Can the Conservatives win the next election despite delivering record (legal) immigration?

22 September 2022

There are two types of immigration: Illegal immigration and legal immigration. Illegal immigration is very visible, it often involves boats from France landing on the South Coast and the accompanying headlines. There is a near consensus that illegal migration should be discouraged and the Government has a plan to deal with it: Removing the magnetic pull to the UK by sending illegal entrants to Rwanda. Once fully up and running this plan should work.

Legal migration is very different. It is the product of UK policy decisions (or often the lack of policy decisions). Whereas pre-Brexit the UK had no control over EU/EEA migration and so no control over overall numbers coming in it can now decide exactly who can come via the Points Based System (PBS).

The UK has decided to use the PBS to run one of the most liberal immigration systems in the world which unsurprisingly is delivering record immigration.

The UK’s immigration flows are made up of different cohorts:

There is a large cohort of skilled workers. Skilled jobs earning over £25,600 (or less in some sectors like the NHS/care sector) are open to the entire world. This equates to roughly 60% of all jobs.

The Conservative Government has decided to be exceptionally generous to the UK universities. Student visas are now uncapped, and all students get a two-year post-graduate visa in which they can work in skilled or unskilled work before transitioning to a skilled visa (if they chose).

We are also very generous to dependants of skilled visa and other visa holders such as post-graduate students. They can bring their families, who often work in unskilled jobs.

On top of this we then have other ‘special interests’ lobbied for by various Government departments. Seasonal workers for agriculture, the NHS and care worker visas at a special low wage and others responding to different pressures, news stories or lobbying.

Add in policy decisions emanating from the FCDO and MOD on visas for Afghan, Ukrainian and British Hong Kong passport holders and the picture is one of record immigration.

We have no actual net immigration figure (that is due from the ONS in November 2022 for the year to June 2022) but we can get feel for what is in store from the recent Home Office visa statistics.

Source: Home Office[1]

As you can see following a dip for Covid both student and work visas have risen sharply. This is not a net figure as we cannot be clear yet who has left the country. The two year graduate visa is also new, so we can not know how many will take advantage and stay at the end of their studies, but it is likely to be a high percentage. The applicants for student/graduate visas have also changed, China has now in 2^nd place topped by 117,965 grants to Indian nationals in 2022 an increase of 80,569, Nigeria is also growing as an origin.

On the worker route, we see a large growth in visas for the NHS and care system (50% of the total) as well as to skilled jobs generally. The visas also cover dependents.

The one area that has potentially seen a drop is that of ‘unskilled’ workers once allowed under free movement.

In general, therefore Brexit and policy decisions made by the Conservative Government have led to a decrease in unskilled migration (although dependants and graduates can work in these fields) and a large increase in ‘skilled’ migration – that being the top c.60% of the labour market.

As this is the ‘controlled’ legal part of our immigration system this is a policy choice. The question, therefore, is whether this is the right decision?

Well firstly, was this a decision? Yes, to an extent. With Brexit there was political pressure to reduce migration into lower skilled jobs suffering from wage compression. This was done (and was popular). There was then a separate decision to allow uncapped migration into the rest of the labour market. This was most likely driven by classic Treasury thinking based on working out the salary at which the average migrant is a fiscal benefit. The Treasury likes economic growth but is less keen on the necessary accompanying infrastructure – more people using the existing infrastructure spreads the cost.

At the time £25,600 was decided upon as the appropriate salary for a skilled visa but this has not been up-rated since. Add in some special pleading for a lower salary for the NHS and massive lobbying by universities for a work visa to encourage the sale of their courses and we have the outlines of our immigration policy.

The outcome of this is the largest surge in immigration for decades and one that if left unchecked will form the backdrop to the next election.

Are we pursuing the right policy?

The decision to switch migration from the unskilled to the skilled has created some perverse effects. We now reserve the bottom of the labour market for UK school leavers and graduates while opening up the top to the world. Not only will this create more demand for unskilled labour that cannot be met, it also raises questions of fairness for UK school leavers and graduates.

To gain a ‘skilled’ job in the UK you will now have to compete against the world’s graduates. This means that jobs that were once open to school leavers will be closed, continuing a trend started by the expansion of university education domestically. A school leaver today is therefore forced to take on debt to go to a university they may not wish to attend and would not have had to a generation ago in order to compete for jobs. Many debt-laden UK graduates then go on to work in non-graduate jobs, and/or ‘graduate jobs’ that used not to require graduates. And all the time these ‘graduate’ jobs are open to global competition.

Secondly, the numbers as you can see are climbing dramatically. This raises obvious questions regarding house building, house prices and the provision of public services. Is it sensible for a country that can build at most 200,000 houses a year to grant over a million work and study visas? Is this fair to first-time buyers already struggling with graduate debt? Is it conducive of a country where people can afford to start families if they wish?

Thirdly, the question of wage compression. It was generally accepted that wages in the lower end of the job market had been held down by EU migration, now the numbers are flowing into the top half of the job market it is likely that we will see wage compression in traditionally more middle class jobs, particularly those that are not protected by particular qualifications or localised skills, (lawyers and media figures are safe). But we are also seeing wage compression and bad practices lower down the wage scales. We may have seen wage compression in building and lorry driving, maybe we will see it in accounting and clerical work next?

The care sector is a particular case. Due to recruitment problems the NHS and care homes have been granted special dispensations to recruit abroad at 25% below the generalised market rate because the sector is badly paid. This is a peculiar quirk of the system that means that sectors that cannot recruit locally (due to poor pay) are rewarded by access to cheap labour abroad. This is an absurdity that has closed off the care sector to UK workers, denying many UK workers careers in care or the NHS.

But access to cheap labour creates more bad habits as the emerging scandal of ‘bonded labour’ in care homes and agricultural seasonal workers attests. No wonder they have labour shortages if their workers so poorly paid and treated.

So what should a UK immigration system look like?

Firstly, it should be entirely there for the benefit of the UK population. We should focus on GDP gains per capita and not chase arbitrary economic growth for the sake of it.

Secondly, we should take a long-term view of population growth. Migrants age, arguments based on aging demographics are a Ponzi scheme peddled by economists who prize economic growth over all else. The only way to keep an aging population artificially young is exponential population growth based on young immigrants, which is an absurdity. We need to address ageing populations and low birth rates rather than seek to avoid it.

Thirdly, our system should be fair to UK school leavers. There is no reason to put them up against the whole world’s graduates for a limited number of skilled jobs. That is unfair to them and makes little sense – why reserve the lowest-paid jobs for your domestic population?

Fourthly, we should sort out the question of recruitment into the NHS and care sector. Why do we cap UK school leavers wishing to train as doctors while importing doctors from the world? Why do we allow uncapped foreign students into medical training when we deny the same to the UK’s students? Why do we insist on recruiting care workers from the world’s poorest states at below the UK market rate rather than recruit and train domestic workers currently out of the labour market? We are outsourcing our training costs to states that can ill afford it.

Fifthly, we should look to our domestic unemployed, inactive and more difficult to employ first. While businesses have found the ability to employ from overseas attractive as these workers are often young, educated and with fewer costs are able to work for less than domestic workers. All the time however we have had persistently high levels of unemployment and economic inactivity. This stands at c.9m. While businesses gained the benefit of immigration the taxpayer often shouldered the wider social costs. The provision of infrastructure, schools, public services and houses. The difficulty faced by more difficult to employ workers re-entering the workplace. If instead of looking abroad employers (including the state) had to work with the DWP to train and skill a harder to employ domestic worker then the benefits would be manyfold. There would be no new housing and infrastructure cost and benefits would be saved.

Sixthly, does our system really make the best use of new technologies to increase our workers’ productivity or seeking cheaper labour from abroad to save on training and investment?

These are some of the questions that need considering but we do not currently have the Governmental mechanism to consider the various trade-offs.

Too often an individual department (say DHSC, DEFRA etc) having failed to train and recruit will lobby for an exemption to recruit abroad. Our migration policy then becomes the sum total of various pieces of lobbying. Creating distortions and side effects.

What we need is a nationally agreed migration strategy that takes in all of the relevant factors. Infrastructure, house-building, domestic education provision, skills, the state of the labour market as well as our foreign commitments.

This should be agreed and held to in the face of lobbying. We would then have to train our own doctors and give the opportunity of a medical career to our own school leavers rather than outsource the benefit it to other states. We could balance population growth with housing, creating a stable housing market that can be accessed by the young. We could concentrate on investment and productivity increases and how to cope with demographic change brought about increasing longevity. We should create a national migration strategy agreed by a national migration council.

The good news is that if such a policy were adopted, we have the mechanisms in place to change our levels of immigration. Under the points-based system we have control. We can increase the salary threshold to whatever figure we chose, we could reduce dependants’ rights, stop various visa types or insist on additional qualifications or change the balance from skilled to unskilled. The system put the UK back in control, the question is what type of control we want to apply.

Which brings us to the politics. We have net migration figures in November each year based on the previous year to June. This year’s figures are already baked in, and next years are getting warm. We don’t now when the next election might be but it may come after the delivery of record net immigration.

For the Conservative Party this would produce certain frictions. Whereas the ‘Redwall’ was perhaps most concerned about wage pressures in the unskilled sector the Blue wall middle class south has seen its fair share of moaning that wage rates are rising for services they consume. Add to that the political pressure on planning from population growth in Blue seats and you have a perfect storm. All the political downside of immigration with no upside for middle class voters (cheap services). The offset of support in the Redwall may not compensate.

So what does the party say in the next election? In the absence of a change in policy the picture is confused. On a political level there are those who argue that the existence of control is enough to reassure voters. Others would argue that numbers are the key issue and control has always meant numbers. One thing that is certain is that if no control is exercised the next election will be fought on the basis of delivering record immigration. Maybe, some would say, a good thing but that would also need a coherent narrative to explain which would make a thought-out national migration strategy a political necessity.

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[1] https://www.gov.uk/government/statistics/immigration-statistics-year-ending-june-2022/summary-of-latest-statistics