Watchdog plays down migrants impact
The issue of immigration is "not very important" economically and there is "masses of space" in Britain, a senior official from the government fiscal watchdog has suggested.
Office for Budget Responsibility (OBR) board member Stephen Nickell told MPs that new arrivals had held down unskilled wages "to some extent" but the overall impact was marginal and the NHS would be in "dire straits" without migrant staff.
Although the public was concerned about numbers, only 10% of the country was urbanised, he argued.
The comments, on an issue set to be a key general election battlground, came as Mr Nickell gave evidence to the Treasury Select Committee in the wake of the Chancellor's Autumn Statement.
Asked for his views on the impact of immigration on wage inflation, Mr Nickell said: "It's perfectly true, I think, from the evidence that the pay of unskilled workers, particularly in the service sector, has been held back to some extent - not a massive extent, but to some extent - by unskilled immigration...
"At the end of the day, let's say over the next 10 years or so, the general consensus is that for the native population, the existing population, immigration may be a little bit good, it may be a little bit bad economically.
"But there isn't overall that much in it. Obviously there are special situations like in the health service, for example - some 35% of health professional are migrants.
"It's quite plain that, if they weren't there, the health service would be in absolutely dire straits."
Mr Nickell went on: "If I were thinking about immigration, I think that the argument basically boils down to people, the number of people.
"The evidence suggests that, since more immigrants mean more housing, more roads, more airports, more incinerators, more more more of this being required, and since the evidence would suggest that people by and large don't like these things - especially if they are near them - I think that is the key issue about immigration that people may wish to face up to.
"One argument says 'We are a small island, not much room'.
"On the other hand, of course - there is masses of room. The urbanised part of Britain occupies less than 10% of the surface area.
"The urbanised part of Surrey occupies less of Surrey than golf courses. So in some senses, plenty of space.
"But as you know, explaining the situation ... there's plenty of room, these issues are really not very important, it doesn't get you very far. This is not the way people think about these things.
"People think about these things on the basis of their experience and what they read in the newspapers.
"Most of the things that people object to arise because there are just more people."
During the committee session, OBR head Robert Chote delivered a stark warning that the gap between consumer spending and wage increases was the greatest for decades.
"If you look at the relatively robust pace of growth over recent quarters, that has been reflected particularly in terms of the contribution from the consumer, in terms of people running down savings rather than having stronger income growth," he said.
He said the watchdog's assumption was that it was not "plausible" for this to continue.
"If you look at the last year, real consumption growth has been running further ahead of real wage growth than in almost any other year over the last 15 or 20.
"Therefore in our forecast the main reason we expect the quarterly rate of growth to slow is that you see consumer spending moving more into line with income growth, and being less driven by the sort of decline in saving you are talking about."
Tory backbencher Steve Baker predicted that long-term low interest rates were going to provoke a "horrible crash".
"I'm really concerned that we are not focusing on the extent to which monetary policy is dis-coordinating the market for loanable funds, sending false signals about where we are in the production possibilities frontier, stimulating over-consumption and false investment," he said.
"And I think we're going to be caught out by another horrible crash as a result."
Mr Chote also stressed that the OBR was dealing with a "fundamentally unobservable variable" when it tried to estimate the size of the structural deficit - the measurement being targeted by the coalition.
He cautioned that politicians should not "bet the farm" on the body's forecasts, and bear in mind that there was a high level of uncertainty.
Fears over immigration have been widely credited with fuelling the Ukip poll surge, which saw the party top European polls and win two Commons by-elections.
David Cameron pledged to reduce net annual immigration below 100,000 by the general election, but figures released last month showed it is running at 260,000.
The Prime Minister has said he will use a mooted renegotiation of Britain's EU membership terms to tackle "pull" factors - including banning newcomers from claiming tax credits for four years.