Want fewer cuts and smaller tax rises? Then welcome more immigrants

The Office for Budget Responsibility unveiled its annual long-term Fiscal Sustainability Report today, which provides an outlook for the public finances over the next five decades.

The central projection is not much changed from last year. The OBR says the fiscal pressures of supporting an ageing population means Britain needs to push through a permanent fiscal consolidation (spending cuts and tax rises) of 1.1% of GDP to bring the national debt down to 40% by 2062. That’s around £17bn in today’s money. Last year, the OBR said the required consolidation was 1.5% of GDP, or £22bn. So we’re a little better off. The OBR says this is mainly because the Government has now decided to peg pensions to the Consumer Prices Index rather than the Retail Prices Index, with the former tending to be lower. Over a long period, this makes a big difference.

But how much of this adjustment is really necessary? If you dig deep into the OBR report you find that the projections are very sensitive to net immigration flows.

The OBR’s central assumption is that net inward migration will fall to about 140,000 a year (it is presently around 250,000) and remain there over the next five decades.

But what if immigration, instead, remained at present levels (what the OBR calls “high migration”) for that period?

The OBR’s answer is that we’d have stronger growth, as this table shows:

The OBR also says there would be less strain on the public finances because the working population would be larger (immigrants generally being younger). This would mean that the national debt, by 2062, would be considerably lower, 50% of GDP rather than 90%:

And if the goal is to get the national debt to 40% of GDP by that date, higher levels of immigration would be a considerable help. Indeed, as this shows, the consolidation would need to be just 0.3% of GDP, rather than 1.1%:

That means £4.6bn of austerity, rather than £17bn.

So if the OBR is right and you want fewer spending cuts and smaller tax rises then you should welcome more immigrants.

One normal objection to this sort of analysis is that “immigrants grow old too”, so we’d merely be deferring a necessary fiscal correction. Well, maybe, but in 50 years our economy might have advanced to such an extent that levels of spending that today look unsustainable might be easily bearable. Who knows what productivity leaps forward we’ll have made, pushing up tax revenues?

The second conventional objection is that immigration on this scale would make Britain too crowded, with the OBR projecting that the population would reach 85.8 million by 2062, rather than 77.2 million if inflows were lower:

But if that seems like a big leap, recall that in the 1801 census, the population of Great Britain was 10.5 million – levels that Thomas Malthus regarded as unsustainable. Now whatever happened to him?

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• http://www.facebook.com/people/Peter-Snelson/557035971 Peter Snelson

  nuts, this guy is mad has no clue about wars and why they happen. People dont mix and he thinks of them as machines. A really really stupid article.

• http://www.facebook.com/people/Peter-Snelson/557035971 Peter Snelson

  If 5 million people pile into a countrty that is an invasion. Hitler went into Russia with a million. We are being invaded.