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Mark Hunter: I very much agree with that, and I guess that the Minister will want to return to the point later on.

Although I praise the Government's efforts to make the system simpler, and believe that they have largely succeeded in that respect, the process of economic migration into Britain will remain fairly complex. Indeed, the Command Paper praises the fact that the new arrangements will be what it specifically calls "sophisticated". That is why a detailed assessment of the pilot scheme will be necessary, and why lessons must be learned. There will be many links in the overall chain making up this policy and a weakness at any one of them could undermine the system as a whole. Any such problems will need to be ironed out during the phasing process. Anyone who has dealt with the points system for local authority housing—and I guess that that includes many hon. Members present for this debate—will know that it is not necessarily a panacea, and that it certainly does not always produce the right or logical result.

I believe that the Government are on the right track with the proposals. If they can implement the system efficiently and effectively in the way outlined in the Command Paper and if they can follow up the policy with effective action on illegal entry into Britain, they will have gone a long way to restoring confidence in the system of economic migration. Those are big ifs and the pilot scheme will need detailed scrutiny over the coming months and years if we are to restore confidence in the system.

8.28 pm

Mr. Andrew Smith (Oxford, East) (Lab): I welcome the measured tone of the previous speech. It is clear from both the speeches of the Opposition Front-Bench spokesmen that they do not have an alternative policy, and that is probably quite a good thing. The more measured a debate we can have about immigration policy issues, the better it will be both for getting the policy right and for the general tone of public debate and community relations.

I greatly welcome reform, but I have some reservations about the proposed system. I do not disagree that what we have at the moment needs to change. I do not think that anyone would disagree with that. It makes sense to rationalise the 80 streams of immigration into something simpler, more transparent and more straightforward, with a clearer sense of people's entitlements. It makes sense to do so with extensive consultation and I welcome the consultation that the Government have undertaken. However, I have some questions on the practicalities of the scheme and on the principle, as well.

I am glad that the Minister recognised the challenge ahead of him in translating the system into something fair and practicable. When I asked him which of the skill
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tiers chefs in south Asian restaurants would fall into he gave the honest and clear answer that they could fall into both, depending on their skill level and, I dare say, demand, remuneration and all the other factors that will have to be judged. Given that one of those tiers carries with it the right of settlement after five years and the other does not, there will be some powerful and natural human pressures, as well as all the tensions, and some risk of abuse in the system, which will have to be addressed before the system can be introduced.

I commend greatly the Minister's commitment to have further discussions with the associations that represent south Asian restaurateurs to put in place a system of sponsorship that enables responsible employers with a record of compliance with immigration and work regulations to employ the workers they need. A lot of care will have to be given to that if we are to have a system in which people have confidence, as well as one that meets the human and economic needs that are in play. I underline the point that has already been made that care will have to be given to ensure that small employers are not disadvantaged, either by their lack of understanding of the system or their inability to deal with the bureaucracy. As Members on both sides of the Chamber are always saying, it is the small employers who generate the jobs in this country. They are the ones who will have to operate the system if it is truly to succeed.

The Under-Secretary of State for the Home Department, my hon. Friend the Member for Leigh (Andy Burnham), said that there was a key economic test—a test of the economic contribution that workers could make to this country. When we talk about skills shortages in that respect, we sometimes need to think a bit more carefully about the language that we are using. I am not sure that there is a skills shortage; there is a shortage of labour, in different skills categories, ready to work at the going wage rate in that category.

In those terms, it is perfectly plausible that, at some point in the future, there will be labour shortages in lower skilled categories that may be as great—if not greater—as those in some higher skilled categories. That is why, when my right hon. Friend the Home Secretary made his statement, I asked him whether different groups would be dealt with on a fair basis in that respect. The answer that we should address skills shortages or labour shortages in different skill categories by training applies equally to all the categories—the higher ones as well as the lower ones. Equally, the argument that we might want to meet needs through immigration can apply to the less skilled categories as well as to the more skilled categories. There are some powerful humanitarian arguments as to why that should be the case.

I wonder whether Ministers share my unease about proposing to bring in a system that is institutionalised discrimination against the least skilled and the poorest. I share some of the concerns voiced by my hon. Friend the Member for Walthamstow (Mr. Gerrard) about what that might mean for the employment rights of those who are working here in the least skilled categories. When someone's right to remain in the country depends on their employer, they are in a vulnerable situation. If a system such as this is to be introduced, it is important that careful attention is paid to the rights and terms and conditions of the workers who are being employed.
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I also worry about the extent to which a system such as that proposed will limit the opportunities for significant groups of people to come here from many Commonwealth countries, with which Britain has historical, cultural and family ties. If there were a demonstrable labour shortage in a relatively low skilled area and even those arriving from central and eastern European states were not filling the vacancies, I wonder whether it would not be fairer if some unskilled workers were allowed in without having their rights curtailed to a year's residence.

Another question is what happens to someone who enters under the third tier—relatively unskilled—and, during their time here, demonstrates that they can benefit their employer just as much as someone in a more highly skilled tier. Would they be able to earn a change in their status, which would carry with it the right of settlement? It is that sort of practical and very human question that will arise in the operation of the system.

Hon. Members on both sides of the House have rightly praised the enormous contribution made to this country by previous generations of immigrants. We do well to remember that those previous waves of immigration included many people who came here as relatively unskilled workers, but who developed their skills and made a big economic contribution. Their families prospered, as did the society that was pleased to have them. It would be sad if we were to deny that possibility to some workers in the future.

I also worry about what the system will mean for poorer countries. If we take only their most skilled workers, and take none of their relatively unskilled workers, an imbalance will be created. There is a danger that we will take too many of the workers that those countries need and deny many poorer communities the stream of remittances that—as has been pointed out—is an important factor in the relief of poverty there.

We need to consider all the practicalities of the scheme very carefully. I hope that we might be able to consider, even now, the recruitment of relatively unskilled workers when there is a demonstrable need, so that their settlement rights are not curtailed. Both on human rights grounds and because of the risk of exploitation, there are weaknesses to a system that operates in that way. I hope that there will be further consultation on the system and careful reflection on the points that I have made, so that we end up with a fair and practical system that commands public support because its integrity is beyond reproach.

8.38 pm

Mr. Peter Lilley (Hitchin and Harpenden) (Con): We are asked to consider today a points-based system of managed migration. Most of the management gurus tell us that the important aspect of any management system is not the process, but the objectives towards which it is managed. That is also true of a points-based managed migration system. How it will work will depend above all on the objectives the Government use it to pursue. I wish to discuss, first, what the Government's objectives are, and secondly, what the objectives should be for any points-based managed migration system.

Happily, we know—not, admittedly, from the Minister's speech, but from other sources—what the objectives of the Government's migration policy are,
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because they were spelt out objectively by Home Office officials in a Government document that the House required them to produce. That document stated:

So we know that the Government's objective is to encourage, sustain and increase lawful migration to the UK, presumably using the proposed system to achieve it.

The Government have certainly been successful in increasing immigration. The net inflow last year was about 223,000 people; more came to settle in the UK than left to return home or emigrate. The figure for net immigration was five times the number Labour inherited in 1997. We know how the Government have achieved that figure: by systematically liberalising the immigration rules. They have trebled the number of work permits granted and drawn to companies' attention the fact that they can bring people from abroad to fill vacancies. In the pamphlet I produced last year, "Too much of a good thing?", I list 10 other liberalising measures that the Government have introduced.

Above all, we know how the Government will operate a points-based system if they generalise it, because they have already introduced one such system. In 2002, they set up the highly skilled migrants programme, setting the number of points people needed to be able to come to this country and seek work. The Government set the points objectively, to establish the level of skill they thought desirable in anyone given the right to seek work in the UK.

Only a modest number of people applied under the scheme, however, so did the Government accept that that was the number who should be allowed to immigrate? No, they promptly reduced the number of points needed to acquire right of entry under the scheme to such a degree that the system was overwhelmed. We know that the Government will, if need be, manipulate a points-based system to achieve their objectives of encouraging, sustaining and possibly increasing immigration.

What should be the objectives of a points-based system? First, let us dispose of the notion that one objective should be to exclude economic immigrants because they are intrinsically undesirable. The caricature of economic migrants as welfare scroungers, driven by a desire to milk our benefit system, prone to criminality and a danger to society is not simply wrong; it is by and large the reverse of the truth. For most of my life, I have lived in areas where there was a large number of immigrants. I have known them as my neighbours, worked with them as my constituents and worshipped in the same Churches, and I have concluded, like anybody who knows the facts, that the vast majority of people who come to the UK to work are decent, hard-working and law-abiding.

Conservatives particularly admire two virtues that characterise economic migrants; they tend to be enterprising—they have to be to get to this country—and to be driven by family commitment and cohesion. We are biased in their favour. In the language of "1066 And All That", we think immigrants are "a Good Thing", but the implication, common to both sides of
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the debate, is that we need to manage migration and that we need to restrict it—that we can have too much of a good thing, and there should be limits.

Secondly, let me dispose of the notion that the reason for managing migration is that immigrants take British jobs. As my hon. Friend the Member for Buckingham (John Bercow) said earlier, that idea is based on the lump of labour fallacy. In any well-working market the number of jobs will sooner or later equal the number of people seeking work, who will price themselves into jobs and by obtaining them generate extra demand, exactly equal to the amount of demand that they have absorbed from the labour market. However, precisely the same fallacies lie behind the Government's claims that we need workers to fill shortages.

Whereas those who want to play the race card argue that there is a lump of labour—a fixed amount of work to do—and that, if we allow in immigrants, there will be too many of them and they will take some of that fixed amount of jobs and some of our people will be out of the work, the anti-racists, including the Government and my hon. Friend the Member for Buckingham, say that there is a fixed amount of work, but that there are not enough people to do it and that we must therefore import them from abroad. That is the same fallacy, based on the same logical mistake that there is a lump of labour, that prices do not work and that extra workers do not create extra demand.

Indeed, the very idea of a shortage in a properly functioning market is problematic. The vice-chairman of the US Commission on Immigration Reform said:

His colleague added:

So shortages can occur only in unusual circumstances.

The idea that we suffer from a generalised labour shortage is denied by the evidence. The symptom of a shortage in any market economy is a rising price. If we had a labour shortage in this country, we would see wage inflation, but we have never had a period of lower wage inflation in our lives. The idea that we are suffering from a labour shortage is manifestly untrue.

The idea that importing labour fills established shortages has also been disproved by the facts. The Prime Minister began some years ago to say that there are 500,000 vacancies in the British economy and that we need to employ people from abroad to fill them. Some years later, we have imported more than 500,000 people; there are still 500,000 vacancies in the British economy. So that theory has not been proven, because all those who come to work in this country and get jobs generate as much demand for additional work to fulfil their consumption needs—the goods and services that they consume—as they fill any shortage that exists before they arrive. That is why that theory simply does not work in this or any other country: we do not end shortages by importing workers.
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As for shortages in certain sectors, they can surely only persist if pay is not allowed to rise to the market-clearing level that will attract people to acquire those skills domestically. If pay is held down artificially in sectors by importing people from abroad who are willing to work at below the market-clearing level for this country, a temporary shortage can be rendered permanent. Of course, the pay will not rise to the level at which people in the domestic market will acquire those skills, so people must continue to be imported from abroad. That has clearly happened in a number of professions in this country, particularly in public sector health and medical services.

The Government's whole theory that there are endemic shortages that can be filled only from abroad is, by and large, wrong. We should avoid becoming permanently reliant on immigration to provide any skill that can and should be acquired by the resident population. We should allow the market to work, with pay rates rising to levels that attract people from the resident population to acquire those desired skills. Even if we import people to meet short-term difficulties, we should not allow that to be used as a reason to depress pay rates in that sector. That would allow the shortage to become permanent.

What the system should do is focus on giving work permits to people with skills that people in this country cannot acquire by the normal processes that are used to fill vacancies. There are such skills and, in the past, they have been the main reason for importing workers from abroad. The first such type of skill is company-specific skills. Companies have their own way of doing things and those that operate worldwide will often want to bring their accountant to this country to install their accounting system here, to train people to operate that system or to introduce their work-flow processes. For all the systems that IBM or Coca-Cola have, they will bring workers here to establish the systems. In due course, those workers will probably return home having transmitted the skills that are specific to that company to people in this country. That is fine and right; we ought to encourage that process. If anything, we should make it easier for international companies to transfer personnel from subsidiary to subsidiary across the world so that they can transfer the specific skills that have been developed internally within those companies.

The second type of skill that one cannot easily just acquire is entrepreneurship. I believe that entrepreneurs are born rather than made. If we can import more entrepreneurs who will generate high-quality jobs in this country for other people, that is excellent. Let us do that. It is another reason that we have traditionally given for granting work permits.

Another category is that of star performers—the people of outstanding skills at an international level. Many sectors of the City need a star performer in their analytical or sales teams. In medicine, one may need a star performer to develop a particular team and its expertise. We should bring in the star performers and, around them, they will generate teams and create jobs and wealth for those of us who star less in those professions.

Very rarely, there can be cases in which economies of scale mean that it is impossible to recruit domestically sufficient people with the particular skill for a post because we do not have the people with the basic
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aptitudes to fill such posts. An industry the size of the City probably could not meet all its needs from the domestic population, so it is perfectly reasonable to allow it to bring in additional people from abroad to build the huge wealth-generating capacity that the City has.

We therefore need to encourage some immigration. Some immigration is a good thing, but I use the analogy of oil and petrol. We need some oil in a car or it will not go at all. However, putting more and more oil in it does not make it go any faster. It is not like petrol. The Government seem to think that immigration is more like petrol than oil. They think that if they put the foot on the accelerator and encourage people to come, the economy will grow faster and faster.

We need some sensible targeted immigration through a managed points-based system. However, to respond to the hon. Member for Leicester, East (Keith Vaz), why do we need to worry about numbers? If immigrants are a good thing—in my view, they are; by and large, they are admirable people—why do we want to impose any restrictions at all? The answer is that we are one of the most densely populated countries in Europe. South-east England, including London, is more densely populated even than the Netherlands. It is absurd to suggest that there not enough people here to run a good economy. It is absurd to suggest that we need to—or even can—attract relatively large numbers of people. It is absurd to suggest that we ought to be a country of immigration. For most of our history we have been a country of net emigration, and it is only in recent years that we have become a country of net immigration.

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