OBR changes tune on Brexit migration cut

CUTTING migration after Brexit could boost growth by encouraging businesses to innovate, the Office for Budget Responsibility has said.

Robert Chote, chairman of the independent forecaster, told the Treasury select committee there is a possibility lower migration from the EU could “trigger” companies to be “more productive” and deliver an economic uplift. This is because the associated higher labour costs could “encourage firms to innovate in ways that could increase their underlying productivity,” Mr Chote said.

The comment appears in contrast to previous warnings from the economic forecaster that a fall in migration would increase the cost of Brexit.

Mr Chote had been asked by the committee if he could “envisage a situation where a more restrictive migration regime being applied to EU migrants could ever be positive for the public finances”. Net migration from the EU fell to a five-year low in 2017, according to the Office for National Statistics.

This month, the OBR revised its GDP growth forecast for 2018, from 1.4 per cent to 1.5 per cent. The forecaster said: “Productivity growth – measured as output per hour – has been much stronger than expected.”

Mr Chote also told the committee there may be a Brexit growth boost if it led to the UK pursuing policy changes which it was previously “constrained from making by EU membership”.