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Government Forecast: Cutting Migration After Brexit Could Boost Economy

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DANIEL LEAL-OLIVAS/AFP/Getty Images

Reduced migrant inflow after Brexit could boost Britain’s economy by forcing businesses to improve productivity, according to the Office for Budget Responsibility (OBR).

Robert Chote, who heads the official forecasting body, said higher labour costs resulting from a cut in EU migration could “trigger” companies to “innovate in ways that could increase their underlying productivity”.

“That could have longer-lasting positive effects,” he told the Treasury select committee, following a question on whether the OBR believes a “more restrictive migration regime being applied to EU migrants could ever be positive for the public finances”.

Pointing to another potential Brexit boost to the economy, Mr. Chote said the government could pursue GDP growth through policy changes Britain was barred from pursuing under the bloc’s rules.

“In other words, we could deregulate, and become more competitive, and [see] faster trend growth rather than disappearing into the economic slow lane with the rest of the European Union?” said Conservative MP for Dover Charlie Elphicke.

Net migration from EU nations fell to its lowest level in five years in 2017, according to Office for National Statistics (ONS) data released in November, the Bank of England noted wages in Britain rising for the first time in years.

Revising its GDP growth forecast from 1.4 per cent to 1.5 per cent earlier this month, the OBR said that productivity growth in the UK “has been much stronger than expected”.

Mr. Chote’s remarks to the Treasury select committee regarding immigration and productivity contrast with the forecasting body’s usual line on the issue, with the OBR previously having warned of a budget “black hole” of £6 billion a year post-Brexit if migrant numbers reduced.

However, the predictions were assessed as “highly questionable” by Britain’s leading migration policy watchdog, which accused the OBR of “seriously exaggerating” the fiscal impact of cutting migration.

Noting post-Brexit immigration controls will focus on restricting the volume of low-skilled workers, Migration Watch UK said the quango’s estimate of migrant contributions — based on the assumption that migrants on average have the same economic performance as natives — was “implausibly high”.

The think tank said: “Statistics published by HMRC show that such migrants pay only about half the income tax and national insurance of the average UK taxpayer.

“Even if these new migrants on average made the same contribution as the native population it is most unlikely to be true for migrants on arrival.”

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