Migration Causes Steady Inflation in the UK

John Sydenham

Inflation occurs when prices rise across the economy. In the UK the central bank has a policy of increasing the amount of money in the economy every year (the ‘money supply’) and this increases prices steadily. The government occasionally, such as during COVID, takes out loans to inject large amounts of money into the economy. This results in a spike of increased prices. Increasing the money supply too much causes inflation.

The money supply is mainly increased through the lending activity of banks. Property prices have a major role in lending because property provides collateral for loans. Loans for property (Mortgages) also have a direct role in increasing the money supply because banks issue money today on the expectation of repayment at a later time. Property prices in the UK are closely linked to migration (see Details below). As a result migration is a major driver for inflation. The steady inflation in the UK is partly the result of the migration driven property market.

The government seems blind to the inflationary effects of migration and instead sees migration as a tool for controlling wage growth. When inflation is taken into account UK earnings have been static for 20 years.

Source: ONS.

As has been discussed elsewhere, static wages are due to high migration. Migration works, it stops us getting richer.

Migration reduces the potential for wage inflation but it exacerbates property price inflation and the money supply. Overall migration is a major contributor to UK inflation and, by inhibiting productivity growth, actually reinforces the potential for episodes of wage inflation.

The Conservative and Labour governments have agreed that inflation should be set to 2% a year. Inflation works like compound interest so 2% inflation a year causes prices to rise by 22% in 10 years. Migration ensures that the inflation target is met. These governments see inflation as a way of transferring wealth from the established population to those who have fewer assets. This might seem like a ‘good idea’ but is really a tax on savings. Cash holdings are not stagnant in a modern economy. Banks invest people’s cash so it does not just sit around as pounds under their beds. Banks are actively using cash so any ‘moral’ case for inflation is about taxing people who hold cash, it is mainly about penalising private sector pensioners, not about improving the economy. (The so-called ‘millionaire pensioners’ are largely retired public sector workers who are insulated by index linked pensions that have actuarial values over £1m, in 2022 a £10,000 pa pension was worth c.£1m (1% r.a. rate)).

Economists see migration as a way of stopping the labour market from ‘overheating’ (Goldman Sachs) eg: stopping you from getting pay rises. This is sold to the British electorate as a holy project to help poor little foreign people. Taking money from the British is like taking candy from a baby.

As we battle every year to keep our wages from falling behind prices we should blame our Internationalist neighbours who value virtue signalling about migration higher than the welfare of their fellow citizens.

Strangely it is the young British who cannot afford to even rent a room, let alone buy a house, who are most convinced that migration is a ‘good thing’. They are Internationalists so have been heavily indoctrinated. If migration stopped tomorrow then within ten years any British, middle class, young adult could afford a house in London.

Details

Over a few years the supply of money permitted by the banks and government can clearly be seen to control inflation in the UK:

Source: Bank of England: The determination of MO and M4

Economics journalists still act like inflation is a surprise but this is seldom true:

Anyone could have predicted the inflation in 2021-2023. The government cannot simply pump cash into the economy as it did during COVID and expect that the value of money would stay constant.

The link between money supply and inflation is clear and well known. During the years when money was tied to gold reserves there was little inflation:

Source: IEA

The inflation after 1950 was driven by Keynsian Economics, after 1970 was driven by wage inflation and after 1997 by property prices (migration).

In the UK House prices are set by demand:

Source: Nationwide, Migration Watch Record net migration and the rising demand for housing

Migration watch say:

• The UK population is now 67 million but new Migration Watch UK projections estimate that it will increase to between 83 and 87 million by 2046 if net migration continues at the record level of just over 600,000 per year.

• Immigration is the largest component of demand for additional housing

• Population growth over that period would mean the need to build between six and eight million more homes, depending upon assumptions.

• That is equivalent to between 15 and 18 cities the size of Birmingham, which in 2021 had 423,500 households (according to Census statistics).

• Cutting net migration levels to 100,000 per year or less would help young people to get on the property ladder and preserve more of our beautiful UK countryside from being lost forever to housebuilding.

Source: Migration Watch

The Treasury are particularly keen on migration driven property prices because they have a strange policy for dealing with the UK Balance of Payments deficit. Membership of the EU has left the UK with an appalling Balance of Payments problem. This should lead to step-wise falls in the pound. The Treasury, rather than implementing policies to decrease imports from the EU and increase exports, has decided that the value of the pound can be maintained by selling UK property to foreigners. This requires migration to keep the property prices high.

Balance of Trade in Goods and Services with EU (ONS Series l86i):

Of course, the Treasury is full of Internationalists who hope that within a few years the UK will be an insignificant part of a greater Europe and a small region controlled by a global government. Why bother to run the UK properly? They hope to get a good job in Strasbourg or New York.