Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:36 pm on 14th April 2003.

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Photo of Peter Lilley Peter Lilley Conservative, Hitchin and Harpenden 7:36 pm, 14th April 2003

I want to talk about precisely that point because the Chancellor raised it too. The Chancellor claimed that net immigration has economic and social benefits that have been important to the success of the US economy and are now important to ours. Is that true? It is certainly true that, if one has extra workers, one has extra output. However, there is no evidence that those extra workers increase the productivity or the rate of growth of the pre-existing workers. Adair Turner recently analysed the difference in productivity growth and economic growth in Europe and America. At first sight, American growth over the past 20-odd years is half as great again as European growth. However, when the figures are broken down, they show that per-head growth in the States has been almost identical to that in Europe. In other words, all that migration has achieved in America has been to add to the size of the economy but not to the average wealth per head.

What of the social benefits to which the Chancellor referred? Clearly, cheap labour benefits the rich. Many people whom I have met around London say that they enjoy employing cheap workers who have come from eastern Europe or elsewhere. However, by definition, it benefits them by holding down the pay of lower and less skilled working groups. I am not the only one who says that. The Government's adviser on labour matters, the noble Lord Layard, wrote to the Financial Times to say that, according to the newspaper, we needed "immigrants, skilled and unskilled".

However, his letter continued:

"This may now be the conventional wisdom, but it glosses over the conflicts of interest between different groups" of people.

"For . . . employers and skilled workers, unskilled immigration brings real advantages. It provides labour for their restaurants, building sites and car parks and helps to keep these services cheap by keeping down the wages of those who work there.

But for unskilled" people

"it is a mixed blessing. It depresses their wages and may affect their job opportunities. Already unskilled workers are four times more likely to be unemployed than skilled workers, and it is not surprising that they worry.

Although the total size of the labour force has no effect on the unemployment rate, its structure does; and a rise in the proportion of workers who are unskilled does raise overall unemployment."

The social benefits of unlimited immigration—or, not unlimited, but boosted net immigration—are not so visible to those at the lower end of the pay spectrum. The reason why nurses in this country are paid relatively little, and less than secretaries, is that we recruit nearly 30,000 nurses from abroad every year, enabling us to hold down their pay. That is why a third of all those who train as nurses leave the profession. That is why there are 100,000 people in this country with nursing skills who do not take up nursing jobs. The story is similar in a number of other professions.

The major social cost of this immigration policy is surely in the housing market. In an empty country, it is sensible to promote net immigration to exploit natural resources. However, England is the most overcrowded country in Europe; it is more densely populated even than Belgium and three times more densely populated than France. Net immigration into this country imposes social costs and leads to competition for scarce resources, especially in housing and land. The Chancellor deplores that. In his Budget, he deplores high prices and the scarcity of supply of housing. He proposes to relax the planning laws. However, he does not say how many extra houses that will create. I would ask the Chancellor to tell us, when he sums up, whether the measures that he announced in the Budget for extra houses will be sufficient to cope with and house even the extra flow of labour into this country, which he is encouraging, let alone the net immigration of 200,000 people a year into this country. That was the predicted figure before this Budget. It is equivalent to two whole constituencies' worth of houses having to be built every year—two thirds of them in the south-east. That target cannot easily be met. We have made a problem for ourselves by promoting excessive net immigration to this country. I hope that the Government will think again about the wisdom of that policy.