Soon there will be only two workers for every pensioner in Britain - mass immigration is not the solution - Miriam Cates

However, as much as I’m enjoying this new pro-growth mood music, a closer reading of Reeves’ speech raises questions about whether the government understandshow to achieve real economic growth, or indeed why we need it so badly.

First things first. Why is the UK in such desperate need of ‘growth’? Reeves gives a number of reasons, saying:

“Without growth, we cannot cut hospital waiting lists or put more police on the streets. Without growth, we cannot meet our climate goals or give the next generation the opportunities that they need to thrive. But most of all, without economic growth, we cannot improve the lives of ordinary working people.”

In the Chancellor’s mind, growth is needed because, without it, Net Zero can’t be achieved, public services will fail, and standards of living will fall. On Net Zero, the Chancellor is completely wrong. Far from stimulating growth, UK climate goals have actively constrained growth, as our rush to renewable energy transition has given British businesses some of the highest electricity and gas prices in the world. Industries such as steel and car manufacturing are in terminal decline in Britain, but demand for their products is as strong as ever. In the absence of British made goods, we now import from abroad. Sacrificing our own industries on the altar of Net Zero has not reduced global emissions one iota—it quite simply an act of economic self-harm. Yet despite Reeves’ continued lip service to green goals, I suspect that this Government will soon be forced to water down its climate targets. An exclusive report for GB News this week revealed that the true cost of Net Zero could amount to an eye watering £100 000 per UK household by 2050.

But what of the other reasons Reeves gives for needing growth? Do we need economic growth to fund our public services and improve—or even just maintain—our standard of living? In a word, yes. Demand for public services has grown far faster than our national income in recent years. This is principally because, thanks to a combination of low birth rates and longer life expectancy, the proportion of retired people in our population has grown dramatically. The cost of pensions and healthcare has therefore risen steeply, alongside a fall in the proportional size of the working age, tax-paying population.

In the 1970s, there were four working age people for every pensioner, yet soon there will be just two to one. Unless our national income increases considerably, we simply cannot afford the public services and the lifestyle we have now. In fact, government spending has been unaffordable for some time, which is why we now have a national debt of over £2.7 trillion. Just paying the interest on this debt each year costs £100bn, a payment that will rise and rise unless our national income rises to exceed our outgoings.

It is useful to think about this problem in household terms. Imagine a married couple, Mr and Mrs Smith, who have two children and a combined gross income of £50 000 a year. Until recently, the Smiths managed to make ends meet but then their car broke, at the same time as an elderly relative and a depressed out-of-work friend came to live with them. Mr and Mrs Smith had to borrow £60 000 to fund a new car and convert their garage into a granny annexe. The debt repayments on the loan amount to £7 000 a year which, along with the additional mouths to feed, means the family’s outgoings now exceed their income. They sink deeper and deeper into the red each month, maxing out the overdraft to repay the debt. The only way out of this trap would be for Mr and Mrs Smith to increase their income, but if they work more hours, they have to pay others to care for their children and elderly relatives. The Smiths are trapped.

A simplistic analogy, perhaps, but it illustrates just how deep-seated the UK’s economic problems are. We have borrowed eye watering amounts of money to fund our current standard of living, a cost that will almost certainly increase as the economically active working age population continues to shrink in relation to pensioners and the long-term sick. Successive governments—and employers—have tried to plug labour market gaps through immigration but, as a result of poor policy and woeful record keeping, the vast majority of recent immigrants have not come to the UK to work in productive jobs, but instead have added—significantly—to the cost of dependency. In a perfect illustration of this point, Karl Williams of the CPS analysed ONS data to reveal that,

“In the first six months of 2024, the UK gave out 1,063 health and care visas to workers from Zimbabwe. They brought with them 10,670 dependents. That's ten dependents for every (likely minimum wage) social care worker.”

There may be a theoretical argument that limited, high skilled immigration could contribute to economic growth. But the reality of the last ten years is that the vast majority of immigrants have added to—rather than reduced—the gap between our national income and outgoings.

So, Rachel Reeves is right that our economy—specifically our GDP per capita—must grow if we are to have any hope of maintaining current levels of public spending. But even if the Government is successful in turbocharging new infrastructure, and reducing the number of working age people on incapacity benefits, will that ‘growth’ be enough to fund public services and reduce our national debt?

Only time will tell, but the odds are stacked against Reeves. On the current trajectory, the OBR forecasts that over the next 50 years, our national debt will almost trebleas a proportion of GDP. Even record-breaking levels of productivity gains per worker cannot possibly meet this shortfall.

Sadly we face a locked-in continual decline in the number of British-born people of working age. In the early 1960s, around 900 000 babies were born each year. Twenty years ago, there were around 700 000 thousand births a year. In 2024 there were fewer than 600 000. This means that for every nine people reaching retirement age, there are just seven young people available to replace them in the workplace. And, thanks to a combination of epidemic levels of family breakdown, the impact of social media and cultural changes, a significant number of those young people have such severe problems that they are unable (or unwilling) to enter the workplace at all. There are now around one million 18 – 24-year-olds who are not in employment, education or training.

Investing in infrastructure and clearing red tape are worthy aims, and—if successful—will give both the UK and our beleaguered Chancellor a boost. But if we are serious about achieving the levels of growth required to fund public services in the future, we must address the issue of demographic decline. We have proven beyond doubt that, when it comes to GDP per capita growth, mass immigration is not a substitute for home-grown young people. Unless we’re willing to do what it takes to support families and make it easier for couples to have more children, we will never find the keys to unlock the kind of economic growth we do desperately need.