The Government should cap levels of immigration to Britain, a parliamentary inquiry concluded.

Peers, including two former Chancellors and several other Cabinet ministers, delivered a blow to the Home Office by concluding that record immigration had led to "little or no impact" on economic well-being.

Certain groups in Britain - the low-paid, some ethnic minorities and some young people looking for a foot on the job ladder - may have suffered because of competition from immigrants, the Lords' all-party Economic Affairs Committee said.

advertisement Ministers should set an "explicit target range" for immigration and set the rules to keep within that limit, the report said. It raised the prospect of cutting the number of partners and other family members allowed to settle in Britain because a relative is already here.

The peers rejected the Government's claim that immigration is needed to prevent labour shortages as "fundamentally flawed". They also warned that the much-trumpeted new points-based immigration system carried a "clear danger of inconsistencies and overlap".

"We are suggesting that the Government should set a target range for net immigration and then the rules should depend on the target range, rather than the numbers following from the rules as at present," committee member and leading economist Lord Layard said.

"You would have the scope to vary the scale of net immigration by varying the rules, by choosing how tight the rules should be."

Inquiry chairman Lord Wakeham said: "Looking to the future, if you have got that increase in numbers and you haven't got any economic benefit from it, you have got to ask yourself is this a wise thing to do? That is why we want the Government to look at it."

Lord Vallance of Tummel, committee chairman and a former CBI president, said the Government's economic arguments in favour of current immigration levels were "very shaky".

The Government's decision to use GDP as the main measure of immigration's economic contribution was "irrelevant and misleading", added the report. Instead, the yardstick should be income per head of population, or GDP per capita.