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The House of Lords Economic Affairs Committee, in a report published today, reject the Government's argument that a high level of net immigration is of economic benefit to the UK. In the light of this, they call on the Government to set an explicit target range for net immigration to the UK.

The Committee argue that while the high level of net immigration of recent years has inevitably increased GDP - the measure the Government uses - there has been little or no positive impact on the living standards of the existing population. The Committee show that the economic effects of immigration should be judged not by its impact on GDP but by the impact on income per head of the resident population. On this measure, immigration has had a largely neutral effect on economic well-being with the income of some groups of low-paid workers actually falling.

The Committee also reject the Government's position that a high level of net immigration is needed to prevent labour shortages. They point out that in the long run net immigration simply increases the size of the economy with no impact on the level of vacancies. The report points out that the labour shortage argument in favour of new immigration is often put forward by employers who benefit from greater access to cheap labour from overseas.

The Committee argue that by providing ready access to cheap imported labour the Government risks discouraging employers from adopting alternative solutions to labour shortages such as increasing investment in new technology to make work less labour-intensive or increasing their spending on staff training to meet skills shortages.

The report asserts that arguments made in favour of immigration as a way to defuse the 'pensions time bomb' do not stand up to scrutiny. The Committee point out that over time immigrants too will grow old and, having lived and worked in the UK, be eligible to draw pensions. They argue that raising the pension age is the only viable way to deal with pension issues caused by an ageing population.

The Committee also considered the impact of net immigration on demand for housing. They heard evidence that under current plans for house building, the level of net immigration assumed by the Government Actuary's Department over the next 20 years (190,000 per year) will lead to house prices being more than 10% higher than would be the case with zero net immigration.

Based on their findings that the Government has overstated the economic benefits of immigration to the resident population, the Committee's recommendations for government action include:

• The Government should review the implications of its projection that net immigration in future years will be 190,000 people a year. It should adopt an explicit target range for net immigration and adjust immigration policies regularly in line with that objective.
• There must be more clarity on the objectives of the new partially points-based immigration system. The Committee are not persuaded that this represents the radical overhaul of the present system claimed by the Government.
• The Government should review its immigration policies and then explain the reasons for them and their objectives. They should also explain how they relate to other policy objectives such as improving the skills of the domestic workforce
• The Government should do more to enforce the minimum wage and other employment conditions to protect immigrants and the resident population.

Commenting Lord Wakeham, who Chaired the inquiry, said:

"The argument put forward by the Government that large-scale net immigration brings significant economic benefits for the UK is unconvincing. We have found no evidence to support their position.

"The Government's use of impact on overall GDP as the key measure is preposterous and irrelevant because it does not reflect the economic well-being of the existing population.

"We feel the time is now right for the Government to review the implications of its projection that future net immigration will be 190,000 people a year. Such a high level of immigration, and consequent rise in population, has major impacts in a range of areas from demand for housing to the use of public services. These impacts should be recognised and examined.

"Decisions about the level of net immigration that is desirable must also take into account important non-economic considerations such as the impacts on cultural diversity and social cohesion. These are clearly important but were beyond the scope of our inquiry. Immigration from the EU cannot be controlled and the UK must continue to honour its human rights obligations towards asylum seekers. So controls on immigration from outside the EU is the most appropriate way to achieve a level of immigration that really does meet the UK's economic needs."

Notes to Editors

1. The report The Economic Impact of Immigration, is available from The Stationery Office, House of Lords Economic Affairs Committee, 1st report of 2007/08, HL paper 82.
2. The full report can be viewed at: http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeconaf/82/82.pdf
3. The members of the Committee who conducted the inquiry are: