Supplementary memorandum by Migrationwatch
UK on the cost of pensions
1. The Institute of Public Policy Research
(IPPR) recently provided evidence to the Committee suggesting
that the dependency ratio would increase sharply under a balanced
migration scenario and would "put the equivalent of 9p on
income tax by 2036".
2. This is massively distorted for two reasons:
— It used the 2004 rather than the
2006-based population projections.
— It confused zero migration (no migration
at all) with zero net migration (or "balanced migration"
where immigration is equal to emigration).
3. The use of 2004-based population projections
means that the assumptions about fertility and mortality are now
out of date, as are the resulting dependency ratios. Second, the
2004-based projections were produced before legislation was passed
to raise the state pension age (in stages) to 68. This effectively
moves about 2.5 million people from the "dependants"
category into the "working age" category.
4. Immigrants tend to be young adults whilst
emigrants are predominantly older. Thus, under a balanced migration
scenario, dependency ratios are improved by replacing older people
with younger.
5. The impact of these two factors is very
large. The IPPR's erroneous calculation give a dependency ratio
of 86.2% in 2074 under what they thought was balanced migration.
On a correct calculation, the dependency ratio will rise to only
71.3% in 2081 from its current level of 60.7%. Under the principal
population projection it will rise to 67.7% but the population
would be 21 million higher at 85.3 million. Thus 5.7 million extra
people would be required for each 1% reduction in the dependency
ratio.[82]
6. The IPPR are also wrong to claim that
zero net migration is likely to lead to a falling population.
In fact it will increase to about 65 million in 2056 and then
decline very slowly to 64.3 million in 2081.[83]
7. We conclude that the IPPR's calculations
grossly overstate the benefit of high levels of migration on dependency
ratios and on tax rates. By contrast their impact on population
density and hence on our quality of life will be immense.
11 January 2008
82 Section 6 of Prof. Rowthorn's submission to the
Committee entitled "Commentary on the Cross-Departmental
Submission to the House of Lords Select Committee on Economic
Affairs". Back
83
Ibid-Table 1 Back
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