Low migration risks an economic doom loop for the UK
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Depending on which of the main parties’ manifestos you read, immigration to the UK is either too high or much too high and the next government will cut it. Unlike many other manifesto promises, this one will almost certainly be kept. Visa applications for work and study are down 30 per cent this year already, while emigration is rising. Applications for work visas in the health and care sector have fallen by an astonishing 75 per cent.

Good news for a Labour government? Only in a very narrow sense. The impact of the pandemic and its aftermath on the UK’s labour force, in particular the rise in the number of people out of work because of sickness and disability, has been well publicised. Less obvious has been the extent to which this has been offset by migration, with recent arrivals both much younger and more likely to work than the resident population. There are well over a million more people born outside the EU working in the UK than before the pandemic.  

A sharp fall in migration will therefore be a drag on both growth and the public finances. The Office for Budget Responsibility estimates that a “low migration” scenario would push up the deficit by £13bn at the end of the next parliament, even after taking account of the reduced need for spending on public services. That’s twice as much as Labour’s modest tax increases would raise. And it does not take into account the implications for the NHS and care sector workforce.

But leaving aside narrow fiscal arithmetic, the bigger risk for Labour is a political and economic doom loop. Tighter migration policy makes it harder to finance and staff public services. There is convincing evidence that when centrist governments impose austerity in response to such constraints, it in turn drives support for populist and far-right parties, which blame the impacts of austerity on both immigrants and the “elites” in power.

Meanwhile, restrictions on legal migration can also lead to an increase in the demand for migrants without authorisation to work. Visible increases in “uncontrolled” migration further undermine the government’s credibility on migration issues.

We’ve seen versions of this across continental Europe for a decade, where neither marginalising the populist right nor co-opting them or their policies have so far been successful for mainstream political parties. The vacillation and appeasement demonstrated by much of the current Conservative party leadership towards Nigel Farage and Reform UK doesn’t give much confidence that we will do better.

So the challenge for mainstream politicians, and indeed economists, is to break the doom loop. That means not ignoring the immigration issue nor offering watered-down versions of populist “solutions”. There is a window of opportunity here. In the past decade, the UK public’s attitudes to migration and especially its economic impacts has become more positive. The idea that the vast majority of the British public is hostile to immigration and that there is nothing that can be done to change that is false.

Meanwhile, Labour has been commendably clear that growth, if not the answer to all the UK’s economic problems, is a necessary precondition for reversing them and that there are no easy answers or short-cuts. One essential part of long-term growth strategy — alongside education and skills policy, planning and infrastructure and much more — is a managed but also open and flexible migration policy.  

What does that mean in practice? Uncertainty resulting from frequent policy change over the past few years has undermined business confidence and investment in the UK. Labour needs to explain — and soon — that immigration is not the problem, but one part of the solution.