George Osborne's economic strategy rests on continued high levels of immigration to Britain – in contrast to the Conservatives' policy of cutting net migration down to the "tens of thousands".
The Government will find itself in the position of either having to allow continued immigration in the hundreds of thousands or jeopardising the country's economic recovery, according to its own fiscal watchdog, the Office for Budget Responsibility.
Ministers will not reduce average annual immigration down to the "tens of thousands" over the course of this parliament according to the OBR's projections. Instead, net inward migration to Britain will remain at an average of 140,000 a year until 2016, it says, despite repeated promises from Conservative ministers that they will reduce immigration flows to substantially below these levels.
If ministers were to succeed in reducing immigration down to their target, the UK's growth would be damaged, the OBR's economists believe – acknowledging the role that immigration plays in Britain's economic health. The forecast is embarrassing for David Cameron and the Home Secretary, Theresa May, who have repeatedly insisted that the Tory manifesto pledge will be met.
The OBR said: "Our assumption for population growth is based on average net inward migration of 140,000 per annum over the forecast period [2011-16]." Net migration to the UK in 2010 was 252,000, according to the Office for National Statistics, the highest level on record.
Tory ministers have consistently stressed that their objective is to bring down net migration to Britain to "tens of thousands" a year before the end of this parliament. Mr Cameron reiterated this objective in October.
The Home Office argues that, since the OBR's 140,000-a-year net migration figure is an average over five years it is consistent with immigration levels dipping below 100,000 in future years of this parliament. But the average flows over the parliament would still be considerably in excess of ministers' targets. And the OBR's estimate – which it first made in June 2010 – has not changed despite the immigration control measures introduced by the Coalition over the past 18 months.
The OBR has also pointed out that falls in immigration would have economic implications. Reductions in net immigration would have a negative impact on UK growth, the fiscal watchdog said in November last year. "If migrants have a similar employment rate and level of productivity to the existing average, a reduction or increase in population growth of 0.1 per cent would translate one-for-one to a reduction or increase in trend growth of 0.1 per cent respectively."
Jonathan Portes, the director of the National Institute of Economic and Social Research, said the OBR would have to revise down its growth and deficit forecasts if the watchdog believed the Government was likely to succeed in cutting immigration. "Less immigration would mean fewer workers paying tax," he said.
The Immigration minister, Damian Green, said: "We have introduced a limit on non-EU workers and radically overhauled the student visa system to cut abuse. We will also be announcing restrictions on the right to settle here and reforms of the family migration route."