Immigration, not the economy, is key to Tory election success

immigration, not the economy, is key to tory election success

Rishi Sunak has so far struggled to get a grip on immigration, both legal and illegal – James Manning/PA Wire

The UK may have tipped into recession at the end of last year. The National Institute for Economic and Social Research (NIESR) last week estimated that GDP fell 0.1pc during the final quarter of 2023, as during the previous three months – with two successive quarters of contraction defining “recession”.

We won’t know for sure until the official GDP numbers land on Thursday morning – the day Rishi Sunak’s beleaguered Conservative Party faces awkward by-elections in Kingswood and Wellingborough.

Labour is already odds-on to win both contests, in each case overturning a sizeable Tory majority. That’s before confirmation of Britain’s first non-lockdown recession since 2009.

But if, as voters go to the polls, the airwaves are full of the dreaded “r-word”, the Tories could get a proper double-hammering, raising even more questions about Sunak’s leadership.

Downing Street has lately signalled the Prime Minister intends to “go long”, delaying the general election until October or November.

As inflation slows and real wages keep rising, Sunak’s team hopes an improving economy will help eat into Labour’s 20-point opinion poll lead. If the Bank of England gets in two or three interest rate cuts before the autumn, boosting consumption and investment, that could spark an all-important “feelgood factor”.

Having lowered employee National Insurance from 12pc to 10pc last month, the Tories plan further tax reductions in Jeremy Hunt’s Budget on March 6 and again in an Autumn Statement just before polling day. The Chancellor needs to lower the tax burden, with revenue as a share of GDP approaching a 70-year high.

Hunt says this should be the year we “throw off our pessimism about the UK economy”. That will be tough if the first big economic headline of 2024 is “Recession Britain”.

Yet even if GDP did fall slightly during the last quarter, the UK is holding up compared to its peers – as shown by last week’s forecasts from the Organisation for Economic Cooperation and Development (OECD).

The US is due to expand by a trend-busting 2.1pc this year, not least due to the cheap energy, with America’s fracking revolution helping the world’s largest economy remain buoyant amidst a bleak global outlook. Meanwhile, the UK is set to grow 0.7pc, the OECD says, compared to 0.6pc in France and just 0.3pc in Germany – in and out of recession since early 2023.

The UK Purchasing Managers’ Index, based on surveys of business owners, hit 52.9 in January – with readings above 50 indicating growth. That’s the highest since May, reflecting rising household and business confidence as commercial borrowing costs have eased.

Britain’s service sector PMI also rose to 54.3 last month, up from 53.4 in December, an eight-month high. And while the manufacturing PMI remains sluggish, rising only to 47.0 in January, from 46.2 the month before, business sentiment across the sector just hit a four-month high as order books have grown, despite ongoing supply-chain challenges.

Yet the UK economy overall is still lacklustre – with NIESR estimating a trend growth rate of just 0.9pc, far less than 2.3pc during the 10 years before the 2009 financial crisis and 1.2pc in the decade before the pandemic.

Mainstream economists – not least in the Treasury and Office for Budget Responsibility (OBR) – have long maintained that high immigration promotes economic and fiscal success. But the consensus that a constant influx of younger workers helps to drive growth and pay for the UK’s ageing society is now starting to crack.

There are almost 10m working-age people neither working nor looking for work – up sharply since the pandemic. Senior OBR economist Professor David Miles last week argued that welfare reforms pushing more people back to work would be “unambiguously beneficial”.

At the same time, it is “much less clear persistently high levels of net migration…can generate sustained fiscal improvements”, argues Miles, formerly of the Bank of England’s Monetary Policy Committee. He also points to “strong reasons” why high immigration puts public services and broader infrastructure under pressure.

While entirely obvious to most of us, this is a big admission from someone at the heart of the UK’s often other-worldly policy-making establishment. And not a moment too soon.

Coming from immigrant stock myself, I instinctively back the idea Britain has benefitted over many years from the efforts of new arrivals. But the pace of immigration is now so high that even if GDP growth quickens, GDP per head – a far more accurate measure of living standards – still lags.

From 48,000 in 1997, annual net immigration rose to 177,000 in 2012 before reaching 342,000 in 2015 – roughly the population of Cardiff. So, immigration doubled during the three years ahead of the Brexit vote, increasing seven-fold since 1997.

These numbers now look tame. Net immigration hit 745,000 in 2022 – the population of Leeds – in a single year. Illegal immigration is also soaring, with unlawful Channel crossings higher last month than in January 2023, despite Sunak’s pledge to “stop the boats”.

The pace of UK immigration is now nothing short of reckless – given the lack of provision in terms of schools, hospitals, social housing and a host of other public services. This is taking a serious toll on millions of hard-working families, undermining Britain’s natural tolerance and now posing a threat to our public finances too.

YouGov polling suggests concerns over immigration and asylum are now by far the most important issue, outstripping the economy, for those who voted Conservatives in 2019 – not least those “red wall” Tories pivotal to the next general election. The same concerns are also sharply up among the population as a whole.

It has taken our po-faced policy-making elite – far less reliant on public services – years to acknowledge this reality. It’s high time our often equally out-of-touch political and media class did too.

Follow Liam on X @liamhalligan

%n

Sign up to the Front Page newsletter for free: Your essential guide to the day’s agenda from The Telegraph – direct to your inbox seven days a week.

News Related

OTHER NEWS

Volkswagen "very worried" about the future of its operations in SA

A senior Volkswagen executive involved in a global cost-cutting strategy said on Friday, 24 November, he was “very worried” about the future of the company’s operations in South Africa, which ... Read more »

Liz Truss backs Trump with call for Republican presidential victory

Photograph: Toby Melville/Reuters Liz Truss, the shortest-serving prime minister in British history, who was famously shown to have a shorter shelf life than a lettuce, has effectively backed Donald Trump ... Read more »

Standard Bank treasonous? We're literally helping to keep the lights on says CEO

Standard Bank treasonous? We're literally helping to keep the lights on says CEO Bruce Whitfield speaks to Lungisa Fuzile, Standard Bank SA CEO. Standard Bank is one of 28 banks ... Read more »

Israel, Hamas agree to extend truce for two days; Musk ‘would like to help rebuild Gaza’

Israel, Hamas agree to extend truce for two days; Musk ‘would like to help rebuild Gaza’ The UN said many people in Gaza still had no food or cooking fuel ... Read more »

This is what Pitso Mosimane said about the African Football League

Mamelodi Sundowns’ former coach, Pitso Mosimane, dismissed the African Football League Jingles shared his opinion and compared it to the CAF league and said that it was a mere tournament ... Read more »

Take note of these N3 road works between Westville and Paradise Valley

Take note of these N3 road works between Westville and Paradise Valley The N3 between the Westville viaduct and Paradise Valley interchange will be partially closed to traffic for the ... Read more »

UKZN medical student bags 2023 Health Excellence Rising Star Award

UKZN medical student bags 2023 Health Excellence Rising Star Award Durban — One of the country’s most progressive young minds in the medical field, fifth-year University of KwaZulu-Natal (UKZN) medical ... Read more »
Top List in the World