The Minister for Borders and Immigration (Mr. Liam Byrne): I beg to move,

The Committee will know that this year we are making some fairly significant changes to the immigration system. Among those reforms the most important change is the introduction of the points system, which we launched in February. On 25 February I stood here and made regulations that set the fees for the first part of that system, and said that this year we would introduce additional immigration and nationality fees. Today’s regulations set the fees for the next part of the points system and relate specifically to services for which we plan to charge more than the cost of delivery. We make the regulations under powers given to us in section 42 of the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004 as amended by section 20 of the UK Borders Act 2007.

We need to make a slight technical change to the explanatory memorandum where it states that the fees for registration as a British citizen under the British Nationality (Hong Kong) Act 1997 will be charged under the powers in section 42(1) of the 2004 Act.

Peter Bottomley (Worthing, West) (Con): Which paragraph?

Mr. Byrne: It is in the second line of the first table at the top of page 4. However, that reference should be to section 42(2A) of the Act. Apologies for that.

Peter Bottomley: On a point of order, Mr. Pope. I am not absolutely certain that I have identified on page 4 what the Minister is quoting from. That might be my fault, but could he double-check? Is that the page that begins, “Table B”?

Mr. Byrne: I am referring to page 4, table A, last line.

Peter Bottomley: Further to that point of order, Mr. Pope. It is on page 3 of the explanatory memorandum available to Members.

The Chairman: That is a fair point. Minister?

Mr. Byrne: I am sorry, but I missed that.

Peter Bottomley: In the copies available to other Committee members, it is on page 3—so that we are working off the same table.

Mr. Byrne: I am grateful to the hon. Gentleman for that clarification.

In setting today’s fees, we were guided by two principles: on the one hand, the need to maintain the UK’s international competitiveness, and on the other, the need to raise money in line with the value that we are creating for foreign nationals seeking to work here and the businesses that employ them. In both tables A and B, broadly we are seeking to increase prices in line with the prices that we charged last year. One fee departs from that principle and another is without precedent. We are seeking to increase by some margin the fee for tier 1 investors and entrepreneurs, which we proposed this year to set at £600, reflecting the value to investors and entrepreneurs of the opportunity to work in the UK.

The new fees for which there are no real precedents are those that we propose to charge for sponsors, and in particular the licences for medium and large organisations. Licence sponsorship is an important part of the points system, and the fee will cover a four-year licence period and enable businesses to sponsor in a number of migrants. We have consulted extensively on that and think that we have set it at the right level. I anticipate that about 4,500 sponsors will fall into that category, out of about 15,000 sponsors whom we anticipate will register under the points scheme this year.

Damian Green (Ashford) (Con): The Minister says that large sponsors will be able to bring in a number of people. Is that an indefinite number or is there a limit on the number for a particular time period?

Mr. Byrne: We will seek to set, with the individual businesses concerned, an indicative range as to the number of migrants they will be able to sponsor, to help to monitor their behaviour. As the hon. Gentleman will know, however, the point system is ultimately demand-led, so, as long as jobs are offered first to UK citizens and EU migrants locally, it is up to businesses to decide how best to fill vacancies.

The Committee will want to know how much we plan to raise through the measures and what we plan to spend the money on. In the financial year 2008-09, we expect to generate about £50 million from the fees in the regulations, which will go toward the total £671 million that we project to raise from the fees paid by migrants. That money is a significant part of the £2 billion that will fund the UK Border Agency in the year ahead. The fees strike a balance between being fair, reasonable and necessary and I commend the regulations to the Committee.

Damian Green: I am grateful to the Minister for his explanation of the order and the explanatory memorandum. As he has said, we seem to have been down this course before, and we have developed a routine for these fee-setting debates. He knows that the Conservatives support the principle of having reasonable charges for people who want to come to this country, and we accept that the fees should cover more than the administrative costs.

When the Minister winds up, it will be useful and illuminating if he explains how the figure for tier 1, which has increased greatly, was reached. I am interested to know whether he thinks that he should charge the highest fee that the market can bear or whether other principles have come into play, particularly at that end of the economic spectrum. Those who will come in under tier 1 will be very wealthy and many of them could, conceivably, afford to pay more if they value coming to this country so much. With that caveat, it is fair that people who want to come and live here and to benefit from doing so should be asked to pay for the processing of their paperwork and towards the enforcement of the rules.

We also support the notion that firms that wish to employ migrant labour should be licensed and approved as being fit to do so. It is important that companies do not abuse the system or the law, and it is equally important that they do not abuse employees who are potentially vulnerable. Will the Minister ensure that there are sufficient staff and resources to process all the fees and licence applications quickly? Is he confident that the agency can receive the fees and issue the licences without the unnecessary delays that have plagued the system in the past? I have specific reasons for asking that. He will recall that I tabled a parliamentary question last year asking whether the Home Office had estimated how many firms would apply for licences to sponsor and whether it had adequate resources to deal with applications. In a response last week, he said that, as of 31 May, only 125 businesses had applied. He also said, and he has repeated this today, that he expects 14,000 businesses to become sponsors, so take-up has been derisory so far. If he is not slightly alarmed that the figure is so low, he ought to be. I should be grateful for any assurances that the applications will be processed on time. Clearly, if they are not, there will be damage to the economy of this country and to its reputation around the world.

The Minister has been helpful in telling us how much the Home Office expects to recoup. Could he break that down a bit and tell us how much tier 2 migrants will contribute, and is he completely confident that the figure that he has estimated the UK Border Agency will raise will be reached? Can he tell us whether the fees charged at present for the immigration documents and procedures for which charges are made cover the costs that they are meant to cover?

Finally, what contingency plans does the Minister have if the fees do not rise to the levels that he expects? Clearly, they are funding essential enforcement activities of the agency. An economic downturn would, presumably, lead to a reduction in the number of people coming to work in this country—it is perfectly plausible to expect that the numbers will come down—so the amount of money he raises may well be less than he was anticipating a few months ago. What would have to give? Would some operations of the agency be vulnerable in those circumstances?

I hope that the Minister can give us some reassurance on those various aspects of the order. As I said, we have no objection in principle to the fees or the levels.

Tom Brake (Carshalton and Wallington) (LD): It is a pleasure to serve under your chairmanship, Mr. Pope.

Liberal Democrats support the principle of the point-based system as described in the debate that took place on 25 February, and the principle of raising charges, although, as we mentioned a couple of months ago, we would like to see some sort of hypothecation so that the money that is raised could be used to train the UK work force to take the jobs that are being taken by migrants. Our work force would be better able to compete for those jobs.

I have several questions, some of which have already been asked by the spokesman for the official Opposition. First, has there been any revision in the amount that will be raised through the charges? What is the contingency plan, should there be an economic downturn and the number of migrants is reduced as economic prospects here deteriorate? What assessment has there been of the impact of the fees on the number of arrivals? In particular, what impact will the large increase for entrance clearances for tier 1 investor or entrepreneur migrants have?

Finally, could the Minister confirm a point that was raised on 25 February about the differential between the charge for a large or medium company—the £1,000 charge—and small businesses? I raised concerns about how small the differential was. Could the Minister confirm whether the £300 that was discussed previously is, in fact, the small business figure, or whether it relates to footnote 3 at the bottom of page 3—it may be the Minister’s page 4—of the explanatory memorandum, which refers to fees for small sponsors being specified in other regulations? Is that something that we will return to? Is the figure different from the £300 that he spoke about on 25 February? I should be grateful if he would clarify those points.

Peter Bottomley: I would be lacking in courtesy if I did not make some reference to the previous remarks. Are we to take it as official Liberal policy that people who come to this country to fill a gap should be charged extra to allow others in this country to be trained so that the guest worker will not be needed? That is what we heard, and unless I am contradicted, I shall assume that that is the case.

Tom Brake: I would be surprised if the hon. Gentleman did not agree that some of the funds could be a useful contribution towards the cost of training the UK work force. I assume that he would not disagree with that.

Peter Bottomley: As it happens, I disagree completely. I think that, in general, hypothecation is wrong. People should go for cost-clearing levels of charges, although, as my hon. Friend the Member for Ashford said, my party would support some extra charging in some circumstances for some purposes. But, in general, the old rules are the right rules: hypothecation is improper, and charges should not be used as taxation. I take taxation to be taking money from one set of people to use for some other specific purpose.

Having dealt with the previous contribution, I will move on, if I may. I think that the Minister mentioned the figure of £671 million. Is that all the surplus, over and above costs, or is it the total recovery, from which the costs will be taken? I am not asking the question to make a point; I am just trying to establish what levels of surplus recovery we are talking about.

If a tier 1 applicant is granted permission to come here, at the fees in the order, are they able to bring in a dependant—a spouse or recognised partner, or a child? If so, is a similar application required for the dependant, and is the dependant required to apply at the same tier as the applicant, or are they, if they are allowed in at all, to come in for free, at cost recovery, or at a lower tier? It would be helpful to know whether that matter has been decided.

I apologise if I am asking questions that people who may have helped the Bill to go through know the answers to; I was not on the Bill Committee.

I would like to go back to an earlier point, when the Minister was speaking about a particular page on the explanatory memorandum. I just want to double-check that the Minister’s copy of the explanatory memorandum goes to paragraph 9 and that there is not some other paragraph that has come in, which is missing from our copies. I presume that this is just an issue of pagination, rather than anything more.

What is meant by a “large sponsor”? Is it someone who chooses to make applications for more than a certain number of people coming into this country to work, or is it the size of the business itself? For example, if a single-handed Indian or Bangladeshi restaurant in my constituency was able to establish that they needed to have five tier 1 applicants—I am not suggesting that they would, but suppose they did—would they count as a large sponsor because they want a large number of people, or is it the case that if someone already employs 100,000 people and wants one more person they are a large sponsor? It would be helpful to know the answer to that question.

I wanted to discuss one point that has come up from experience in my constituency. For a time, the Rustington Methodist church had a minister who was normally in south India; there was a partnership arrangement to allow him to come here. I am not sure that he came here because the church could not find anybody else or because it was part of his development as a minister to come and work in this country for two or three years. I would be grateful to know whether the reference to a minister’s religion requires their presence here to be due to a shortage of ministers or whether it is possible to have an arrangement, either with an exchange or without an exchange, for someone who is a minister of religion, whether Christian or another faith, to be able to come and work in this country. Presumably, such a person would not have a large sponsor, so there would be a lower fee, but I would still be interested to know what the points-based system would mean for that person, and whether the requirement that the post cannot be filled from within the European economic area would apply.

There may be other issues that come up later on during the discussion. However, I would like to put those questions to the Minister. If any of them are questions that it would be inappropriate for the Minister to try to answer now, I would happily receive a reply by correspondence.

Mr. Byrne: There were a couple of points that were raised by the hon. Gentleman in his contribution to the debate that I will not test the Committee’s patience by responding in detail to now; instead, I will deal with them in correspondence. Most of those issues have been set out in the statement of intent on the points system that I published for tier 2 earlier this year. That statement of intent will deal explicitly and effectively with the last point that the hon. Gentleman made, but also with the point about how we charge for dependants of people coming in under the points system.

The important point that I wanted to address now was the difference between large sponsors and small sponsors. We are not trying to invent a new distinction between “large” and “small”; we want to use the definition of small companies that is set out in the Companies Act 2006. We have decided that small sponsors, as defined as a small business in the 2006 Act, should pay less than sponsors that are bigger. For the Committee’s benefit, the definition of a small business in the 2006 Act is one with a turnover of not more than £5.6 million. I do not know how big the restaurants in the hon. Gentleman’s constituency are that he is referring to, so I have no idea whether their turnover will be higher or lower than £5.6 million. Other definitions include the company having a balance sheet of not more than £2.8 million—I confess that I know even less about the balance sheets of the restaurants in his constituency—and employing not more than 50 employees. Those are the distinctions that we have tried to draw.

We recognise that some small businesses are unable to fill their skills needs from the local labour market and might therefore need to sponsor people from abroad at times. We do not want to put those businesses out of business by charging exorbitant fees, which is why we are introducing a two-tier charging arrangement. Those fees are set at cost recovery level, rather than above cost recovery. The Committee is debating only those fees through which we seek to recover more than our costs. The UK Border Agency is allowed to set cost recovery fees through statutory instruments that are subject to the negative resolution procedure, so those fees have already been passed.

Tom Brake: I hope that the Minister is about to confirm that the fee for small businesses is £300. Will he clarify the position for charities? Footnote 3 on page 3 of the explanatory memorandum refers to small businesses and charities. Is there a distinction between a large charity such as Oxfam and a small one such as a local charity, or will they both be considered to be small companies and therefore benefit from the subsidised rate?

Mr. Byrne: I am grateful for the opportunity to clarify that point. Charities are in the same category as small businesses and will therefore benefit from the lower fee, which is indeed £300.

I am grateful for the support that there has been in the Committee on the principles of over-cost recovery and of charging people, on some occasions, what the service is worth to them. Entrepreneurs and investors are able to afford a little more. Under the points system, an investor is an individual of high net worth—more than £1 million—and an entrepreneur is someone who has £200,000 disposable in the UK. We have tried to keep the fees for tier 1 entrepreneurs and investors in line with those for tier 1 migrants and more generally.

The hon. Member for Ashford made an important point about the work that needs to be done in coming months to get businesses signed up and licensed. He will be delighted to hear that we will be doing a little advertising over the summer to encourage businesses to register. I know that either he or his former colleague expressed concern about the way in which advertising was framed, but it is none the less important to get our message out if we are to address his point. About 160 compliance officers will be in place over the summer and thereafter to help to sign people up.

The hon. Gentleman also asked about contingency arrangements, which have been built in. Of course, we keep fees under constant review, so we will have the opportunity to return to Committee and make adjustments, if we need to take into account changing demand. The set of fees before us form part of about £100 million of over-cost recovery that we are seeking to raise. Our total fee income for this year is projected to be £671 million, of which about £100 million will be made up from over-cost recovery.

Damian Green: The Minister has been very generous with all his answers, with one exception: why £600? What principle or other method caused him to arrive at that figure? He gave the qualifications that those paying the fee will require. That figure could be £600 or £6,000—in many cases—and it would not make much difference. I am fascinated to know how he arrived at the figure.

Mr. Byrne: That is an excellent point. We have tried to maintain the tier 1 fee for entrepreneurs and investors in line with the fees charged for other tier 1 migrants. When we set the latter, we looked internationally at fees charged, in particular, in America, Australia and Canada. We felt that the tier 1 fees that we introduced were pretty much in line with those charged internationally. We did not want to overcook it at this stage—these are big reforms and we do not want to deter from coming those whose skills we need in this country, because of the fees. However, the hon. Gentleman is right to make the point that we might be able to go further in this category, which is why my commitment is to keep the fees under constant review and not to hesitate to come back if I think that we can charge more reasonably.

Tom Brake: Has an assessment been made of whether the figure of £600 will lead to a downturn in the number of investors or migrants coming to this country?

Mr. Byrne: We considered that in the impact assessment published earlier this year, but obviously it is difficult to tease apart from other economic factors the impact of costs on demand. Overall, visa demand was slightly lower last year than the year before, but economic circumstances are different. However, the hon. Gentleman was right to make the point that I think he was making: that we should keep such matters under review.

Peter Bottomley: I try to spot interesting things in statutory instruments. I suggest that the Minister recommends to the Plain English Campaign that it considers for an award—a good award—article 2(2)(b) for describing the provisions in very good and clear English.

Mr. Byrne: I shall take that advice on board.

The Chairman: The Minister has offered to answer in correspondence some of the questions raised in debate by the hon. Member for Worthing, West. It would be a courtesy if he could copy in other Committee members.