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17 Feb 2024

NextImg:Surely They Didn't Lie: Despite Record Immigration the UK is in Recession

The UK’s Conservative government has made abundantly clear for the past 13 years that it can’t cut immigration as its voters want it to because migration grows the economy. Yet curiously, despite the largest wave of immigration to Britain ever, the economy is contracting. Mystifying.

The British economy entered recession last year, having been stagnant in the second quarter, declining by 0.1 per cent in quarter three, and 0.3 per cent in the fourth. These figures are “challenging” for the government, notes the Financial Times because the government has an election coming and had hoped to offer some tax cuts to try and distract voters from the astronomical tax increases they’ve been squarely behind for years.

Of course, the global economy is in a tight spot and governments across the West are battling against damaging headwinds. But the British government has an answer, a shortcut to global growth: importing people. Indeed, they’ve been so bold in this policy of growing the economy by keeping the borders firmly open, that the United Kingdom is now experiencing historic levels of arrivals.

While the headline-grabbing but comparatively inconsequential matter of illegal boat migration has consumed time and attention, changes by the Conservatives to the law to make arriving in Britain legally so much easier that in the year to June 2023, 1.2 million new people came to the country. Adjusting for those who left in the same period, that’s a net population increase of 672,000 in just a year.

As things stand, the population of the UK will soar by 10 per cent by 2036. Of the 6.6 million new people in that period, half a million will be natural growth — having more people born than die — while the remaining six million will come as a result of international migration.

That this is government policy is particularly consequential because it is precisely the opposite of what the governing Conservatives promised to deliver for many years. Elections were fought and won on the promise of reducing migration “to the tens of thousands” a year — instead, it is now a million more people every 18 months.

It was impossible to keep this promise, the government said, because growing the economy is the most important thing and overrules other considerations. Fair enough, you may say: Chancellor (Finance Minister) George Osborne expressed this in his infamous words back in 2017, when in a mask-slip moment he revealed top Conservatives never planned to follow through with cutting immigration in the first place. They just kept these feelings to themselves at election time. He said:

[N]one of [the Cabinet’s] senior members supports the pledge in private and all would be glad to see the back of something that has caused the Conservative Party such public grief… The damage to the economy from seriously reducing work visas was judged too severe by an expert migration committee; the impact on community relations of further limiting family reunion visas was seen as unpalatable; and few thought we were taking in too many refugees.

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The present chancellor Jeremy Hunt has been perfectly clear that this is also where his feelings lie. In 2022 he told the BBC that migration has a “very positive” effect on the economy and so was here to stay. Pro-government newspaper The Telegraph said of his position then that: “Jeremy Hunt is relying on a surge in net migration to more than 200,000 people per year to help deliver economic growth … The increase in migrant labour will help to buttress Britain’s economy as Mr Hunt imposes higher taxes on earnings, jobs and investment.”

Last year, Hunt claimed the government has “a plan to remove the barriers to stop people working in the UK”, and that this is what people who voted for Brexit truly wanted. There were angry noises about this from Brexiteers at the time, but still, the juggernaut rolled on.

As recently as this month, the savants at Bloomberg predicted “soaring UK migration” would boost the British economy so much it would deliver the government a “windfall”. Seems we got a recession instead, though, and now those hoped-for floor-scrap tax cuts won’t be possible.

It is, of course, inconceivable that politicians would lie to voters. That, therefore, leaves the question, what went wrong? With Britain experiencing the highest levels of immigration in recorded history, and the government absolutely sticking with the fiscal orthodoxy that migrations grow the pie, the economy should surely be booming.

Is it possible that without the over three million extra people the country gained purely through migration in the ten years from 2013 to 2023, the economy would have been sent back to the stone age?

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The focus on GDP as a measure of an economy’s success masks part of the problem, that while the UK entered a technical recession at the end of last year, individuals in the economy have been ‘in recession’ for much longer.

While the economy was still growing, GDP per capita — that is to say, how much wealth there is per person in the economy — has been falling and falling. In 2023, GDP per head fell 0.1 per cent in quarter one, 0.2 per cent in quarter two, 0.4 per cent in the third, and 0.6 in the fourth quarter, much faster than the national rate.

This trend may appear to suggest, at least, there are diminishing returns from importing more and more people into the economy.

To grasp how extraordinary the chasm between the Westminster political bubble — which has no party that could conceivably enter government in the near future that wants to reduce immigration — and the British people, consider a poll commissioned last year about public feelings on levels of arrival. A healthy majority, larger than voted in favour of Brexit for instance, support the notion that there could be a “temporary five-year pause on all further immigration into the UK so that the UK can better absorb the immigration of the last few decades.”

In that gulf between London and the country, it could feel like there’s an opportunity for an insurgent political party to make some political hay. The Conservatives are so low in the polls, after all, the party — one of the oldest in the world — may cease to meaningfully exist by Christmas. Watch this space.