Rt Hon Lord Lilley

    Sunday Telegraph ? 27th August 2006
    More workers, but lower living standards
    ? by Peter Lilley MP
    Last week Labour?s immigration chickens came home to roost. Since 1997 it has repeated endlessly two claims: first, that, like Guinness, “immigration is good for you”, it enriches us economically and culturally; and, second, anyone who casts doubt on the Government?s arguments or predictions is racist, alarmist and wrong.
    The first assertion received a blow from Ruth Kelly?s decision to launch the Integration and Cohesion Commission. At best that suggests that multiculturalism has not proved an unqualified blessing. Jihadists and suicide bombers have not culturally enriched us.
    The second assertion received an equally hard blow from the publication of official figures showing that some 600,000 workers have come here from the new EU member countries since May 2004. That made Government claims about alarmist predictions look hollow, provoked concerns that could not be attributed to racism, and showed that some people feel an economic downside from immigration.
    When the Government decided to open Britain?s borders to the new member countries, they forecast the inflow would be 5,000 to 13,000 a year. Ministers called Migration-Watch “extremist” when it presciently described that forecast as “divorced from reality” and itself suggested that “a cautious estimate would be 40,000 a year”: ultra cautious as it turned out. When figures for the first months of the new scheme were released, the hapless then Immigration Minister, Des Browne, crowed that they “show that most media speculation about the number of new arrivals was groundless?. Early indications suggest the numbers registering have peaked and are beginning to fall back”. Two years on, the Government has been shown to be too complacent by a factor of 20. At least we now have a better idea whom we can trust.
    Equally important, the public concern about the influx of Eastern Europeans cannot be blamed on racism. Poles in particular are highly regarded both for Poland?s contribution during the Second World War and as hard workers who assimilate easily. In fact, the vast majority of immigrants from Asia and Africa, as well as Europe, are decent, hard-working, law-abiding people. The caricature of economic migrants as scroungers and criminals is the reverse of the truth. People?s concerns about immigration are based not on race but on economic, housing and public service issues. Precisely because immigrants are often skilled, invariably industrious, and usually willing to work for less than the going rate, the resident population fears their impact on British pay and jobs. Government claims that immigration is economically enriching ring false to those lower down the pay spectrum.
    Of course, that is what makes immigration popular with the better-off. They would rather employ a skilled Polish worker than a semi-skilled Brit; and prefer a highly motivated East European to a Briton whose drive is blunted by the knowledge that he can get nearly as much “on the social”. Why Labour should use the reserve army of the Third World to hold down British workers? pay is a mystery. (The most credible explanation came from the least likely source, a BBC journalist who, alas after the microphones were turned off, volunteered his view that “Tony Blair dislikes the British working class so he is importing one of his own!”)
    The greatest public concern about immigration, and the most rational, is rarely mentioned in public debate: its impact on the housing market. Even if Eastern Europeans share dwellings at double the national average, an extra 600,000 people must occupy well over 100,000 dwellings. That is more than half the new homes built each year. Workers from the new member states are not entitled to social housing or housing benefit, but every private dwelling they occupy means one fewer for local residents.
    Even before the East European influx the acceleration in net immigration forced John Prescott repeatedly to raise his house-building targets for southern England. Yet in some 17 statements to Parliament on this subject, immigration has never been mentioned. Migration to the South from the rest of the UK was raised but that was always minor and has now reversed.
    The main demand for new housing comes from the indigenous population forming smaller households as people live longer, separate, leave home earlier etc. To the extent that extra homes are required to accommodate the same population living in smaller households, we would not need more schools, hospitals, water or other infrastructure. However, ministers admit that net immigration is set to add six million extra people by 2031, a third of new households. These extra people will require not just more homes but more infrastructure. None of this is taken into account in the Government?s claims that immigration is good for us.
    So it is – up to a point. But immigration acts like a lubricant, not a fuel. Without oil your car would seize up and without some immigration the economy would suffer damage. But beyond a certain point adding more oil or more immigration won?t make either car or economy go faster. Unfortunately the Government believes that immigration fuels economic growth. The arguments it uses, though economically illiterate, do logically imply that the benefits of immigration increase in proportion to numbers. That is why ministers say there should be “no upper limit”.
    The notion that immigration boosts growth confuses size with income. Of course a bigger labour force will produce more output. But it does not increase output and income per head. Indeed, if cheap labour removes the pressure on employers to raise productivity, it will make living standards grow more slowly, as has happened since immigration accelerated. The notion that immigration is necessary to fill “shortages” is plausible but nonsense. In a freely working labour market, pay rates rise to the level needed to persuade domestic workers to acquire the necessary skills or perform an unpleasant job. There was a shortage of nurses as long as their pay was held down by siphoning off nurses from the Third World. Since nurses? pay rose, the shortage has disappeared.
    For too long the Government has silenced rational debate on immigration by branding any critic a racist. After last week they cannot get away with that any longer. Those who have a positive view of immigrants but happen to believe that beyond a certain point the benefits of immigration are outweighed by the costs should speak out.
    ? Peter Lilley is Conservative MP for Hitchin and Harpenden and former Secretary of State for Social Security. He is author of Too Much of a Good Thing? by the Centre for Policy Studies.