Never mind the Brexit: The OECD is bang on about immigration deadlock harming British growth

Julian Harris
Follow Julian
Passport control at Gatwick Airport
It's hard to disagree with the OECD's stance that the UK should quickly agree some "simple criteria" of citizens' rights (Source: Getty)

The OECD’s bearish outlook on Brexit grabbed headlines yesterday (indeed, including ours), and also drew ire from Leave supporters who noted the group’s excessively pessimistic forecasts following last year’s referendum.

Away from this inevitably febrile topic, however, the Paris-based think tank’s report also provided some healthy food for thought with regards to domestic UK policy.

One timely suggestion, given our elevated rate of inflation, is to scrap the triple-lock on state pensions and replace it with a still-generous peg to the increase in average earnings. Many British pensioners have considerable private assets, the OECD notes, and those who do not could be helped with complementary welfare policies to alleviate the threat of old-age poverty.

Read more: OECD: Reversing Brexit would give "significant" boost to UK economy

With chancellor Philip Hammond in attendance, the OECD’s economists also threw their weight behind his doomed attempt to equalise levels of National Insurance between employees and the self-employed. Such a policy is fair and stops the risk of workers being pushed into self-employment. The Treasury brushed off the suggestion, no doubt still scarred by the backlash triggered by the policy when it was originally revealed earlier this year. But could it be revisited via a modest tax cut to employees, instead of a tax rise for the self-employed? Worth considering.

On growth and productivity, the report issued two major concerns – weak investment in infrastructure, and a drop in net migration.

Hammond is believed to be weighing up an infrastructure boost in the Autumn Budget (although we’ve heard that before), while the future of migration into the UK remains uncertain.

Read more: UK economy to slow as prospect of hard Brexit causes jitters, says OECD

On the latter subject, the OECD could not be more stark. “Immigration has enhanced living standards through higher labour resource utilisation and productivity gains,” it says, alongside accompanying statistics and charts for evidence. EU migrants to the UK “have a higher educational attainment than in most other EU countries,” it adds, going on to warn: “lower immigration would reduce labour force and productivity growth”.

Thus, returning to the subject of Brexit, the OECD’s pessimism is almost beside the point. A far more significant part of its commentary on the topic concerns the future of EU workers in Britain. The government must “rapidly conclude negotiations”, agreeing “simple criteria” of citizens’ rights that “would minimise administrative burdens” on productivity-boosting migrants and employers, the report says. It’s hard to disagree.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles