Reducing net migration could mean the state pension age goes up and annual payments come down
Hitting the government’s net migration target would put an £8bn hole in the public finances, and could lead to lower state pensions or higher taxes.
New analysis, out today, from the National Institute for Economic and Social Research (Niesr) found that reducing immigration to the "tens of thousands" would hit tax revenues by £3bn a year by 2032 and by at least £8bn a year by 2057.
To make up the shortfall, the government could raise the state pension age from 68 to 69, cut the annual pension allowance by £300 a year or raise the rate of employees’ national insurance from 12 per cent to 13.5 per cent.
The calculations assume that the “profile” of immigrants to the UK does not change. In other words, the average earnings of migrants that arrive stays the same. The Institute and Faculty of Actuaries (IFoA), which commissioned the report, said that the potential shortfall could be offset if the fewer number of arrivals took home higher wages and thus paid higher taxes.
Net migration to the UK is currently running at 333,000 a year. The Conservatives promised before the 2010 general election to bring that number down to five figures, though that target has been missed in every single year.
The ins and outs
|
|
Total arrivals |
Total departures |
Net migration |
|
UK citizens |
83,000 |
123,000 |
minus 39,000 |
|
EU citizens |
270,000 |
85,000 |
184,000 |
|
Non-EU citizens |
277,000 |
89,000 |
188,000 |
|
Total |
630,000 |
297,000 |
333,000 |
Business leaders say high migration levels reflect the strength of the UK economy and fear tighter restrictions could damage the recovery.
Yesterday, Leave campaigners presented their vision for an “Australian-style points-based immigration system”. It was dismissed by Remain campaigners as unworkable, though it is a clear sign that immigration looks set to become one of the key battlegrounds in the final weeks of the EU referendum campaign.