45. Memorandum submitted by
the Association of Labour Providers
INTRODUCTION
1. The Home Affairs Select Committee is
holding an inquiry into immigration control. Among other things
the inquiry is considering the lessons to be learnt from the operation
of the current system that might inform the implementation of
the new government policy.
2. This paper comprises evidence by the
Association of Labour Providers. The Association was founded early
in 2004 to provide a voice for labour providers in the development
of policy in relation to "gangmasters" and the provision
of labour to the agriculture and food industry generally. The
Association has rapidly expanded and now has around 130 members.
It has played a major part in the work to implement the Gangmasters
(Licensing) Act 2004 and has also been involved in a range of
work relevant to the informal economy and to the use of migrant
labour.
3. This evidence is largely confined to
employment-related migration issues, the area where the Association
has competence.
SUMMARY
4. Stated government policy is to encourage
immigration by highly skilled people. The evidence is that there
is as great a need for migrant workers to do low skilled work.
5. There is a plentiful supply of labour
willing to do low skilled work in the UK from the Accession States
of the European Union and further afield.
6. Immigration controls are ineffective.
White people can obtain forged documents and it is relatively
easy to stay in the UK after a visa expires.
7. Workers in the UK illegally have to work
in the flourishing informal economy. Without the informal economy
there would be few illegal workers.
8. Government policy is not only ineffective
in dealing with the informal economy but actually encourages it.
The Accession States Worker Registration Scheme has no benefits
but discourages workers from working in the formal economy. It
is difficult for many workers to obtain National Insurance numbers.
The government is ineffective in tackling both tax evasion and
illegal immigration.
9. Migrant workers are generally migrants
not immigrants. There is a risk that tightening border controls
will deter workers from returning home because they fear they
may find it difficult to come back to the UK.
GOVERNMENT POLICY
10. On 7 March 2006 the government published
its proposals for amending migration policy A points based
system: making migration work from Britain (Home Office, 2006).
11. The key feature of the policy is that
the more skilled the worker the easier it will be to live and
work in the UK. This does not apply to nationals of the EU countries
who are entitled to live and work in the UK.
12. The paper confirms that the government
sees the Accession States of the European Union as the source
of low paid workers for the foreseeable future—
"With an expanded European Union there is an
accessible and mobile workforce already contributing to our growing
economy, closing many gaps experienced by employers. In a changing
environment where our European commitments provide many opportunities
for the UK to benefit from this new source of labour, it is right
that we look again at migration to the UK as a whole. Our starting
point is that employers should look first to recruit from the
UK and the expanded EU before recruiting migrants from outside
the EU."
13. The proposed new arrangements provide
for five tiers. Tier 3 comprises: "Limited numbers of low
skilled workers needed to fill specific temporary labour shortages".
Workers in Tier 3 will be expected to return home after their
period of work and will require a sponsor who will have to be
approved by the Home Office.
THE LABOUR
MARKET
14. A major strength of the UK economy is
that it is one of the most open in the world, thereby bringing
the benefits of competition. Foreign businesses are attracted
to operate in the UK because of the favourable environment. The
UK is an attractive place to work for enterprising people, partly
because it is comparatively easy to get jobs.
15. Many UK industries rely heavily on foreign
labour. This applies all the way from the major financial institutions
in the City of London many of which are both foreign-owned and
employ large numbers of highly-paid non-UK workers, right down
to the catering and hospitality industries which rely heavily
on migrant labour. Up to 90% of low paid jobs in London are filled
by migrant workers (Evans et al, 2005).
16. Employers use migrant workers for reasons
spelt out in a study commissioned by the Home Office (Dench et
al, 2006)—
"Employers cited advantages of migrant workers
in terms of their general attitude and work ethic. They tended
to be more motivated, reliable and committed than domestic workers.
For example, migrants were said to be more likely to: demonstrate
lower turnover and absenteeism; be prepared to work longer and
flexible hours; be satisfied with their duties and hours of work;
and work harder in terms of productivity and speed. In the view
of some employers, the more favourable work ethic of migrant workers
encouraged domestic workers to work harder. Migrants had also
widened the horizons of domestic workers by helping them understand
more about other cultures. Migrant workers' greater commitment
was a result of their motivations: they wanted to learn English
or send money to families at home. Employers also suggested that
migrant labour assisted in economic growth and an overall increase
in job vacancies."
17. This study called into question the
central feature of the points-based system—
"It is generally accepted that the UK economy
relies on a significant number of skilled migrant workers who
enter the UK largely through the general work permit would. However,
this study shows the UK employers also place considerable reliance
on low skilled migrants. Many employers in both high- and low-skilled
sectors did not explicitly set out to recruit migrant workers;
rather they employed from the pool of labour available to them.
If domestic workers were not available to them, then they employed
migrant workers. Employers were however keen to employ those most
highly qualified and experienced, regardless of nationality."
IMMIGRATION CONTROLS
18. The UK now devotes substantial resources
to policing its frontiers. Foreigners arriving in the UK may take
a considerable time to clear through immigration controls, and
there are substantial penalties for living and working in the
UK when this is not permitted.
19. However, the controls are ineffective.
This is hardly surprising. The UK is an open economy and an open
country in which people can come and go more or less as they please.
It is virtually impossible to have a robust system of restricting
people from entering the country or requiring them to leave.
20. The UK is part of the European Union
and all European Union nationals have the right to live and work
in the UK. It follows that the UK controls are only as effective
as the weakest controls in other European Union countries. It
is comparatively easy to obtain forged (or even real) passports
or identity cards from a number of European Union countries. Certainly,
there appear to be quite a number of workers from Russia, Belarus
and the Ukraine working in the UK. According to official UK statistics,
an implausibly high 5% of young Lithuanian men have registered
to work in the UK. This route is open in practice only to white
people.
21. Other people are able to enter the UK
on tourist or student visas and then not leave when they are required
to. An IPPR study has suggested that irregular migrants overstay
their visa rather than enter the UK clandestinely (IPPR, 2006).
There is in effect no mechanism to force them to leave. They are
not allowed to work, which means in practice that they are not
allowed to pay tax or to obtain National Insurance numbers. Instead,
they are free to work in the informal economy.
22. The existence of the informal economy
is a key factor in explaining irregular migration. If workers
who are not supposed to be in the UK are not able to obtain work
then the flow of irregular migrants would reduce. As it is the
informal economy is flourishing, and family and personal networks
makes it relatively easy for new migrants to find a job and accommodation.
23. Any measures which strengthen border
controls are inclined to worsen rather than ameliorate the problem.
Most of the irregular workers in the UK have no wish to be long-term
immigrants. They are here to earn money and wish to go back to
their home countries. Many go back on a regular basis. If they
know that it will be difficult to get back into the UK they will
be less inclined to leave. There is a similar debate taking place
in the USA in respect of irregular migration from Mexico.
THE EXTENT
OF IRREGULAR
WORKING AND
THE INFORMAL
ECONOMY
24. There is a large number of people living
and working in Britain who are not entitled to be here. A Home
Office study (Home Office, 2005) estimated that there were between
310,000 and 570,000 irregular migrants in the UK. This does not
count people who are entitled to be in the UK but are working
contrary to the terms of their visas.
25. There is no exact overlap between the
informal economy and irregular migrants. There is a flourishing
informal economy involving native workers, for example in respect
of building work. And the vast majority of migrant workers are
employed in the formal economy. Indeed, some irregular migrant
workers are probably also employed in the informal economy. However
irregular migrants and the informal economy go together. If a
person is not supposed to be in the UK he is unlikely to want
to register for tax or National Insurance.
26. There is a view that the informal economy
is not actually a bad thing and usefully "oils the wheels"
of the economy. This is a dangerous point of view. Those who operate
in the cash economy have a price advantage of anything between
30% and 50% over those operating in the formal economy. Members
of the Association of Labour Providers generally provide workers
on long-term contracts to food businesses. In order to pay the
legal minimum wage and essential add-ons, the minimum wage of
£5.05 requires a labour provider to charge a labour user
around £6.70. However, there are labour users that are
unwilling to pay anywhere near that amount. If labour providers
protest that they cannot operate at this level and comply with
the law they are simply told there are other labour providers
who will, and sadly this is the case. This means that it is difficult
for legitimate labour providers to operate in some parts of the
country because of the strength of the competition from those
evading tax. Once this activity is anything more than a marginal
level it has a major effect on the whole market.
27. The informal economy also causes a substantial
loss of tax revenue. The IPPR study estimated the loss of tax
revenue as a result of migrant workers in the informal economy
at over £1 billion a year.
GOVERNMENT POLICY
28. The point has already been made that
government policy is ineffective in preventing people working
in the UK who are not entitled to. Ample evidence is available
to anyone who cares to look. Some food factories in East Anglia
are staffed to a large extent by illegal workers who will run
out of the factory if people thought to be tax or immigration
inspectors arrive. Of the streets of London there are hundreds
of hand car wash facilities staffed to a significant extent by
illegal immigrants.
29. HMRC is not equipped to deal with tax
evasion through the informal economy. It is at its best going
through detailed records with a view to finding unrecorded income
or disallowing expenditure. ALP members report virtually no enforcement
activity by the tax authorities even where there is blatant tax
evasion which is reported to them. If businesses are aware that
they can evade tax and obtain a 40% price advantage with little
risk of being caught it is hardly surprising that many choose
to do so. Even if they are caught any penalty is likely to be
payment of the tax that was due.
30. Enforcement activity is also ineffective
by the Immigration and Nationality Division of the Home Office.
One understands the difficult environment in which they are working,
in particular the difficulty of returning workers home. This was
sadly demonstrated in the Morecambe Bay tragedy.
31. There are other aspects of government
policy which demonstrate a lack of joined up government and which
serve both to encourage the informal economy and irregular migration.
32. Even though the date on which 10 new
countries joined the European Union was known some years in advance
the government decided just one month before the date to introduce
the Accession States Worker Registration Scheme. It did this without
any consultation and no regulatory impact assessment. The scheme
was a political device designed to placate those MPs and the media
who wanted evidence that the government had some control over
what was happening. Workers from the Accession States have to
register within one month of arriving in the UK and to pay £70
for doing so. They have to send their passport to the Home Office
at a time when it is most needed. The scheme has been beset with
administrative difficulties with some workers not having access
to their passport for 12 weeks or more. The scheme does nothing
other than count workers. It has no policy use as the government
is already committed to allowing workers from the Accession States
to work in the UK without restriction. The statistics are of limited
value. They count workers who register but do not record those
who subsequently leave the country. The figures are not compatible
with other government statistics; it is clear that many workers
have not registered because they do not wish to pay £70 and
indeed have practical difficulties in doing so.
33. Workers who choose not to register may
well believe that they are illegally in the country and therefore
seek to work in the informal economy. This is based on a misguided
belief that the Home Office and HMRC communicate with each other.
The scheme therefore encourages workers who are here legally to
behave as if they were here illegally with all the problems that
that entails. The scheme should be abolished at the earliest opportunity.
The Association has made formal representations to this effect,
including an analysis of why the statistics are of little value
(ALP, 2005).
34. A related point is that in practice
it is difficult for many workers to obtain National Insurance
numbers. This should be a simple task with the government working
in a way that is friendly to business and workers. In practice,
ALP members report that their workers may have to devote a whole
day simply to go to an office to get a National Insurance number
without any certainty that they will succeed. It is hardly surprising
that some workers decide not to bother. At the margin this gives
a further boost to the attractiveness of the informal economy.
REFERENCES
ALP (2005): The Worker Registration Scheme—time
for abolition (available at www.labourproviders.org.uk)
Dench et al (2006): Sally Dench, Jennifer
Hursfield, Darcy Hill and Karen Akroyd, Employers' use of migrant
labour, Home Office Online Report 03/06.
Evans et al (2005): Evans Y, Herbert
J, Datta K, Mcllwalne C and Wills J Making the City work: low
paid employment in London, Queen Mary College, University
of London.
Home Office (2006) A points based system:
making migration work for Britain.
Home Office (2005) Sizing the unauthorised
(illegal) migrant population in the United Kingdom in 2001.
IPPR (2006): Irregular migration in the UK,
IPPR factfile (available at www.ippr.org).
Mark Boleat
Chairman
12 April 2006
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