The current political and fiscal landscape in the UK presents a stark and perplexing contradiction: the government publicly advocates for a reduction in immigration while quietly relying on high immigration levels to maintain fiscal balance. The disparity between rhetoric and reality ultimately undermines the credibility of public finances.
The Labour Party criticizes the Conservative government for opening the floodgates to immigration, resulting in record net migration levels. Prime Minister Rishi Sunak has made reducing immigration a priority. The latest data indicates that net migration fell to 204,000 by June, which the government describes as a step toward its target, emphasizing the need to ‘do more’ and continue to push downward. Visa conditions have been tightened repeatedly, leading to a significant decline in the issuance of work, study, and family visas, while industries reliant on overseas labor have begun to scale back recruitment. If this trend continues, it is not difficult to foresee net migration approaching zero in a few years, or even briefly turning into a net outflow.
However, fiscal forecasts tell a different story. The Office for Budget Responsibility (OBR) continues to assume in its latest budget that net migration will rebound and stabilize at around 340,000 annually, calculating that new immigrants will reduce borrowing by approximately £7.4 billion each year during the forecast period. This assumption equates to the belief that the UK can simultaneously achieve two mutually exclusive goals: tightening immigration sources while attracting more people than currently enter. Both cannot hold true at the same time.
This contradiction is not limited to the Labour Party. For years, the Conservative Party has vocally aimed to reduce net migration to ‘below 100,000’; the Reform Party has even adopted the far-right rhetoric of ‘remigration,’ advocating for the expulsion of certain settled groups in the UK. Political discourse has become increasingly heated, yet no one is willing to address the underlying reality: with a birth rate of approximately 1.4, a stagnating or shrinking working-age population, and chronic staff shortages in the NHS and social care, a significant reduction in immigration will only lead to a shrinking tax base, slower economic growth, and greater difficulty in maintaining public services.
The iron law of the UK’s demographic structure is simple: natural growth no longer contributes significantly to population increases, and the expansion of the overall population and workforce largely depends on immigration. Current economic growth and fiscal revenue similarly rely, in part, on the work, taxes, and consumption of new immigrants. The OBR’s projections are based on earlier assumptions of relatively high net migration, which have now diverged from the latest sharply declining data. Without a substantial influx of new immigrants, the fiscal space outlined in the budget will evaporate; conversely, if there are large numbers of new immigrants, it will contradict the government’s current political objectives.
If the government continues to implement a stringent immigration reduction plan, maintaining net migration at 340,000 will be nearly impossible. At that point, a fiscal gap will inevitably emerge, forcing the government to make difficult choices between raising taxes, cutting spending, or increasing borrowing. This is a contradiction that will reach its limits sooner or later.
Immigration is not a panacea, but in an aging society, it is a critical variable for sustaining the economy and public finances. The issue is not whether immigration numbers should decrease, but whether the UK is willing to face the truth: fewer immigrants mean accepting reduced fiscal capacity and slower growth; better public services cannot be achieved while simultaneously pursuing isolationist policies and expecting others to foot the bill.
