Friday, July 13, 2012

open the gates

The longer, healthier lives the British can expect to lead will not always be happier, or at least as prosperous, as we might wish  – and the public services we have come to enjoy and take for granted will grow less generous for recipients and less affordable for the state.

The Government's fiscal watchdog, the Office for Budget Responsibility, said higher levels of immigration would help the economy to grow faster and ease the pressure to cut spending. However the Coalition has pledged to reduce the annual figure to the "tens of thousands" of people by the end of this parliament in 2015, down from the current official level of 260,000 a year.

The OBR said that an ageing population would put pressure on state finances through increasing health spending, higher state pension costs and rising social care bills and Britain will need to undergo an extra £17bn of spending cuts and tax rises to bring down the national debt to 40 per cent of gross domestic product by 2062. The OBR's analysis was based on the assumption that annual net migration over the following five decades will fall to 140,000. Yet it also showed that if annual immigration were to remain at present levels of 260,000 the economy would grow more quickly. The OBR said that higher immigration would raise the annual growth rate over the next five decades from 2.4 per cent to 2.7 per cent. Under these circumstances the size of the fiscal consolidation needed to bring down the public debt to 40 per cent of GDP would be three times smaller, at just £4.6bn.
The OBR's analysis showed that with annual immigration of 260,000 the UK's population, presently 62.3 million, would reach 85.8 million by 2060, and the working age population (16-65) would be 50.3 million. If annual migrant flows were 140,000, the British population would reach 77.2 million and the working age population would be 44.5 million. With zero migration the population would rise to 64.1 million and the working age population would fall to 41.4 million.

The OBR also forecast that if net inward migration were cut to zero over the next five decades, the scale of the public austerity facing Britain would need to be three times larger, at £46bn. If all migration ended tomorrow, the UK's average annual growth rate would fall to 2 per cent and the national debt would spiral to 120 per cent of GDP by the middle of the century.

The OBR said: "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."

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