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1.06 pm

Lord Paul: My Lords, it is a pleasure and an honour to follow the maiden speech of the right reverend Prelate the Bishop of Lincoln. I note that he lists his favourite things as fish and chips, Bruckner, the Corrs, “EastEnders” and Lincolnshire poacher cheese; and lists among his dislikes meringues, reality TV, dogmatism and the Daily Mail. It is perhaps appropriate that he makes his maiden speech today. He tells us that his epitaph should be that “he meant well”. I am sure that all noble Lords will agree that this afternoon “he did well”. He is a renowned theologian and philosopher and I hope that he will make many more contributions to the House in the years to come.

We have heard six excellent speeches, a variety of points of view and some statistics have been quoted. In my personal life I have always been afraid to use statistics too much so I shall try to stay clear of them. I am a member of the Economic Affairs Committee and contributed to this report. I am aware of its contents and the exchanges initiated by my noble friend Lord Peston. Let me commend the excellent

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chairmanship of the committee by the noble Lord, Lord Wakeham. As he said, in his time we have produced many reports. He has been a great chairman.

I have also read the critique by my noble friend Lord Peston. I agree with many of his points, although I might not have made them quite so forcefully. I have immense respect for his views. My argument is that because of media manipulation those parts of the report which have got into the public domain have acquired a completely different interpretation than the one intended by most members of the committee. I believe everyone on the committee was agreed on the contribution to the workplace and the economic benefits that the immigrant community has brought to this country. As a matter of fact, Britain has been a country of immigrants for a very long time. A debate like this will always happen in any country that has an immigrant population, and will become more intense because of the unfortunate economic situation we are in at the moment. However, my experience says that in the end the British people historically have recognised the benefits of immigration, which is why they have accepted immigrants as being of great value, not only to the economy but to social and political life.

The status Britain has enjoyed through history compared with its size and population is largely due to the fact that we welcome immigrants from all over the world and have recognised their value and contribution. In my experience, immigrants bring in fresh ideas, more vigour and a greater desire for success. That is natural because to be a success in a new country one has to work at least 25 per cent harder to be counted at par. I know this from my personal experience and 40 years of hard work here. There is no bigger example of that than the victory last week of Barack Obama as President of the United States. He was not elected because he was an immigrant but because he brought new hope to the people of the United States and to the world. I started my business in this country with a loan of £5,000. Today the company of which I am founder and chairman, the Caparo Group, which is managed by my sons, has a turnover of over £1 billion and employs more than 3,000 people in Britain and another 5,000 in the United States and India.

I shall get back to the report. The committee reached some of its conclusions based on the evidence of GDP per capita. Using that as a basis to assess the benefit of immigration, however, is fundamentally flawed. I shall give you an example. One immigrant arrives with his wife and two children. Using the GDP-per-capita model, his contribution to the economy is divided by four. But my contention is that after 10 years his children grow up and his wife finds work, and then you have four people contributing to the economy, an increase by a multiple of four—not to mention the benefits that children who have received a good education here will take forward. It is a fact that children of all nationalities who learn together are better equipped for the future.

I had that experience myself almost 60 years ago when I went to study at the Massachusetts Institute of Technology. I gained as much from my fellow students who came from many other countries and their approach to life as I did from my studies. You should not

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calculate the potential of the immigrant family based on one individual at a particular time. It is the same thing in business: when you make a capital investment your return on capital goes down in that year but eventually you will get a much bigger return, and that is why you continue to invest. Investment in immigrant communities has to be looked at on a more long-term basis and not a short-term one to suit some short-term results, otherwise we will be in the same situation as the financial community, which has also been looking for short-term results—and look where that has got us. Short-termism, in my view, is always dangerous.

If Britain did not have an immigrant community—I know this myself from running an industrial business—we would not have a labour force, the same productivity or an economy of the size we have today. We would have lower standards of living, higher inflation and very little influence in the world, which would reduce Britain to a second-rate country. If avoiding that scenario is not a huge benefit, I really do not know what is.

I do not think that there is anything wrong with the report, merely the way in which it has been interpreted. Immigration is too complex a subject to be looked at from the narrow viewpoint of GDP per capita. As I said, I shall not go into any of the statistics because enough has been said and written. The Government’s response to the report has been robust and comprehensive, and I recommend it. In the past 25 years, this country has transformed its work ethic, and for that I congratulate the noble Baroness, Lady Thatcher, on her contribution in the 1980s as well as the employers and trade unions which took the lead from that and worked together in a renewal of the industrial scene of this country. I also congratulate my right honourable friend the Prime Minister on steering the British economy, during his time as Chancellor and as Prime Minister. For 12 years, Britain has enjoyed a much stronger economy than the other G8 countries and even in today’s financial crunch is playing a great role on the world stage. The world is looking to my right honourable friend for leadership. He has played a great role in making sure that the work ethic in this country remains strong and that entrepreneurship is encouraged. I am a strong believer in Britain and in what this country can achieve. I am very proud to be British, proud of the country I come from and proud to be an immigrant.

Finally, I say that globalisation, which has benefited all of us, cannot be complete without the free movement of people.

1.17 pm

Lord Moser: My Lords, I will confine myself to two aspects of the report: the state of our migration statistics and the committee’s central macro conclusion that the economic impact of immigration was extremely limited—near zero. Given the limit of the empirical evidence available to the committee, and the state of our migration statistics, I must say that I felt surprised that it felt able to come to such a firm, negative conclusion, and I remain unconvinced by it.

First, I have a more general point. Perhaps it was inevitable that the committee confined itself to the economic impacts of immigration—it is, after all, the Economic Affairs Committee. The trouble is that we

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all know that the non-economic issues are at least as important. One has only to think of all the social implications and impacts—social cohesion, diversity, cultural influences, and so forth—all, incidentally, with their own economic implications. We cannot forget that countless immigrants come here for totally non-economic reasons—I will resist the temptation to talk about my own past as an immigrant—but many of us would argue, myself included, that the non-economic benefits or losses are every bit as crucial in drawing up a balance sheet of pros and cons. To try to isolate the purely economic aspects, however dictated by the terms of reference of the committee, is bound to be unsatisfactory both for public consumption and for policy-making.

The trouble is that this key limitation of the report—self-imposed and probably inevitable—coupled with its conclusions on the little economic impact, encouraged that rather slanted reception in the media. There was massive coverage, much of it with headlines such as, “Migration has brought zero benefit”, and “We must cap migration”. Another, from the FT, was that, “Peers reject economic benefits of immigration”. Perhaps that is not exactly what the committee wanted to convey, but it was an inevitable interpretation in the public arena. I quote the committee’s central point and central conclusion at macro level:

“The overall conclusion from existing evidence is that immigration has very small impacts on GDP per capita, whether these impacts are positive or negative”.

What is the relevance of GDP as a yardstick? The committee was of course right in arguing that using GDP, which is simply a growth indicator that does not take account of population change, is misleading. If GDP was to be used at all, ideally it had to be used per head of the resident population. I do not quarrel with that, but I do quarrel with using GDP at all. There are many flaws in it, but, in the interests of time, I shall confine myself to two. First, immigrants, as we all agree, fall into many different categories in regard to skill, age, sex and purpose in coming here—economic or non-economic. To lump them all into a single group is too blunt to be helpful. Secondly, and even more important, any economic impact is likely to be long term, perhaps very long term. That is much too complex to capture in analysis, and a focus on the short-term impacts on growth of a certain number of immigrants at this time, or even in this decade, is much too crude to be helpful.

So I end up having very little confidence in any conclusions based on GDP, even per head. The problem with that view, which I feel strongly, is that it applies as much to the committee’s own conclusion as it does to any government interpretation. The committee’s conclusion that there is very little impact is no more sustainable than the more ambitious interpretation by government. I noticed that the views of the academics who gave evidence, including a number of distinguished economists, and of other witnesses from the business world, for example, were not sufficiently of a single mind to justify the committee’s final and crucial view, which has already been quoted, that,

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In my view, this conclusion went beyond available empirical evidence.

What is uncontroversial is the rest of that same recommendation, that the Government should initiate research in this area in view of the paucity of evidence. There are so many areas in which research is needed that I do not have time to talk about them, but research on the impact of migration should take the wider view that I have encouraged—non-economic as well as economic—and involve not just government activity but also the academic community here and abroad.

Finally, I will say a word about immigration statistics. The committee was clearly and understandably hampered on this score. It stressed:

That was a leading recommendation with which I totally agree, as does everyone involved in official statistics.

At the same time, we must accept that this is a highly complex field for statisticians, perhaps the most complex of all the tasks facing them. The National Statistician, Karen Dunnell, explained all that in detail to the committee, but she also left no doubt about the determination in the statistical services to improve what is available. In my view there is only one satisfactory way of dealing with this, which is to establish a population register. That is a controversial matter, but several countries which have population registers benefit not only in the field of migration statistics but in population data generally. It is definitely the right way to go. Of course I am very aware of the arguments against, but there is a strong case. It would also have the advantage that we would no longer need censuses.

Meanwhile, there is much to be done. The formal arrangements that have now been introduced in Whitehall are encouraging. There is now a ministerial group and a programme board chaired by the National Statistician, both committed to progress on migration data. What matters, of course, are the details. The International Passenger Survey is being strengthened by using bigger samples and, I hope, will no longer be voluntary. The Labour Force Survey—the other main source—is also, I hope, being improved. There will be a redesigned new port survey. There will be new improved ways of estimating mid-year population figures and data on short-term immigration.

All that is encouraging, but I am most pleased about two things. First, there will be a focus on local authorities as a crucial source for better data. Secondly, there will be an increased dependence on administrative information. I stress to your Lordships that the future of improved population statistics, leaving aside the register idea, is through better administrative data, not through surveys, although surveys cannot be done without. A number of government departments which have been somewhat unhelpful in the past have relevant data sets covering and identifying migrants. The use and linkages of these sets and registers is the way of achieving better statistics. I know from my conversations with ONS that all that is now going to happen. Moreover,

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local authorities, many of which have also not been helpful in the past, will be urged, I hope increasingly, to help with using their administrative data with the same purpose in mind.

I find all that quite encouraging. Migration is now a top priority in the statistical system. The question is whether the Government will ensure adequate funding and collaboration from all relevant departments and local authorities. I am also encouraged by the fact that the new and very powerful statistics authority, which this House had a significant role in establishing, has now selected migration statistics as a priority for monitoring very early in 2009. As the authority reports to Parliament there will be another opportunity in both Houses, I hope, to judge progress.

1.30 pm

Lord Peston: My Lords, I join other noble Lords in congratulating the noble Lord, Lord Wakeham, on his chairmanship of the Economic Affairs Committee. As he knows, I was an ardent supporter of his appointment and was delighted when he agreed to accept this arduous task. However, he also knows that I dislike this report intensely. Indeed, I can tell your Lordships that I regard the report as the worst produced in this House in my 21 and a half years here; I would like to ensure that that is on the record.

I start with the report’s title, The Economic Impact of Immigration. One would have expected that it would cover the long history of migration to this country, starting, say, with the notorious Aliens Act 1905, introduced because of the appearance of a fair number of Jewish people in east London at the start of the 20th century. We then get to the arrival of the workers from the West Indies in the 1950s and 1960s, and then the Ugandan and other Asians, leading to the Commonwealth Immigrants Act 1962, which curbed, inter alia, the rights of the citizens of the West Indies, India and Pakistan to settle here. That must be about the most racist piece of legislation ever to appear on the statute book.

More recently, we have had the workers coming from eastern Europe because of their countries’ membership of the European Union, which has also given the Europhobes a pleasant outing. In fact, the xenophobes and racists have had their say in all these cases. I would have thought that, for that reason alone, if the Economic Affairs Committee really believed that this subject was a top priority, it would have proceeded with the utmost caution.

However, we have something quite different. There is no historical perspective at all. The emphasis is entirely on the period of power of the present Government. I say that advisedly to my noble friends who are members of the committee. In addition, to my amazement, we have a report in which the opinions of a xenophobic front group such as Migration Watch are given the same weight as those of the Institute for Public Policy Research—an outstanding research body—and the Government themselves. I find this lack of judgment on the part of the committee amazing.

On the economics, the report is simply a ragbag: a bit of this and a bit of that. At no point is a full set of assumptions laid out, either for the short-term quasi-static

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model or for a long-term dynamic model. I do not know whether I am the only person who has read all the oral evidence—I am a devotee of that sort of thing—but little, if any, of the questioning in the oral evidence is devoted to elucidating the witnesses’ assumptions. On the dynamic side, that is especially important. There is a vital distinction between the workers who come from abroad and settle here permanently—according to the dictionary, that is the correct definition of “migrant”—and those who, sooner or later, go home or elsewhere. Eventually, those who settle become part of the resident population, so the distinction of whether the resident population gains becomes difficult in a dynamic context.

There is the additional fact that many of the workers who arrived recently from abroad themselves have an impact not on what is sometimes called the home population but on the workers who arrived from abroad a bit earlier than they did. There is also the difference in the propensity to save between workers from abroad and workers from the so-called resident population, which has important dynamic effects. Economic analysis in this area is immensely difficult, but one would have thought that the Economic Affairs Committee would, as a minimum, have made some attempt to get to grips with it.

If you make a set of assumptions, such as constant returns to scale and no technical progress, it is not in the least surprising that GDP per capita stays the same, because that is what you have just assumed. If you assume that there is technical progress but that it is unaffected by the immigrants coming in, again, by definition, they have no impact. If you then assume that there are further increases of a more dynamic kind, in the modern theories of growth, but that they are unconnected with what the immigrants are doing, again immigration has no effect. But you do not have to assume any of that. In fact, a very famous economist, Harry Johnson, pointed out when referring to a paper on immigration written nearly 50 years ago that the authors simply assumed that the answer begged the question, so that it was not surprising that they got the results that they did. My days as an economist are well gone, but I should have thought that a serious and unbiased Economic Affairs Committee would have recognised those sorts of considerations.

I am even more struck by the total lack of common sense on the part of the Economic Affairs Committee. I think that I am right in saying that it failed to take evidence from some easily accessible foreign entrepreneurs whose activities have clearly benefited our economy. The noble Lord, Lord Paul, sits on the Economic Affairs Committee, but there was no sign until today that anybody took any notice of his success here with steel production. As a Member of this House, the noble Lord, Lord Bilimoria, might well have been asked to tell us about beer production. The noble Lord, Lord Weidenfeld, had a considerable effect on publishing in his younger days. The noble Lord, Lord Stone, could have told us about the enormous impact that the immigrants who founded Marks & Spencer had on retailing. The Economic Affairs Committee is telling us that this country has not benefited from any of those coming here, whereas in my judgment

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common sense will tell you that almost the whole way we run our country depends on those sorts of people.

While I am on the subject of your Lordships’ House, let me say that, as I look around the House, not so much today but at Question Time, I am struck by the mixture that I see in gender, colour, race, religion and so on. In the present context, a large percentage of us are either migrants or the children or grandchildren of migrants. Looking at your Lordships’ House, I, at least, am biased enough to believe that this country is better off as a result of our being here.

I add en passant that although I do not wish to belittle Barack Obama’s great achievement, our House had a leader of Afro-Caribbean origin five years earlier than the American achievement. Moreover, our leader was of the female gender, so we killed two birds with one stone, although I am not sure whether that is a good metaphor to use; at least we got two benefits from one appointment. I say to those noble Lords who consider that their real task is to criticise the Government that that appointment was immensely to the Government’s credit.

My next point concerns something that is typical of what is wrong with the report. It is generally agreed that in most circumstances goods and services are best provided by the private sector in free markets. However, an important precondition is that those markets are competitive. If they are not, we need policies to try to make them so if we can. In the free markets that are now broadly espoused, entrepreneurs producing their own objectives will take decisions leading, via Adam Smith’s “invisible hand”, to the best outcomes. Those entrepreneurial decisions include the inputs of factors of production—broadly, raw materials, capital equipment and labour. It seems to be the case that the Economic Affairs Committee, although it would not like to be regarded as anti-free market, accepts all that except for one thing—labour from abroad. It is so opposed to such inward movement of labour that it argues the case—I found this the most startling bit of the whole report—for the entrepreneurs to move their businesses abroad rather than to import overseas labour. It is not simply a matter of the nonsense of so-called “British jobs for the British”; the EAC must actually be opposed to having overseas labour here. There is no other case for that whole section of what it says.

I have spent a lot of time following this report by looking through the main textbooks in economics, where I can find nothing to support the committee’s view that entrepreneurs ought to go abroad. In addition, why does the committee not also announce that we must not have any machinery from abroad as long as, in theory, it could be produced in this country?

I am aware that I am running out of time. One subject that interests me is GDP per capita. The committee quotes Professor Borjas’s 1995 paper on immigration generally. He makes a most intriguing comment, but then does not enlarge on it, when he refers to the criterion of GDP per capita of the native or resident population. He then adds, but does not clarify:

“It is far from clear that immigration policy should pursue this objective”.

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I wondered what he could possibly mean. I am sorry to say that the Government have rushed into accepting this as well.

What I have to say slightly follows the remarks made by my old friend and teacher, the noble Lord, Lord Moser, but I have to tell your Lordships that there is a class of cases where, other things being equal, the absolute value of GDP is important. Those are the set of competitive circumstances in which a country might find itself. If we normalise for GDP per capita and all the other relevant variables except for size, a larger country with a larger population but with everything else the same is more likely to win a war than to lose it compared to a smaller country, is more likely to win Nobel prizes, because there is a fixed number of them, is more likely to win sporting events and so on. If all those things raise national morale and the national sense of well-being, larger is better than smaller. I mention that as a technical piece of economics for those interested in the subject.

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