Select Committee on Economic Affairs Minutes of Evidence

Annex A

THE IMPACT OF IMMIGRATION ON GDP PER HEAD

  1.  In their 2006 pre-budget report, the Treasury estimated that immigration in the period 2001Q3 to end 2005 had added about ½% a year to the working age population. They assumed that migrants contributed the same percentage to GDP growth as they added to population. Trend growth is now estimated to be 2.75% a year. ½% of this is 18.2%—hence the government claim that migrants add 15-20% to trend growth.

  2.  However, this takes no account of the addition to overall population and hence the impact on GDP per head. Using GAD population projections and the Treasury assumptions the following would be the impact of migration on GDP per head at today's production levels:

(a)  Annual growth in working age population due to migration from 2004-2031 = 0.42%.

(b)  Thus, annual growth in GDP due to migration in this period = 0.42%.

(c)  Annual growth in the overall population from 2004-2031 due to net migration = 0.35%.

(d)  Average annual addition to GDP per head of population (b-c) due to net migration = 0.07%.

(e)  Addition to GDP per head each year (at 2005 production levels)x = £14 per annum or 28p a week.

 REFERENCES

  i  ONS International Migration—Series MN.

  ii  GAD Web article on migration and population growth at

http://www.gad.gov.uk/Population/2004/methodology/mignote.htm

  iii  Source Home Office: Accession Monitoring Report.

  iv  Home Office Press Release 12.11.2003.

  v  Parliamentary answer given by Ruth Kelly, then Financial Secretary to the Treasury, in May 2002.

  vi  Migrationwatch Briefing Paper 1.3 "Immigration & the Dutch Economy"—

http://www.migrationwatchuk.com/Briefingpapers/economic/Immigration_and_the_Dutch_economy.asp

  vii  The migrant population in the UK:fiscal effects—Home Office: Ceri Gott and Karl Johnston.

  viii  IPPR: The fiscal contribution of migrants in the UK: Danny Sriskandarajah, Lawrence Colley and Howard Reed.

  ix  House of Commons Library ref 2007/7/69—SGS.

  x  Based on GDP of £1,234 billion in 2005 (Source:ONS) and a UK population of 60 million.

26 September 2007

---