Memorandum submitted by NASSCOM
NASSCOM®is the premier trade body and the
chamber of commerce of the IT-BPO industries in India. NASSCOM
is a global trade body with more than 1,200 members, which include
both Indian and multinational companies that have a presence in
India. NASSCOM's members and associate member companies are broadly
in the business of software development, software services, software
products, consulting services, BPO services, e-commerce &
web services, engineering services offshoring and animation and
gaming. NASSCOM's membership base constitutes over 95% of the
industry revenues in India and employs over 2.24 million professionals.
NASSCOM member companies include not just Indian IT BPO firms
but they also include many UK based organisations such as BT,
RBS, Barclays, HSBC, TESCO and Logica.
NASSCOM's area of interest is Intra Company Transfers
(ICTs).
INTRODUCTION
1. The Home Affairs Select Committee is
undertaking an inquiry into the cap on non-EU economic migration.
The Committee will investigate the Government's current proposals
to cap migration through Tiers 1 and 2 of the points-based system
by implementing a permanent limit.
2. The area of inquiry that NASSCOM wishes
to respond to regards the proposal for a quota on Intra Company
Transfers (ICTs), which is one of the focus points of the inquiry.
NASSCOM's submission and the provision of oral evidence concerns
only the question: should ICTs be included in the proposed Government
cap for non-EU migration? Any questions concerning quotas for
mainstream immigration are outside NASSCOM's area of expertise.
What are ICTs?
3. Intra-Company Transfers are the mechanism
used by businesses to bring their own people into the UK to do
jobs within the company which it only makes sense for an existing
company employee with a particular set of skills and experience
to do (source: UKBA, June 2010. Limits on non-EU economic migration.
A consultation). ICTs are transferred by their overseas employer
for an average time frame of 18 months in the case of NASSCOM
member companies. At the end of the transfer time period, ICTs
return to the country of origin.
Should ICTs be included in the proposed quota
for UK migration?
4. The key question is whether ICTs should
be included in the Government's quota on net migration from non-EU
countries. NASSCOM believes that ICTs should not be included in
the quota. This stance is supported by the below arguments and
followed by suggestions of possible alternative measures that
the UK Government could consider (paragraph 5).
4.1 The purpose of ICTs is to allow UK plc to
remain competitive in today's globalised economy. Limiting the
availability of ICTs would limit the UK's competitiveness.
If, for example, a leading London-based bank
wanted to renew its IT systems, it would be likely to tender the
contract internationally to ensure it benefits from the best possible
overall arrangement. But for overseas firms to compete for this
contract, they would need to bring highly skilled professionals
to London, who are familiar with the company's proprietary framework
to liaise with the client, map systems and trouble-shoot throughout
the development and installation process. These staff would also
need to be willing to be relocated to the UK to then return to
their home country to take forward the bulk of the development
work. If the international IT Company could not easily transfer
staff to the UK for temporary periods, it could not effectively
trade with the UK bank. The UK would have effectively imposed
a non-tariff trade barrier, pushing up costs for its own businesses
and damaging the country's long term economic position.
4.2 ICTs no longer allow even highly skilled
workers to settle in the UK. They are not a route for immigrants
wishing to come to the UK to stay permanently.
Most of the highly skilled workers, especially
in the IT industry, come for short durations and return to their
countries after completion of the projects. We feel market forces
should determine its needs on the visas and there is no need to
limit, control or curtail this economic activity, since this migration
does not lead to permanent migration of the professionals.
4.3 The exclusion of ICTs from the quota would
not undermine the integrity of the basic policy—it would
arguably strengthen it by making it more "business friendly".
The UKBA's own consultation document recognises
"the unique and temporary nature" of ICTs. They are
a mechanism used by overseas and UK businesses to transfer key
staff for temporary periods to the UK that, as the consultation
document says, "only makes sense for an existing company
employee to do". ICTs can be easily and justifiably excluded
from the policy.
4.4 Whilst economically important, the contribution
ICTs make to the net number of people coming to the UK is extremely
modest.
The UKBA's consultation document makes the point
that ICTs are responsible for 45% of all Tier 2 entry clearance
visas, of which, according to the MAC, 36,000 were issued in 2009
(down from 68,000 in 2007. This is in comparison to 362,000 student
visas that have been issued in the 12 months to June 2010). This
means that about 16,000 ICTs were issued in 2009. But even this
relatively modest figure exaggerates the figure that really counts—that
is, the net number of incoming ICT highly skilled workers.
Research by NASSCOM amongst its leading members
suggests that (a) these companies apply for around 40% more entry
clearance visas than they actually use (something that reflects
the premium companies put on being able to move quickly and flexibly
should the clients' needs dictate it) and (b) that for every three
ICT highly skilled workers who these companies bring into the
country, they send two or more home. Based on these ratios, the
actual net figures for 2009 for ICT "migration" in 2009
would have been a little over 6,000—a modest number in absolute
terms despite these highly skilled workers' economic importance
to the UK.
One of our recommendations is that the UKBA
should capture this data from the sponsoring companies. NASSCOM
members will be more than willing to help fill this data gap and
assist the UKBA in the process.
4.5 Highly skilled ICT workers do not directly
affect the local job market—the roles they perform are not
roles that local workers could do unless (a) they were familiar
with the company's systems and (b) were willing to move overseas.
4.6 Where quotas have been implemented for ICT
type schemes, it has led to hoarding, increased costs, inflated
figures and a distortion of the system.
Quotas on ICT-type schemes have a deeply unhappy
history for both business and the host country's economy. They
lead to distortions in the market, increased costs and a jump
in the number of visa applications. This last point can be illustrated
by a simple example. If two or three companies are on a final
shortlist for a major IT scheme, these companies need to be in
a position to ensure they can deliver this scheme without delays
should their tender be successful. In situations where there are
quotas, these shortlisted two or three companies invariably choose
to apply for visas in case they win the contract, despite the
costs in doing so—they cannot risk the possibility of delays.
This practice both inflates visa numbers from each short listed
company and can make it more difficult for other companies to
secure visas.
Quotas could possibly work in the case of other
tiers. The distinguishing factor is that ICTs are demanded by
"corporations" whereas it is the "individuals"
that demand the visas. At times, regulating the flow of individuals
does become necessary for the economy. It is here that we believe
the importance of the Points-Based System comes to the fore.
4.7 Including ICTs in the quota would be detrimental
to the UK's ability to attract inward investment, undermining
a major strand of the UK's economic strategy.
Indian companies have been the second largest
investors in the UK. Investments into the UK by Indian companies
come by way of acquisitions and setting up facilities in the UK.
UKTI is encouraging such activities from Indian companies showcasing
the UK as a "gateway to Europe" for Indian companies.
A quota on ICTs would inevitably mean that companies
seek to minimise the staff they transfer to the UK—part
of the intention of the quota. The problem for the UK economy
is that this would make it very hard to locate regional headquarters
in the country (four out of five of NASSCOM's biggest members
have their European headquarters in or around London) and they
would be driven to explore the possibility of locating elsewhere
in Europe, particularly in light of moves to introduce a Schengen-wide
work permit.
A quota would also make the recent trend of
India-based companies investing large sums in UK businesses less
likely to be sustainable. It would raise difficult practical as
well as "confidence" issues.
4.8 Including ICTs in the migration quota would
greatly damage the UK's reputation with the international business
community.
It is a truism that the world of business, economics
and much else works from important but hard to define measures
of "confidence" and perception. The UK has traditionally
benefited from this in the past as it is seen as a leading promoter
of world trade and liberal markets—and hence attracts trade
and investment. Introducing quotas for ICTs would send damaging
signals to the international business community, the reverberations
of which would extend beyond the issue of ICTs themselves.
5. Related to the central question, the
UKBA and MAC consultations both ask whether ICTs should be allowed
to bring dependants with them to the UK for the duration of their
project work. We believe that dependants should be allowed to
accompany ICTs, as only a small proportion of ICTs bring dependants
with them. Firstly, preventing ICTs from bringing their families
would make the UK a much less attractive base from which to do
business. Secondly, the economic contribution of the dependents
is usually quite significant—they typically have high disposable
incomes which they spend in the UK.
So what should the UK government do?
6.Whilst including ICTs in the migration quota
would be unnecessary for the integrity of the overall policy and
extremely damaging to business, there are other measures the government
should explore.
6.1 First, all ICT sponsoring companies should
be obliged to inform the UKBA when a worker comes to the UK and
when they leave, thereby providing the government with robust
data for enforcement and policy development purposes. This data
would also underscore the facts that (a) ICT workers only travel
to the UK for temporary periods, they do not settle in the country,
and (b) that the net numbers involved are relatively modest.
6.2 Second, greater emphasis should be placed
on auditing the compliance of ICT sponsoring companies. The standards
expected of sponsoring companies should be clearly laid out—and
the companies should be held to account accordingly. Unlike individuals,
it is relatively easy to monitor and control businesses.
6.3 Third, the situation regarding ICTs should
then be reviewed again at a later date. The government would have
a far sounder statistical basis for making extremely important
decisions affecting the long term future of the UK economy.
CONCLUSION
7. In conclusion, ICT visas are not a route
to immigration, but rather a platform for trade. ICTs ensure that
UK companies and the UK economy remain competitive in a globalised
world. If the decision to implement a quota on ICTs is made, the
disadvantages to the UK economy would be the same as with the
imposition of any other non-tariff trade barrier.
August 2010
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