Westminster blog

Been out of the office this morning, so afraid I’m coming a bit late to the OBR report. But one conclusion that leaps out is on immigration. Sir Alan Budd finds that:

1) A fall in immigration will hit Britain’s long-term economic potential and

2) Cameron will still fail to meet his promise to lower net migration to 1990s levels

First the point on the economy. Sir Alan Budd’s report cuts the forecast for “trend growth” from 2.75 per cent to 2 per cent from 2014 onwards, primarily because Britain’s workforce won’t be growing fast enough to sustain it.

The implication is to maintain a 2.75 per cent long term growth, either the British birth rate needs to rise significantly (it’s predicted to fall) or immigration levels need to run at the same pace as when Britain opened its doors to Poland.

It’s an economic challenge that runs against the grain of the political debate these days. Most folk in Westminster are only happy to talk about restricting the borders, rather attracting more foreign workers.

As the OBR points out, the flagging economy and the competition from Germany (which opens its borders to Poland and other A8 countries in 2011) will make Britain much less attractive destination for migrants.

But even with this headwind, it concludes that David Cameron will break his promise to “reduce net migration to tens of thousands not hundreds of thousands”, as billed in the Queen’s speech.

The OBR estimates that net migration will run at 140,000 a year — about 40,000 higher than Cameron’s own immigration pledge. It is only a working assumption. But it is hardly a vote of confidence in Cameron’s ability to deliver his programme for government.

Also makes you wonder what the additional hit to trend growth would be if Cameron did manage to bring net migration down to under 100,000.

UPDATE: I’ve been corrected. The OBR assumes, on most issues, that the previous government’s policies will continue. So the report is in fact stating that Cameron’s immigration policy needs to reduce immigration from a trend rate of 140,000. That, of course, means that the OBR’s long term growth assumptions are also on the optimistic side. Cameron’s immigration cap, if successful, will hold-back economic growth.