‘Serious problems' with UK's reliance on migration, warns OBR official

Telegraph

2 days ago

Immigration is creating 'serious problems' for public services and living standards, a senior official at the Government's fiscal watchdog has warned.
David Miles, an executive at the Office for Budget Responsibility (OBR), said Labour must prioritise getting Britons back to work instead of relying on overseas workers to grow the economy.
Only by achieving this will Sir Keir Starmer be able to slash the welfare bill and tackle the country's 'explosive' debt pile.
The economics professor, who has also served on the Bank of England's interest rate-setting Monetary Policy Committee, said the UK was already on course to become the most populous country in Europe by the middle of this century.
He added that depending on an increasing population to expand the economy 'could not be sustained', as migrants themselves use schools, hospitals and other public services as they get older, have children and become eligible to claim benefits.
Writing in an essay published by the Common Good Foundation, Mr Miles said: 'Immigration – which primarily involves those of working age who are many years away from retirement – both delays the impact of the ageing of the population and is the driver of population growth.
'Some conclude from this that a faster rise in the population ... will be beneficial in alleviating acute underlying fiscal pressures.
'But, even setting aside the fact that it is GDP per capita that matters for average standards of living – and growth in population does not obviously boost it – there are serious problems with the idea that faster population growth can consistently alleviate fiscal problems.'
Mr Miles also suggested that tackling worklessness among working-age Britons was more important than attracting the most highly paid migrants to the UK.
Almost the entire rise in economic inactivity since Covid has been driven by people born in the UK, many of whom are also claiming sickness benefits that do not require them to look for work.
Mr Miles said: 'The fiscal benefits of raising the incomes of those who are born in the UK and who might be on a trajectory of consistently below average wages are as great as the benefits of having more people come and stay in the UK with average or, especially, well above average earnings.'
It comes after the OBR has faced scrutiny for overstating the economic benefits of migration, with Morgan McSweeney, Sir Keir's chief of staff, reportedly concerned that the watchdog does not properly account for the burden on public services.
The watchdog has previously admitted that low-paid migrant workers are a drain on the public purse – costing taxpayers more than £150,000 each by the time they hit state pension age.
However, calls for restrictions on overseas workers are likely to be uncomfortable reading for Rachel Reeves, with Treasury officials warning successive chancellors that a big reduction in migration would substantially reduce the Government's headroom.
Ms Reeves is already likely to have to raise taxes by £20bn this autumn, following a series of about-turns on welfare and winter fuel payments.
'Substantial' burden
Official data shows that immigration has fuelled the two biggest population increases in peacetime.
The Office for National Statistics (ONS) has found that the population of England and Wales grew by more than 700,000 in the year to June 2024 to nearly 62 million.
This is the second-biggest annual jump since records began in 1949 and only beaten by the 800,000 rise in the population in the previous 12 months.
This stemmed from record rises in net migration – the number of people entering the UK minus those leaving.
Mr Miles said continuing these trends was unsustainable because it would pile a 'substantial' burden on the public finances.
He highlighted that even if all the future migrants arriving in the UK were all aged 24 and would not reach retirement for more than four decades, the population would have to rise by 20m to balance the split between pensioners and workers.
He said: 'Twenty million extra young people would need to arrive in the UK over the next 40 years to stabilise the dependency ratio at its current level. That would imply a UK population of around 100 million by 2064.'
Worklessness crisis
OBR analysis published last year showed the average low-earner who comes to Britain aged 25 costs the Government more overall than they pay in from the moment they arrive.
The cumulative bill rises to an estimated £150,000 each by the time they can claim the state pension at 66, according to the watchdog.
This is because low-paid migrants, who the OBR assumes earn half the average wage, demand more from public services compared to what they contribute in tax.
Mr Miles suggested that tackling the substantial rise in young Britons claiming they are too sick to even look for work would be more beneficial for the public purse.
He said: 'The fiscal benefits of helping people, especially young people who potentially have many years of work ahead of them, back into employment are substantial.
'There is a great deal of evidence that mental health in particular is typically improved by being in work. And mental health problems have been a very significant factor behind the recent rise in illness-related inactivity.'
Calls for lower migration come amid growing scrutiny of the UK's benefits bill, particularly after Labour watered down welfare reforms earlier this year following a backbench rebellion.
The benefits bill for people on sickness or disability benefits is currently on course to hit £100bn by the end of the decade.
Mr Miles said: 'The higher population route to fiscal sustainability by slowing the ageing of the population is uncertain. Today's young people are tomorrow's old people, so fiscal benefits fade. And the rise in the population needed to completely offset ageing in demographic structure is very great and gets bigger over time. It could not be sustained.'