Rachel Reeves has pushed for an “ambitious” youth migration deal with the EU in a bid to improve the outlook of the public finances ahead of the autumn Budget.
The chancellor told the Times an exchange scheme for young workers would be “good for the economy, good for growth and good for business”.
The UK agreed to work towards a “youth experience visa” with the EU in May this year but the specifics of the scheme are still being negotiated.
Reeves also called for the Office of Budget Responsibility (OBR) to factor the potential economic impact of such a scheme into its forecasts ahead of the Budget, which she hopes will reduce the need for spending cuts or tax rises.
The proposal has previously been criticised by the Conservatives and Reform UK, who have said it amounts to a partial return to freedom of movement, which ended when the UK left the EU.
Such a scheme could mean those aged 18-30 could stay for two or three years, but the details are to be negotiated.
In an interview with the Times ahead of the Labour Party’s conference in Liverpool this week, the chancellor declined to specify how many visas could be issued annually under the scheme.
The UK already has similar schemes with 11 countries including Australia, New Zealand and Japan, with people able to stay for up to three years depending on where they apply from.
Under those agreements, the UK issued just over 24,000 youth mobility visas in 2024.
The OBR has previously scored UK growth down by 4% due to the original Brexit deal.
The chancellor believes that has set a precedent and that the OBR should include the projected economic upsides of a youth mobility scheme into its upcoming forecast.
Referencing the agreement between London and Brussels earlier this year, Reeves told the Times: “As a result of that reset in May, we think the economy will be stronger. We also want the OBR to score that.”
The OBR will send its first economic forecast to the treasury on Friday, which will include the gap the chancellor will need to make up in her 26 November Budget.
Much is depending on the OBR’s expected downgrade to the underlying long-term performance of the economy, or productivity. The gap could be £20 or £30 billion per year.
In response, the chancellor has stressed a series of measures aimed to help the economy grow faster, including further trade deals.
If accepted by the independent forecasters, the inclusion of the proposed EU youth mobility scheme into its calculations could theoretically limit the extent of any new tax rises.
The OBR has scored policy moves on house building and childcare as helpful to the economy in recent years.
Speculation has been rife that the chancellor will be forced to raise taxes or cut spending in order to fill the fiscal hole, despite Labour’s election promise not to increase income tax, National Insurance or VAT for working people.
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