ONE thing which Rishi Sunak did not mention yesterday, in what was a lengthy speech and included several heavily patriotic references to Brexit, was the negative impact on the public finances and economic output of the Conservatives’ immigration clampdown.

These major effects are laid out in the Office for Budget Responsibility’s forecasts. These projections do not take into account the domestic effects of the COVID-19 coronavirus outbreak or of the UK Government’s response to it, given the rapid development of this crisis. The Government’s major response was outlined by the Chancellor yesterday, and includes measures on statutory sick pay and support for businesses amid the crisis.

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While the OBR’s overall forecasts have been overtaken by events, the detail includes the projected effects of the Government’s post-Brexit immigration plans. And the projections on growth and on public sector net borrowing and debt – drawn up before the coronavirus outbreak took a lurch for the worse – make for dismal reading.

The Treasury-funded OBR has analysed the likely effects of the Government’s points-based immigration system unveiled in February, which will apply to people from European Union countries after the transition period runs out at the year-end. It makes plain its projection that this system will reduce the UK economy’s potential output, flagging downward effects on the working-age population, employment and taxes.

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The OBR calculates that, by 2024/25, the annual upward impact on public sector net borrowing arising from the new migration regime will be £1 billion.

Its projections show the annual impact building gradually between the 2021/22 fiscal year and 2024/25.

The OBR, set up in 2010 to provide independent forecasts, notes the new migration regime “raises borrowing by reducing population and receipts growth”.

By 2024/25, the changes to the immigration system will cost an annual £1.5bn in terms of lost receipts to the Government, including income tax and national insurance contributions.

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This loss, the OBR notes, is offset to some extent by a fall in welfare spending because “the associated decline in migrants from the EU is concentrated among those in the income bracket that is most likely to be eligible for means-tested in-work support”. However, this projected associated decline in spending is only an annual £500 million in 2024/25.

The OBR foresees a 0.3 per cent hit to real UK gross domestic product in 2024/25 from the change in immigration policy.

It has revised down its projection of net inward migration in 2024/25 from 190,000 to 129,000.

The OBR says: “This means slower population growth, particularly among those of working age, and a slightly lower participation rate, reduces employment by 0.4% by 2024/25... This leaves real GDP 0.3% lower in 2024/25 but GDP per capita little changed.”

The OBR also sets out the major negative effect on UK economic potential that has already occurred since the June 2016 Brexit vote.

It calculates there has been a 2% reduction in potential output arising from the resultant decline in net immigration already seen and the hit to productivity arising from the effect on business investment of Brexit-related uncertainty.

The OBR says: “We estimate that the economic effects of the referendum vote have so far reduced potential output by around 2%, relative to what would have happened in its absence. Part of this reflects lower net inward migration, but mostly it reflects weaker productivity growth on the back of depressed business investment and the diversion of resources from production towards preparing for potential Brexit outcomes. Real business investment has barely grown since the referendum, whereas our March 2016 forecast assumed it would have risen more than 20% by now.”

It adds: “We believe that around one third of the long-run hit to productivity from Brexit has already happened, that another third is likely to come over the forecast period and the rest comes through beyond our forecast horizon.”

The OBR's latest projections, which exclude the domestic effects of the coronavirus outbreak, show UK GDP growth slowing to just 1.1% this year from an already-weak 1.4% in 2019, with expansion forecast at 1.8% in 2021, 1.5% in 2022, 1.3% in 2023, and 1.4% in 2024.

And its projections put public sector net borrowing in coming years much higher than in the restated March 2019 projections.

The OBR’s latest forecasts, excluding the coronavirus effects, show public sector net borrowing of £54.8bn in the 2020/21 fiscal year, up from a projection of £40.2bn in the restated March 2019 predictions, with the forecast for 2021/22 up from £37.6bn to £66.7bn. The net borrowing projections for the following two fiscal years are up to £61.5bn and £60.2bn, from £35.4bn and £33.3bn respectively.

Public sector net debt is projected in the OBR forecasts to rise from about £1.8 trillion currently to £1.969 trillion in 2023/24. This is higher than the restated March 2019 projection for 2023/24 of £1.87 trillion. And public sector net debt is forecast in the latest OBR projections to hit £2.03 trillion in 2024/25.

The OBR says: “Since we closed our…forecast, news about the spread of coronavirus has prompted unusually large movements in asset prices, while other forecasters have been downgrading their assessments of the economic outlook to take account of the possible adverse consequences. The ultimate spread and economic impact of coronavirus are at this stage highly uncertain, but they represent a clear downside risk to the forecasts presented…The consequences are, though, most likely to be concentrated in the near term.”