Britain is reaping substantial economic benefits from the increase in migration from Eastern Europe, a top official at the Bank of England said yesterday.

David Blanchflower, one of the nine members of the Bank’s Monetary Policy Committee, which sets interest rates, said that immigration had helped to keep a lid on inflation.

Professor Blanchflower has regularly cited migration as a reason why interest rates need not rise as high as his more hawkish colleagues believe.

He said the evidence showed that immigration had reduced joblessness to a level below which the economy starts to overheat, in turn causing inflation, the so-called “natural rate” of unemployment. Rather than taking jobs from Britons the new workers had, instead, helped unemployment to stay relatively low without forcing interest rates to climb.

His report argued that competition in the jobs market from the new workers — mostly young and male and earning on average 14 per cent less than non-immigrants — had helped to keep the pace of increase in earnings at a sustainable level by keeping a lid on workers’ bargaining power over wages during periods when strong economic growth and high employment levels might in the past have fuelled excessive pay demands.

His speech was made after a report by the anti-immigration group Migrationwatch, which argued that the benefits of immigration were trivial at best. The group said that mass immigration had brought financial benefits of only 4p a week to every person in Britain. Its analysis essentially reproduced government data on the effect of migration on economic growth.

Professor Blanchflower said that there was “little evidence” that immigrants from Eastern Europe had significantly affected the wages or employment chances of Britons. A paper published alongside his speech said that the 0.8 per cent rise in unemployment in the past 18 months had little to do with the arrival of about 500,000 workers from Eastern Europe. It also noted that a significant proportion of those workers had now probably returned home.

The report said that population growth had been “extremely low by international standards” over the past 30 years — 7 per cent compared with 42 per cent in the US and 18 per cent in France. But the rate of growth has shot up in recent years, with the British population increasing by 1.8 million (3.2 per cent) since 1999, largely because of the inflow of Eastern European migrants.

“It would seem likely that the UK could absorb a relatively small inflow of immigrants, by international standards,” the report said. “It appears that it has already done so to a considerable degree.”

Around the world, the report said, there was little or no evidence that immigrants had a significant impact on wages or unemployment. The paper was published days after the entry into the EU of Romania and Bulgaria, whose citizens have been granted restricted access to jobs in Britain.

City analysts are divided over whether the Bank will put up interest rates next month to 5.25 per cent. But Professor Blanchflower’s speech was taken as a sign that he would oppose any increase.

• A superstore tycoon and avowed Eurosceptic has defended his decision to hire more than 30 workers from Poland. Bruce Robertson, who owns Trago Mills and is a member of the UK Independence Party member, employs the workers at his complex near Newton Abbot in Devon.

  He said: “I have no alternative than to employ foreign workers to keep our business going. Increasing legislation by our own Parliament and the EU has provided a mass of red tape for employers.”

  New arrivals

  380,000 left the UK in 2005
  565,000 people immigrated in the same year, the equivalent of 1,500 a day
  84% of immigrants are aged between 15 and 44
  25% of incoming migrants in 2003 came to study

  Source: Office for National Statistics

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