The government could lose out on billions of pounds in tax revenue as immigration numbers plummet, according to experts, meaning the Chancellor will have no choice other than to raise taxes to address the shortfall.
It is forecasted that net migration could this year reach zero, or even lower, which would significantly hit the sums brought in to the Treasury through taxation.
Experts told The Times that the immigration crackdown launched by the government could have “serious consequences” for the state of the public purse and push the government into raising rates.
In November 2025, the difference between the number of people arriving in the country and those leaving was 204,000, down from 649,000 the previous year, according to the Office for National Statistics (ONS).
Meanwhile, the OBR forecast in November that net migration would be 262,000, but experts have said this is likely to be a significant overestimation.
A 200,000 reduction in net migration could result in a loss of £20bn over the course of a decade due to lost tax revenue.
New measures introduced by the government will likely deter people from coming to work in the UK, whilst encouraging UK citizens to leave.
Indefinite leave to remain rules
Home Secretary Shabana Mahmood announced sweeping changes to the indefinite leave to remain (ILR) policy in November 2025.
The strict changes mean that someone on a work visa will have to wait at least a decade to get ILR, which allows them to live in the UK permanently, work without restrictions, and access public services. Some will have to wait for 15 years.
The OBR said it lacked “sufficient detail” to map how wide an impact these changes would have, but James Bowes, a data analyst at the University of Warwick estimated that 70,000 people may leave the UK.
He said: “Realistically, people can’t just commit to 15 years safe in the knowledge that they’ll get ILR at the end of it. A precedent has already been set that rules can arbitrarily be changed when people are already here, which has broken the trust in the system.”
Secretary of State for the Home Department Shabana Mahmood has vowed to clamp down on immigration (Photo: Rasid Necati Aslim/Anadolu via Getty Images)Work visas
The number of work visas being granted has plummeted since stricter rules were introduced under the previous government.
In December 2023, the Home Office announced several policy changes for work visas, and these began to come into place throughout 2024.
They included stopping overseas care workers from bringing dependants, increasing the minimum earnings threshold for Skilled Worker visas, and raising the minimum income requirement for family visas.
The Labour government last year closed a dedicated visa route for social care workers which had been introduced during the Covid pandemic.
Visas for skilled workers have dropped by a third, whilst the number of health and social care visas halved last year.
There were 182,553 visas granted to main applicants in all work categories during the year ending June 2025, which was a 36 per cent decrease from the previous year.
Graduate visas
Two years ago, hundreds of thousands of people were granted graduate visas, but these are now set to expire.
Most people spend two or three years in the UK after being granted the right to work temporarily. This means that there will naturally be a high rate of emigration a couple of years after a period of high immigration.
In 2023, more than 144,000 graduate visas were granted, up from 66,000 the previous year.
Madeleine Sumption, the director of the Migration Observatory at the University of Oxford, said that all three factors combined mean that net migration would drop by the end of the years.
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“I would say net zero migration is perhaps a 10 per cent probability — not impossible but relatively unlikely”, she added, “Somewhere between 100,000 and 200,000 in the short run, by the end of this year, seems most likely.”
Experts believe that even if the reduction in migrants was temporary, the drop would be enough to affect Reeve’s decisions around the budget.
Fewer people working would mean that tax revenue is reduced, meaning the Chancellor would be forced to look at tax rises to make up the difference.
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