Could more immigration boost the UK economy?

By Will Smale
BBC News Online business reporter

David Blunkett wants to see more skilled workers come to the UK

The issue of illegal immigration into the UK has become something of a cause celebre in recent times.

A number of the national tabloids have appeared to delight in screaming that the country is being swamped by asylum seekers attracted half-way round the world by the government's over-generous handouts.

And how much of a drain these foreigners are on the British taxpayer.

Yet look beyond the lurid headlines and knee-jerk xenophobia, and increased immigration - of the legal variety - may actually be very beneficial to the UK economy.

Staffing shortfall

With Britain suffering a real staffing shortfall in sectors such as catering, construction and agriculture, a rise in immigration could be the answer to the problem.

The construction industry has a staffing shortfall

Home Secretary David Blunkett agrees.

He recently said he wanted to see more skilled workers come to the UK to resolve the staff shortages in such industries - and added that he did not believe there should be a cut-off level.

"No, I see no obvious limit," he said.

Balance

Mr Blunkett added: "I see a balance in terms of the different forms of entry, migration and residency in this country so that we can get it right."

If the Home Office's own statistics are to be believed, increased legal migration into the UK would not only help remove hard-to-fill job vacancies, it would boost GDP.

The economic benefit of immigration (into the UK) is overall very clear - it boosts GDP Dr Heaven Crawley of the IPPR

The most recent publication on the subject by the Home Office suggested that migrants contribute more in taxes and national insurance than they consume in benefits and other public services.

It estimated that the UK's foreign-born population contributes about 10% more to government revenues than it receives in state expenditure.

Social effect

The report said this was worth £2.6bn in 1998/99.

Or putting it another way, if there were no foreign-born people in the UK, taxes would have to rise, or expenditure cut by the same figure - the equivalent of about a penny on the basic rate of income tax.

Dr Heaven Crawley from the centre-left think tank the Institute for Public Policy Research (IPPR) agrees, but also cautions that the social effect of immigration must be taken into account.

Tory leader Michael Howard is himself the son of Romanian immigrants

She said: "The economic benefit of immigration (into the UK) is overall very clear - it boosts GDP.

"The economic benefits are significantly higher than the costs.

"However, the question is the balance between the definite economic benefits and the other connected issues, such as the social impact, and the additional strain on public services. This balance is the issue."

Dr Crawley also believes that David Blunkett is right to say that you cannot set a limit.

"There should not be a limit in terms of geographical space, rather it should be on the needs of the industrial sectors in question."

Low-skilled sector

And far from limiting immigration to those people from abroad who are highly qualified, Dr Crawley says the low-skilled sector of the UK economy is most at need of an influx of new labour.

"Catering, construction, agriculture, low-skilled carers and cleaners - these are the industries that are most suffering from a lack of staff," she said.

Debating whether or not migration is a good thing, economically or otherwise, has become tied up with the huge problems in the asylum system The problem with managed migration

Dr Crawley puts this staffing shortfall down to two main factors - the UK's ageing population and more young people choosing to go on to higher education.

"The UK has a smaller working population and our young people have a higher expectation of what job they are going to do," she said.

Paying taxes

"To attract more legal migration would mean more people paying taxes and contributing to pensions. With illegal immigrants you get all costs and no benefits.

"The overall question, however, remains one of balance. If you want the benefit of migration you have to accept the (social) costs."

Employers group the CBI agrees that migrant workers can have a positive impact on the UK economy.

We have no problem with moderate and managed migration - the problem is that it is neither moderate nor managed Sir Andrew Green, Migration Watch

John Cridland, CBI deputy director-general, said: "While the government must remain committed to tackling low skills, immigration has an important role to play in alleviating current skill and labour shortages in specific sectors."

Too high

However, others disagree, saying the UK already has too high a level of immigration.

Sir Andrew Green, of Migration Watch, responded to Mr Blunkett's increased immigration suggestion, by saying he was "astonished".

He added: "We have no problem with moderate and managed migration. The problem is that it is neither moderate nor managed."

The Conservative Party, whose new leader Michael Howard is himself the son of immigrants, also questioned Mr Blunkett's comments.

Shadow Home Secretary David Davis suggested Mr Blunkett spoke in favour of increased legal migration "as a way to cover up their (the Government's) failure to tackle widespread abuse of the asylum system."