwise occur then that would be likely to create additional fiscal pressures, but it could always choose to offset those pressures through additional spending cuts or tax increases.”

So there you have it. Unless they’re willing to acknowledge that “tens of thousands” is a politically convenient but unachievable fantasy, we should be asking politicians what they’re planning to cut, or where they’ll hit us in the pocket to meet it. The chances are that more migrants will stay at home anyway, as the eurozone recovers and the Brexit brakes squeeze our economy. But it still takes a peculiar form of mania to go out and argue for a policy that will probably take a recession to achieve.