Immigration has little economic benefit to Britain, according to a House of Lords committee on Tuesday which rejected government claims to the contrary and called on ministers to review their policies.
A report by the Economic Affairs Committee rejected the government's argument that current record immigration levels provide economic advantages and said ministers have used "irrelevant and misleading criteria".
"We have found no evidence for the argument, made by the government, business and many others, that net immigration - immigration minus emigration - generates significant economic benefits for the existing UK population," the report said.
The government says immigration contributes an estimated 6 billion pounds a year to Britain, but the committee said it is wrong to use the total size of the economy as a benchmark for judging its impact.
Instead, the peers said, immigration provides very little benefit on the income per head of the resident population while it has a social impact by affecting the demand for housing.
Low-paid people are also worse off as they do not receive training as businesses seek cheaper skilled workers from abroad. Nor could immigration solve the "pensions time bomb" of an ageing population, the report said.
"Nothing in our report is saying we should stop immigration," committee member and former Conservative minister Lord Wakeham told BBC radio.
"We believe immigration is good and emigration is good. What we want to do is keep the balance between the two."
The committee said the government needs to review its policies and clarify the objectives of the new points-based system which comes in later this year.
Immigration has been a long-running and heated political issue amid public fears that schools, hospitals and transport networks are being swamped by foreign nationals, especially since European Union enlargement.
The Conservatives say the government has lost control of the issue with official projections showing that net immigration will increase by about 190,000 a year in future.
David Davis, the shadow Home Secretary, said the report reflects their call for a cap on numbers and "demolished the government's case on several fronts".
Immigration minister Liam Byrne told BBC radio. "What the report is saying is let's not just look at what's good for the economy, let's look at what's good for Britain, let's look at the wider impact of immigration when we set immigration policy.
"That's something that I happen to absolutely agree with. I think we have got to look at the wider impact of migration when we decide in our new points system ... how many points a migrant needs in order to come to the UK."
Prime Minister Gordon Brown said the points system will prevent unskilled workers from coming to Britain, while other new measures will mean that immigrants pay more towards the services they use.
"We want to get the balance right," he told reporters.
Council leaders also called on the government to review its immigration policies, saying the money generated by immigration is not finding its way to local levels.
"The speed and scale of migration combined with the shortcomings of official population figures is placing pressure on funding for services like housing and children's services," said Simon Milton, chairman of the Local Government Association.
