Business leaders and the public service sector are to help to determine the number of immigrants allowed into the country, Immigration Minister Liam Byrne announced last night.
The Birmingham MP said health and education managers would join business representatives in advising the Government on how many immigrants Britain should accept.
The measure follows criticism that public services are struggling to cope with the number of migrants.
In a speech last night, Mr Byrne insisted that closing the nation's borders to new arrivals would "strangle Britain" but admitted the public had a "question of confidence" over immigration policy.
And he clashed with candidates in Labour's deputy leadership election who have called for an amnesty for illegal immigrants who are in the country.
He said: "We could simply give up trying to control immigration and say it's all too difficult, which is what an amnesty might mean."
Backbencher John Cruddas, seen as the most Left wing of the candidates, has backed an amnesty while rival candidates Education Secretary Alan Johnson and Justice Minister Harriet Harman have both given the idea more cautious support.
Pressure groups such as Migrationwatch have claimed that migrants place strain on Britain's infrastructure.
And Mr Byrne himself claimed recently that one school in his Hodge Hill constituency was struggling to maintain standards because of increasing numbers of pupils for whom English was a second language.
Trade Minister Margaret Hodge also sparked controversy when she argued that established families should take priority in the allocation of social housing over new economic migrants.
Mr Byrne said last night that politicians could not ignore the concerns of the public but he also stressed the economic benefits of immigration.
Speaking at a conference organised by KPMG in London, he said: "Western countries are conflicted, trying to balance the concerns of communities and the calls of commerce.
"In Austria, Denmark and Holland, governments have lost office in elections where immigration was an issue that mattered to people. In France immigration was central to the outcome of the election."
But migrant labour was worth #125 billion a year to the British economy and foreign students bring in #5 billion a year, he warned.
"If I listened to some, I would not be strengthening a border around Britain - I'd be building a barricade. Lots suggest I do this."
Ministers had previously announced that business leaders would be invited to advise the Government on who should be allowed to enter the UK, but Mr Byrne went further last night by revealing that public services would also have a say.
"This debate is in desperate need of better evidence. So today I'm announcing who will join our Migration Impact Forum. Local government, housing, education, the voluntary sector, the police, the magistracy, the NHS, the CBI and the TUC.
"In other words, when we make migration decisions, business will not be the only voice we listen to because others have a claim to stake."
Chris Clifford, West Midlands regional director of the CBI, said: "Immigrants play a vital role in the economy, and not just in low paid, low skilled roles.
"Without immigrants, business would struggle. Having said that, the sorts of numbers we are talking about can put pressure on services in the UK."
Allowing immigrants to work in Britain must not be used as a substitute for providing proper skills and training to British workers, he said.
Mr Byrne also admitted that last year's foreign prisoners scandal, when it emerged 1,023 foreign convicts had gone free without being considered for deportation, had undermined confidence in the immigration system.