One of my favourite books of recent years is One Billion Americans by Matthew Yglesias. While I don’t think that One Billion Brits is likely anytime in the near future, it is only right that we also think big and are ambitious for the UK.
There has been a lot of commentary about the fact that net migration to the UK might reach one million this year. Most of this commentary has been pretty dreadful as people demonstrate their lack of understanding of the economic benefits of immigration. One common argument has been that we need to cut immigration in order to make housing more affordable. While this argument does at least demonstrate some grasp of supply and demand it is wrong to focus on the demand side rather than the supply side of the equation. While cutting immigration will reduce demand for housing, the impact on house prices will be negligible because demand will still far outstrip supply. Not only this but our ailing economy would take a further hit as skilled people are prevented from moving to the UK and young people – already taxed far too much – would be forced to face even more of the burden in propping up our crumbling public services. As Dr Kristian Niemietz has pointed out, cutting immigration is no substitute to reforming the housing market.
Our current planning system is restricting growth and is the economic equivalent of the UK shooting itself in both feet. Keeping our restrictive planning system and cutting immigration would be like shooting ourselves in the face. If we want to revive the UK’s economic fortunes and boost productivity then we need to liberalise the planning system in order to make it as easy as possible to build more of everything. We need more reservoirs, wind turbines, solar panels, nuclear power plants, and millions of new homes. We also need to liberalise the immigration system to make it far easier for people to move here.
When I have made these points before I have been inundated by people on Twitter (many of them well meaning, others trolls) sharing simplistic graphs showing immigration increasing over the years while economic growth remains sluggish. The reason why such graphs are misleading is because anyone who has progressed beyond Key Stage 3 should know that there are generally more than two variables at play when it comes to complex things such as the economy of a G7 nation. The reason why we have seen such sluggish growth in the UK is because there are a number of factors at play, including our failure to build anything. It’s the same reason why Poland is doing so well despite having much lower levels of immigration – it actually builds things.
The economic case for immigration is irrefutable and is arguably the only thing currently preventing the UK economy from completely collapsing. We know that increasing immigration not only boosts GDP for the country as a whole, it also increases GDP per capita. In short, immigration boosts productivity and makes us all richer. Moreover, the downsides of immigration are neither non-existant or greatly exaggerated. For example, it has been well established for decades that increased immigration has no real impact on job opportunities, including for low skilled workers. Moreover, there is scant evidence that increased immigration depresses the wages of native workers in any meaningful way.
The argument I have used so far has been an economic one. This is understandable given that this is a blog about the economics of public policy. Advocates of increased immigration are often accused of seeing everything through an economic lens. I don’t think we should be ashamed of this. Obviously there is more to life than GDP, but boosting growth does allow us to be able to afford lots of nice things such as functioning public services, a robust military to defend our nation, and enough money to put food on the table and spend time with our friends and family.
However, the case for increasing immigration is not just an economic one. The UK is a much better and culturally richer place thanks to immigration. Take London, for example, just think how much more boring it must have been before Chinatown or Brick Lane. Thanks to immigration, our country is much more interesting and diverse and we get to meet different people and experience different cultures which we may never have done before. Far from replacing UK culture, immigrants enrich it.
There is also a strong moral case for increasing immigration. If someone wants to move to the UK to work and to improve their lives then what right do we have to deprive them of that opportunity? Increasing immigration has the potential to increase the welfare of hundreds of millions of people, all without costing us a penny.
Immigration is a great thing and we need much more of it.
Since leaving the EU, the UK has adopted a relatively liberal approach to high skilled immigration. However, when it comes to low skilled immigration then the system is still restrictive. Even under our relatively liberal system for high skilled workers, there are still frictions when it comes to hiring people and filling vacancies. All of this creates friction for businesses and increases costs as they expend resources either dealing with the Home Office or being forced to hire people in the UK who might not have the right skills. Even worse, vacancies go unfilled as firms can’t find anyone to do the job. The end result is that productivity takes a hit, economic growth remains sluggish, and we’re all poorer than we would otherwise be.
We need to ultimately move to a system of open borders in which anyone from anywhere around the world (with some exceptions) is free to move to the UK to work or study. The first step should be to reintroduce Freedom of Movement with the EU. As is the case with trade, it makes more sense to have closer ties with large economic blocs which are close to you in geographic terms. We should also rejoin the Single Market which will eliminate barriers to trade with the EU. This will no doubt be controversial but it’s the right thing to do.
We should also introduce freedom of movement between the UK, Canada, Australia, and New Zealand. CANZUK is an incredibly popular policy proposal in the UK and the other nations due to the deep historical and cultural ties. However, we should go even further and adopt a CANZUK Plus model consisting of other wealthy countries in the Commonwealth such as Singapore. At the same time we should be pushing for reciprocal arrangements with other highly developed countries such as the United States, Japan, and South Korea (which will obviously be more difficult).
This should pave the way for eventually leading to freedom of movement with India and other growing economies with which the UK shares historic ties. Ultimately, if a country does not pose a national security risk to the UK, then we should open our borders to their citizens and close down the Home Office while we’re at it.
None of this will be possible without liberalising the planning system and it would be inappropriate to go for it before then. We need to liberalise the planning system and get building and then move towards a policy of open borders.