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Fourth Standing Committee on Delegated Legislation
The Committee consisted of the following Members:
Chairman:
†Mr. Eric Forth
†Browne, Mr. Desmond (Minister for Citizenship and Immigration)
Carmichael, Mr. Alistair (Orkney and Shetland) (LD)
Chaytor, Mr. David (Bury, North) (Lab)
Clappison, Mr. James (Hertsmere) (Con)
†Clifton-Brown, Mr. Geoffrey (Cotswold) (Con)
Gibb, Mr. Nick (Bognor Regis and Littlehampton) (Con)
†Grogan, Mr. John (Selby) (Lab)
†Heppell, Mr. John (Lord Commissioner of Her Majesty’s Treasury)
†Malins, Mr. Humfrey (Woking) (Con)
†McKenna, Rosemary (Cumbernauld and Kilsyth) (Lab)
†Mountford, Kali (Colne Valley) (Lab)
†Naysmith, Dr. Doug (Bristol, North-West) (Lab/Co-op)
Oaten, Mr. Mark (Winchester) (LD)
†Osborne, Sandra (Ayr) (Lab)
Picking, Anne (East Lothian) (Lab)
Pope, Mr. Greg (Hyndburn) (Lab)
Sîan Jones, Committee Clerk
† attended the Committee
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Monday 7 March 2005
[Mr. Eric Forth in the Chair]
Draft Immigration (Application Fees)
Order 2005
4.30 pm
The Minister for Citizenship and Immigration (Mr. Desmond Browne): I beg to move,
That the Committee has considered the draft Immigration (Application Fees) Order 2005.
I welcome you to the Chair for our deliberations this afternoon, Mr. Forth. It is the first time that I have had the pleasure of serving under your chairmanship and I look forward to it greatly.
The draft order will do two things. First, it will allow the Government to recover the cost of providing an appeals service for applicants whose applications for leave to remain in the UK are unsuccessful. Secondly, it will provide for the recovery of deficits incurred in previous years from processing certain specified immigration applications. If I may, I should explain in a bit more detail how the order will do that and why the Government are seeking to take that power.
The Government aim to deliver a managed migration programme that is largely self-financing. On 7 February, we reflected that commitment in our new five-year strategy on immigration and asylum entitled “Controlling our borders: Making migration work for Britain.” By recovering the costs of providing managed migration services through application fees, we reduce the burden on the general taxpayer and free up resources to invest in the provision of other key services and initiatives. The income raised through charging—some £70 million in 2003–04 alone—has enabled us to improve the quality and efficiency of our services to their customers. For example, 70 per cent. of customers who apply by post to extend or vary their leave to remain in the United Kingdom can now expect to receive a decision within 15 working days of submitting an application. Customers who apply in person at one of the four public inquiry offices can now make an appointment and have their application pre-screened to ensure that it contains all the right evidence and documentation, and 98 per cent. receive a decision on the same day, often within a couple of hours.
At present, fees for immigration are calculated to cover the estimated cost of processing an application, including direct costs and overheads up to the point of making and conveying the decision. The new fees, which I announced on 7 February, reflect changes in our charging policy and business operations. It might be helpful if I explain what those changes are and make it clear why the increases are of the order proposed.
Over the past 11 months I have overseen the implementation of a number of new measures designed to ensure that our customers are provided
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with high quality, robust and consistent decisions and that the public has confidence in our managed migration system. Those measures have contributed to an increase in our costs. In addition, I undertook a public consultation last year that sought views on the proposals to extend the principle of cost recovery charging. Those principles included incorporating the cost of providing and running an appeals service for unsuccessful leave to remain applicants in the application fee.
The facility to appeal an unsuccessful application is part of the service provided to applicants who seek leave to remain in the UK or seek to vary the conditions of their leave to remain in the UK. Between August 2003 and July 2004, we received 482 leave to remain applications. In the same period, 5,700 appeals were lodged. At present, the cost of delivering the appeal service, which is approximately £17 million a year, is subsidised entirely by the general taxpayer. It is right and appropriate that those who benefit from knowing that they can appeal if their application is unsuccessful should bear a proportion of the cost of providing that service.
Appeal costs make up only about 20 per cent. of the total application fee. The alternative would be to charge individual appellants a fee of around £1,700 per appeal on current procedures, which might be seen as cost prohibitive—in fact, it will be so cost prohibitive that it might be seen as abolishing appeals altogether. Almost 40 per cent. of the respondents to the consultation disagreed with the latter option, despite the fact that the majority of respondents are not likely to think that they would ever need to appeal. However, a good proportion of the respondents also showed that they did not support the proposed option of incorporating the appeal costs into the basic fee. As a result of that, and to support implementation of the five-year strategy, I stated in my written statement to the House on 7 February that we will consider further the process and arrangements for charging appellants. For now, the order is the fairest way of proceeding to ensure that the costs of the appeal system are recovered. That income will help to support the implementation from this April of the new single-tier tribunal, which will deliver more streamlined processes and enhanced efficiency for customers.
As members of the Committee will know, section 102 of the Finance (No. 2) Act 1987 provides a power to specify functions and matters that can be taken into account when exercising a power to fix a fee. Article 2(3) specifies the costs of providing and running the appeal system and the administrative costs of handling and processing fees as functions that can now be taken into account in line with section 102. The costs include staff costs and associated overheads, but do not include legal aid costs or other extraordinary costs.
It is also worth stressing that the order does not allow cross-subsidisation of the recovery of appeal costs. That means that the fee paid by an individual seeking leave to remain in the United Kingdom will include only a proportion of the costs of providing the appeal system for unsuccessful applications for leave to remain. Appeals for other types of application, such
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as asylum appeals, are therefore not included in the charge. Nor does the order provide for the recovery of past deficits incurred under the appeal system.
In addition to the power to recover appeal costs, the order will allow for the recovery of deficits, although that is limited. That means that where the immigration and nationality directorate has not managed to recover all its costs in previous years, those costs will be included in the new fees.
As a presumption in the Treasury fees and charges guide, Departments recover deficits where appropriate. However, we also recognise that the charges must be sustainable and a fair reflection of the services provided. The deficits make up only 9 per cent. of the income that we expect to raise through the charging system in the next financial year. There is no debt recovery for some services, such as student applications for leave to remain.
Article 3 sets out the services for which previous years’ deficits can be recovered through new application charges.
I stress that there will be no cross-subsidisation of deficit recovery. In other words, only the losses related to a particular service will be recovered by the fees for that service. For example, an applicant to the highly skilled migrant programme will pay only a charge that includes a recovery of that programme’s deficit. The charge will not include deficit recovery or, say, leave to remain services. All the fees have been calculated in accordance with strict Treasury guidelines and agreed by the Chief Secretary.
I recognise that increases in our operating costs and the inclusion of appeal costs and deficits in the application fees will mean an increase in costs for many of our customers. As a result, I have been at pains to limit the increases where possible, so we are not recovering all our deficits next year. I have also sought where possible to differentiate the application charges more closely in line with the nature of the services provided. For example, customers who want to benefit from the optional facility to have the conditions of their leave transferred to a new passport will be charged only £5 more from next year. Customers who choose to use the premium service will be asked to pay a charge of £500, which reflects the speed, convenience and enhanced quality of the service provided, whatever the category in which the customer applies.
I know that Members of this House and another place have significant concerns about the impact of the fees on our ability to attract international students to the UK, so let me say at the outset that the Government and the education sector share the objective of encouraging more international students through experience and education in the UK. The Home Office is at one with the rest of the Government in supporting efforts to establish the UK as a global hub of education and innovation.
My Department has contributed to cross-Whitehall activity to capitalise on the long-term diplomatic trade and economic benefits that international students bring to the UK, which is estimated at £5 billion a year in spending alone. That is why I recently launched a
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new scheme to enable science and engineering graduates to remain in the UK for up to a year after their studies are completed. That is why we have also invested an enormous amount of energy in the past 12 months in identifying and tackling abuses of the student entry route into the UK. Genuine students and the public can now have confidence that the establishment at which they choose to study is a bona fide one, and that the minority of applicants who are not legitimate will not be able easily to manipulate the system to their advantage.
The measures announced in the five-year strategy on immigration and asylum are designed to enhance that very approach—welcoming and protecting genuine students, but policing the system effectively to root out abuse. However, effective management of the system comes at a price. International students also glean significant benefits from the opportunity to remain in the UK to study. The challenge for Government is to ensure that we balance the cost of managing migration services for students with the benefits to be gained by the students, the education sector and the UK generally.
The Government’s view, which is held collectively across Whitehall, is that international students should be charged a fee for the consideration of their immigration applications in the same way as other applicants, but that that fee should be set at a level that would recognise the benefits that international students bring to the UK. In view of that we have set the postal fee for students at £250. That allows us to recover some, but not all, of their administrative costs and the costs of providing an appeal system for unsuccessful applicants. I believe that that fee is reasonable and proportionate.
Living and studying in the UK is expensive. According to Universities UK, international students undertaking a year’s study in higher education will pay at least £7,500 in tuition fees for an undergraduate course. Education UK advises international students that they should budget £13,000 a year for living expenses and tuition fees. In that context the new charge of £250 for an application to remain in the UK represents an increase in costs for higher education students of less than 1 per cent. For students who undertake courses of more than a year it will of course be an even lower proportion of the total expenses. The arithmetic is pretty straightforward and one could divide that 1 per cent. by the number of years’ study in a course.
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): First, generally the House does not pass retrospective legislation, because it is deemed unfair. Will the Minister comment on that? There must be cases at the margin in which someone would not have made an application or an appeal if they had known that they would have to pay the costs; to make them do so retrospectively seems unfair.
Secondly, I was at the Royal Agricultural college in my constituency on Saturday, which is admitting an increasing number of Chinese students, and the figure of £13,000 that the Minister quoted is roughly in line with what the college representatives say, but they also
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say that every penny of that is a job for the parents in China to find. They must save for many years to send someone to that university. There are complaints about the existing fees, let alone the new fees. I think that if the 61 per cent. increase had been known about people would have been pretty angry with me on Saturday.
Mr. Browne: I should not want the hon. Gentleman’s constituents to be angry with him, particularly at this time. I shall respond in more detail to his second point as I continue with the remaining remarks that I have prepared. In answer to his first point, it is not intended that the fees will apply retrospectively. They will apply only prospectively. The hon. Gentleman can rest assured that no one’s expectations will be defeated; people who come here to pursue part of their intended total studies in the United Kingdom, in anticipation of making further applications for leave to remain under a particular fees regime, will find that it has changed, but it will not be applied retrospectively, and certainly not to anyone who has made an appeal. If I have explained our approach to appeal properly, it should be clear that no individual will be penalised by appealing. We are spreading the cost of appeal across the original fee.
The answer to the hon. Gentleman’s second point is, of course, that collectively—as the responsibility of the Government, the education establishment and the applicant—we should get better at ensuring that students from abroad make appropriate applications, when they come, for the full leave to remain that they require. In other words, they should get entry clearance that reflects their needs appropriately at the time. We are becoming better at that, as I shall demonstrate.
I recognise that some students, having completed one course, might want to go on to do postgraduate courses. They are the people to which the provision will apply. However, Chinese students and others are charged the princely sum of £36 for their applications for entry clearance to study in the United Kingdom. My point relates to the proportion of the cost that we impose on foreign students, who come here in increasing numbers. Some work indicates that there is elasticity in the fees, including those that I propose to increase. However, that is a marginal issue for students when they are deciding whether to study in the UK.
On the basis of the proportionality argument, I do not believe that the charges will significantly deter large numbers of students from continuing their studies in the UK. Nevertheless, there were 9 per cent. fewer student applications for leave to remain in the 12 months to November 2004 than in the previous year. That has led to suggestions that the introduction of the charges in 2003 deterred international students from studying in the UK. Let me be clear: the number of students applying for leave to remain in the UK is not a measurement of the number of international students in the United Kingdom. In fact, we are designing immigration policy to allow international students, wherever possible, to secure leave for the full
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duration of their courses before coming to the UK. That is a much more effective way of controlling immigration, and it is more cost-effective for the individual student.
Demand for student visas overseas remains strong, particularly in China. For example, international management information shows that the number of applicants for student visas in the 12 months to November 2004 was 37 per cent. higher than it was the year before, so empirical evidence suggests that the mechanism that the hon. Gentleman fears is not operating in the market.
Mr. Clifton-Brown: What I found on Saturday was that, while the number of undergraduates from China is increasing, that of postgraduates is not. The scale of fees that will apply to postgraduates is likely to be a deterrent. Most Chinese students work to supplement their fees, and apparently they also work incredibly hard on their courses—they are one of the hardest working groups at the college and a lot of them are very bright. It would be sad if we were to deter some of our brightest foreign students from taking postgraduate courses in this country.
Mr. Browne: The hon. Gentleman’s two interventions go to the nub of the argument. That is why I had a piece of work carried out to test the elasticity in the fees. I wrote to all members of the Committee—including you, Mr. Forth—late last week to make the detail of that research accessible to them, and I shall go into it in some detail in a moment.
Mr. Humfrey Malins (Woking) (Con): May I press the Minister very gently on China? I had a long meeting the other day with an organisation called Campaign for Mainstream Universities, which is concerned about the number of visa refusals by British officials in relation to international students coming from China, as a result of which the Chinese are deterred. Is there anything particular about China that we should know in this connection?
Mr. Browne: China is an important market, and because of the comparative poverty of the middle-class Chinese families who send their children abroad to study, the market is price sensitive. However, the factor that has had the most significant effect on Chinese students has been the fall in the value of the dollar. I have no expertise in international currency, but that is my understanding from those who speak to the families back in China.
Interestingly, the reverse appears to be the case for undergraduates. The argument about proportionality is strong. Compared with the total costs that both postgraduates and undergraduates from countries such as China expect to incur if they come to the UK to study, the figures are small. I gently chide the hon. Gentlemen. Should the Conservatives come into government, they would find a significant hole—approximately £100 million—in their plans for the Home Office budget, in particular the element that relates to the immigration and nationality directorate, were we not to cover the costs of the service. They know that they are planning to save significant
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amounts from the immigration and nationality directorate, not to spend more. Perhaps they will contemplate that before they decide whether to support the provision.
Demand for student visas overseas has continued to be strong. I explained that there had been a 37 per cent. increase in the 12 months to November 2004 by comparison with the previous 12 months. That is further reflected in the monitoring of the Prime Minster’s initiative, which shows that the Government have already exceeded the 2005 target to attract an extra 50,000 international students into higher education. That is thanks to the considerable efforts and expertise of the education sector, on account of which we are also set to meet the target that we fixed for students in further education.
Nevertheless, despite all the evidence to the contrary, I appreciate the concern that a 6 per cent. increase in the fee for student applications could have an impact on the numbers seeking to remain in the UK. As anyone with even the most basic grasp of economics would tell us, increasing the cost of a product is likely to reduce demand for it. To test that concern, last autumn I asked a joint project team, comprising representatives from the Home Office, the Department for Education and Skills and the British Council, to assess the likely impact of the increased charges on the number of students who will seek to remain in the UK. The project used very cautious estimates, including the likelihood of students discontinuing their studies. The findings suggested that there could be a reduction of 2.7 per cent. in student applications made in the UK. On that very worst case scenario, the consequent loss in fees from international students would be about £11 million across the whole of the education sector.
Given that the income from international student fees is worth in the region of £2.3 billion a year, the Government believe that the sector could absorb such a loss. By contrast, current forecasts suggest that the income raised from international student application fees will save the taxpayer approximately £30 million. That revenue will support ongoing investment in managed migration services, from which those very students benefit. The project also estimated the possible loss to the UK economy as a result of reduced international student numbers as being as much as £18 million. As a proportion of the total contribution to the UK economy by international students of £5 billion, that does not seem significant.
I agree that perceptions abroad of the UK education experience are important. We are taking action to ensure that we communicate the hidden costs of the system clearly, so that students are fully informed of the financial implications of studying in the UK before they make the decision to come here. I urge the sector to support this activity and to help us to put across a sense of proportion in the new fees. That could usefully form part of the work of the new joint taskforce that, as I announced, the Government are setting up with the education sector.
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Mr. Clifton-Brown: Does the Minister’s econometric work take into account the new international competitiveness in further and higher education? For example, Qatar has established a world-beating campus, to which some American universities, including Texas and Cornell, are locating. There are increasing international opportunities for students, and if costs in the United Kingdom rise, could not there be a reduction of considerably more than the 2.7 per cent.?
Mr. Browne: I suppose the candid answer is that if circumstances change, the consequences of those changes could be very different from those for which we are planning. That is why, when I announced the fees, I declared that we were setting up the new joint taskforce to keep matters under review. The obligation on the United Kingdom’s education sector and Government is to keep abreast of changes, such as the one that the hon. Gentleman identifies, and to see what effect that will have on our ability to continue to attract students.
Of course, the United Kingdom has some of the best universities in the world. The chance to study at those universities and colleges is a great attraction to a number of people around the world, and a growing attraction to some very able people in China. However, we need to be alert to changes. Of course, one reason why American universities have sought to go to a campus abroad may well be that there has been a significant reduction in the number of students from abroad studying at universities in the United States, as a direct result of steps put in place to improve security after the 11 September incident.
Talking of security, I can give the hon. Member for Woking (Mr. Malins) more information about China. I had forgotten that, among the other measures that we have taken, we introduced a student assessment unit in China at the beginning of May 2004 and revised our procedures. They were put in place to counter the possibility of abuse. As a result, there has been a higher refusal rate for Chinese students. The rate increased significantly in the early stages of the implementation of the new procedures, reflecting an increased identification of counterfeit documents in particular. Refusal rates have now dropped, showing a greater understanding of the requirements among applicants and their agents, and I am told—although this will not feed into decisions—there has been a surge in better-quality applications more recently.
In addition, the service offered to individuals and groups is now faster. During the past year, more than 30,000 students from China were given visas. Of course, we continue to welcome genuine students. That is a good example of us reinvesting fee income to improve the system.
I hope that the Committee will forgive me for having spoken at some length, but these are important considerations and it was appropriate to set out the Government’s thinking as fully as possible. There is an extended constituency for these issues beyond the Committee, and it is important that there be a record of the reasoning behind these decisions. This is my first real opportunity to explain them.
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We have not taken these decisions on new fees lightly. They have been the subject of debate between Departments, as would be expected. We now have a package of fees that will enable us to deliver on our ambitious programme of reform of managed migration services, and that will allow us to continue to attract the migrants that we wish to welcome to the UK.
The Government will introduce regulations that, if approved, will fix the new fees for a range of non-asylum immigration applications. Those fees are appended to the explanatory memorandum that accompanies the order, although they do not form part of it. If approved, the new fees will come into force on 1 April 2005.
4.59 pm
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