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Dr. Starkey: Does the Minister agree that the key issue in deciding between a points-based system and a cap is that the former can respond to the needs of the British economy in a much more specific way? If we suddenly had a massive shortage of nurses, the
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points-based system could cope, whereas a cap is just a total number; therefore, it would not be able to respond to the needs of the economy.

Mr. Byrne: My hon. Friend’s line of argument is absolutely right. The unfortunate reality is that we cannot truly know about anything because the cap is a secret—we do not know how big, or small, it is. She is right that one of the chief virtues of the points system is its flexibility. It is possible to move the points score up if we think that inflows are too high, or to move it down if we think the economy is suffering through lack of access to skills.

The key point that I want to make by way of introduction this afternoon is that migration can make a clear economic contribution, but that it is crucial to ensure that only those we need are able to come here to work and study. Controlling migration is therefore important. A points system has a number of virtues to recommend it, and there is a degree of consensus about those principles in practice. I have come to learn, however, that many hon. Members are more expert than I am on immigration law, so I shall now stop talking and start listening.

3.19 pm

Damian Green (Ashford) (Con): It is always enlightening to hear the Minister describe and defend the Government’s immigration policies; as ever, the imperturbable was defending the indefensible. Before I go on to investigate the gaping chasm between the world and the immigration system described by the Minister and the world in which the people of this country live, I should express some sympathy for him, because he has an impossible job. I say that not because it is impossible to run an efficient immigration system in this country, although I do not underestimate the challenge, but because he must claim, as he did at the start of his speech, that everything that the Government are doing on immigration, such as the introduction of the points-based system, is a radical, once-in-a-generation change. He must do that without admitting that the need for the change is the failure of his Government’s immigration policies over the past 10 years.

The Minister’s introductory remarks were the latest example of a faintly absurd level of hype that the Government attribute to every change they make in the immigration system. When the Home Secretary launched the points-based system, she said that it was

This afternoon, the Minister, perhaps outbidding his line manager, said that over the next year the Government will deliver the biggest shake-up of the immigration system for more than 45 years.

I shall return to the detailed virtues and vices of the points-based system in a moment, but we must ask why this bad analysis is so prevalent. The problem is that in their early years, this Government adopted a policy based on a straightforward analytical fallacy: they said that immigration was good for the economy and therefore the more of it there was, the better it would be for the British economy. Many of the problems we
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face in immigration, strains on our public services and, worse still, community cohesion in this country, have their root in the faulty analysis that the Government adopted in their early years in power. The House of Lords report to which the Minister kindly referred pointed that out as well as anyone has done. It is worth this House remembering that the report was produced by a cross-party House of Lords Committee containing Labour ex-Ministers, distinguished economists, such as Professor Richard Layard, and, indeed, Adair Turner, whom the Prime Minister employed as his adviser on pensions.

Thus, the report cannot be dismissed. To do him credit, the Minister did not do so. He said that he thought that the analysis was good, but he took objection to some of the press coverage. I would be happy to ignore completely what the press made of the report, because the report itself was excoriating about the analysis that the Government apply to immigration and, in particular, about the policies that they have adopted. Indeed, rather gratifyingly, the distinguished cross-party Committee said that we needed precisely the cap for which I have been arguing, and against which the Minister has been arguing for the past 10 minutes.

Keith Vaz: As the hon. Gentleman is citing reports, I wonder whether he has had a chance to examine the Work Foundation report published this morning, which points to the success of migration and to the fact that high levels of immigration have helped our economy, and have kept interest rates and inflation down. Those facts were not analysed sufficiently by the House of Lords Committee.

Damian Green: We can all reach for our favourite reports, but I am quite happy to be on the same side as Professor Richard Layard, Adair Turner, Lord Moonie and many others, some of whom are right hon. and hon. colleagues of the right hon. Member for Leicester, East (Keith Vaz).

I shall make my position and that of the Conservative party clear to the right hon. Gentleman: immigration has benefited and does benefit this country, both economically and culturally. To ensure that we capture the benefits of immigration for those who are already here and for those who wish to come here, we need to ensure that the immigration system is under proper control and that immigration is at a level at which the population and our public services can be comfortable. It is wrong that the Government have failed to do that for the past 10 years.

Chris Huhne: I would not like to leave the subject of the House of Lords report without pointing out one fact. I agree with the Minister that the press reporting of the report was rather partial—I do not know why. The report contained some surprising quotations. For example, it stated:

and that there are

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There is a lot of evidence in the report, such as that given by Professor Steve Nickell, David Blanchflower and other distinguished economists, that suggested that there could be dynamic gains from migration. That evidence was quite possibly underestimated in the report’s conclusion, since it was cited after the recommendation on the conclusion was mentioned in the report.

Damian Green: Since we are all happily quoting the Lords report, I shall go along with the Minister and quote the report rather than the press reports. The report stated that

Dr. Starkey rose—

Damian Green: The hon. Lady is now going to tell me that that is the difference between two large numbers and that we should therefore not take much notice of it, but I shall let her say it for herself.

Dr. Starkey: As the hon. Gentleman clearly understood the first time around, I was going to make a different point, and, of course, he has now put me off. If he would remind me of what he was saying before I stood up, I could remember. [ Interruption. ] No, it is not about GDP. I remember now.

The hon. Gentleman is right to say that the report states that there is “no evidence”, but that is not the same as saying that there is evidence that there is no benefit. That was the mistake that was made in the press release. I am prepared to accept that the Lords said that there was no evidence, but they did not go on to say that they could therefore categorically say that there was no benefit.

Damian Green: That is completely right. I am glad that the hon. Lady thought of another point to make. It seems a slightly strange basis for an entire Government policy to have no evidence that that policy will be beneficial. The hon. Lady has just admitted that there might well be no evidence, and that does not prove the opposite, either. The Government have proceeded on that assumption for 10 years and so has the Minister, for all his statements that he prefers GDP per capita. Just as he is a student of my speeches and press releases, I am probably the world’s greatest student of his. In all conscience, no one would believe that he did not regard the expansion of GDP by £6 billion—a figure he cited again today—as extremely important evidence in favour of the economic benefits of immigration. If he is now claiming that GDP per capita is a better measure, that is a welcome advance on everything that he has said over the past few years.

Mr. Byrne: The hon. Gentleman would accept, I think, that one of the best indicators of contribution towards GDP per capita is wages, so it is simply not true that there is no evidence that migration
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contributes to GDP per capita. When we look at wage rates, for example, we can see that on average foreign-born people earned £424 a week in 2006 compared with the UK-born, who earned £395 a week. There is clear evidence, both in theory and in practice, of a positive contribution towards GDP per capita. As my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) said, of course that contribution will be relatively small when the sums are done, because 87 per cent. of the labour force is UK-born.

Damian Green: All the evidence that I have seen—I am sure that the Minister has seen it too—suggests that, as one would expect, there is an enormous spread in the wages of those who come to this country to work. There are many at the very top end and many at the bottom end.

Oddly enough, that is one of the points of consensus between us. We do not reject the points-based system altogether. We think that it should be used as a base for the cap that we propose and the Minister rejects. It would be a useful tool within our overall, very different policy. One thing that we can do, and indeed that the Minister is trying to do, is ensure that people with the appropriate skills come into this country. By and large, one imagines that in most areas those appropriate skills will be at the high end. The truth about the level of wages is rather more subtle than the point that he tried to make.

Mr. Clappison: May I take my hon. Friend back to the intervention on him by the hon. Member for Eastleigh (Chris Huhne)? Does my hon. Friend agree that it is important to correct the impression, which the Liberal Democrats may inadvertently have given, that some evidence was somehow not properly heard by the House of Lords Committee? The two gentlemen to whom he referred, Professor Stephen Nickell and Professor David Blanchflower, both gave oral and written evidence to the House of Lords Committee. They had the opportunity to consider their comments, and the Committee had the opportunity to consider the Minister’s arguments. The principal conclusion that it reached, in the round, was the one that my hon. Friend read to the House.

Damian Green: My hon. Friend is exactly right. Of course, famously, if one assembles two economists, one will get three different arguments.

Pete Wishart: I know that the hon. Gentleman is an enthusiastic champion of his policy of a cap, and he has probably considered all facets of it, particularly how it will apply in all the constituent nations of the UK. Can he therefore tell me how it would assist Scotland, which suffers from chronic depopulation and has very different immigration and population requirements?

Damian Green: The problem in Scotland is that for many years, it has been under the yoke of Labour Governments that have treated it badly, at both national and UK level. It is therefore understandable that many people have sought to leave Scotland, and that its problems are rather different from those of other parts of the UK.

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The hon. Gentleman makes a serious point, and one thing that it will be sensible to analyse, whether under the Government’s points-based system or ours, is the impact that it would have in different nations, regions and areas of the UK. That seems perfectly sensible, and of course we would do that.

Chris Huhne: I would not like to move on from the House of Lords report without our dealing with the matter that the hon. Member for Hertsmere (Mr. Clappison) raised. The report does conclude, in paragraph 69, that

However, further on, the report mentions the macro-economic impact—perhaps the connection was not realised. It cites Professor Steve Nickell as saying that immigration may reduce the equilibrium rate of unemployment

It seems to me that the report contains a lot of sensible material, but has not absorbed the key aspect of the dynamic potential benefits. Perhaps the hon. Gentleman underestimates that.

Damian Green rose—

Mr. Deputy Speaker (Sir Michael Lord): Order. Before the hon. Gentleman responds, I appreciate that these are complicated, detailed and interesting matters, but interventions appear to be getting longer and longer. A number of hon. Members are seeking to catch my eye and will be disappointed if we take up too much more time, on interventions in particular.

Damian Green: The way to stop that, Mr. Deputy Speaker, is for me to be more ruthless when it comes to refusing interventions.

In the past 10 minutes, I have come to realise that I am much more comfortable with the House of Lords report than are those who want to criticise what I am saying. We all agree that that Committee is full of very distinguished economists: it looked at the evidence, and by and large I agree with its conclusions. Like other hon. Members, the hon. Member for Eastleigh (Chris Huhne) is trying to find the bits in the 1,000 pages of evidence that he agrees with. He says that those bits are right but that, for the rest of it, the House of Lords does not agree with him.

I am happy to say that I think that it is an extremely good report. It took evidence from many distinguished economists with all sorts of differing views, and arrived at a perfectly balanced set of conclusions. The Government should read the report seriously, and act on it. Their key policy recommendation is extremely close to the one that we have made.

The House of Lords report, like all the other evidence, shows that immigration can and does benefit this country in economic terms—it does the same in cultural terms, although we are not debating that
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today—but only if it is properly controlled. The Government are making rather overblown claims about the PBS to hide their long-term failure to control the immigration system. They have lost public confidence, and thereby caused unnecessary anxiety.

The House of Lords report makes the general economic point that I have outlined, but also refutes the Government’s claim that immigration has generated fiscal benefits. It makes the good point that estimates of the fiscal impacts are critically dependent on who counts as an immigrant, or a descendant of one. The report therefore renders invalid the Government’s claim in that respect.

I think that the House accepts that the Government’s policy on immigration is rather confused, and that they are having to hide behind rhetoric. One reason for that is that the quality of statistical information on which Ministers base their decisions is lamentable. That is simply not good enough for such a serious and important policy area. I suspect that the Minister agrees, as he has tried to institute changes to how statistics are collected and analysed. It is too little and too late, but better now than never.

The Statistics Commission told the House of Lords Committee that about £100 billion a year is distributed to the public sector using formulae that are directly affected by migration estimates. That is a colossal sum, and hugely important to local government in particular, but it is based on figures that are pretty dodgy.

Indeed, Mervyn King, the Governor of the Bank of England, told the Committee quite straightforwardly:

That makes it difficult for the Monetary Policy Committee to asses potential output, predict inflation and set interest rates.

Dr. Starkey: I agree about the problems that rapid population changes pose for the funding formulae, but does the hon. Gentleman accept that a major element of those changes is migration within the UK? His constituency and mine are areas where many people who move in come from elsewhere in the UK. That causes just as much of a problem, in terms of the funding formulae, as does the arrival of people from outside the UK.

Damian Green: It certainly causes a problem, although such movements are easier to capture. There are general problems in areas with rapid population change, and especially rapid growth, but our constituencies would be able to cope if the national formulae were working properly.

Dr. Starkey Oh!

Damian Green: The hon. Lady makes a face at that. I completely agree with her, as I interpret that as an acknowledgement that both our constituencies have been badly treated by the local government funding settlement. I thought that I would take the opportunity to get that in.

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Boston in Lincolnshire is often cited. Regardless of any of the other problems there, the underlying point is that the local council is funded for a population of 58,000. It estimates that the actual population is 72,000. The hon. Lady is right: it does not matter where those people come from, but the people who are trying to run schools and other local services for a population of 72,000 with funding for 58,000 will have problems.

Part of the general condemnation of the lack of control of the immigration system stems from the fact that, as in Boston’s case, the problems are caused not by migration from other parts of the country, but migration from other parts of the world. Earlier this week, Trevor Phillips made that point very starkly and very well. He said:

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