Supplementary memorandum by the CBI
What weighting should be given to the various
control factors within the Points Based System (PBS)?
1. The CBI supports an approach to migration
that balances the needs of the economy with social issues. Our
support for the new points-based system (PBS) rests on it effectively
delivering this balance. It is important to recognise, however,
that the PBS will only cover about 73% of migrants in total[32]—usually
those with the greatest positive impact on the economy due to
high employability or attendance at self- or sponsor-funded education.
The CBI's December 2007 London Business Survey will show that
74% of firms in the banking, finance and insurance sector employ
highly-skilled migrant workers. For this reason, policy on the
PBS should not be seen as a proxy for all migration policies.
2. The key benefit of a PBS is that it has
the flexibility to adapt to the requirements of the labour market
and the wider economy. The points test should be reactive to the
labour market, through both the structure of the test itself and
a retained Resident Labour Market Test in Tier 2 to insure against
slow recognition of demand.. The weighting given to the various
control factors should be altered to reflect the needs of the
labour market at any given time.
3. The CBI does not support the setting
of annual target numbers for PBS migrants, as such annual quotas
merely reflect a once-a-year "best guess". Instead,
the MAC and MIF should be used to guide the PBS's use as an entry
tool on a more flexible basis, with demand under more regular
review. The weighting applied to the various control factors must
be sensitive to the needs of each of the Tiers; a truly responsive
system must take account of the different requirements of employers
within the different tier bandings. For example, an employer looking
to bring in highly-skilled sponsored staff (Tier 2) will place
a different emphasis on certain values/ control factors (eg language
skills), than an employer looking to employ low-skilled staff
(Tier 3). With this is mind Tier 2, in particular, must reflect
the needs of employers closely so that they can match the right
staff to the skilled positions within their firms. For this reason
the job offer should carry a significant number of points.
4. The CBI believes it ought always to be
possible to pass the points test on a combination of high skill
level, adequate English and a job offer from a recognised sponsor
with points awarded equally between these three. Additional points
might then be awarded for other less important factors, such as
age group. In Tier 1, more points should be added according to
skill level. We are very concerned to ensure that the level of
English test is appropriate, and in particular that it does not
hinder intra-company transfers, which are vital to knowledge transfer
in many of the UK's leading businesses.
5. In the initial stages of the new system
we support the decision to pause on Tier 3 (unskilled). Tiers
4 and 5 are not primarily business routes into the country. The
CBI strongly believes that Tier 2 should be a demand-led route
and, accounting as it would for a minority of migrants at the
higher level of positive economic impact, be one of the less restricted
routes aside from sponsorship requirements and the establishment
of demand.
A long-term solution to skills shortages in the
economy requires more than migration, which can only be a short-term
fix
6. The CBI believes that migrant workers
have had a beneficial effect on the UK economy by addressing immediate
skills and labour shortages that would otherwise have constrained
the economy's capacity. However, the UK cannot rely on permanent
net inward migration patterns; this is unsustainable for the UK
and for countries of departure—which leaves the issue of
resourcing shortages in the longer term unresolved. While not
in a position to address firms' short-term needs, because of skills
needs and other problems, the high number of economically inactive
UK-born people in the economy could provide a longer-term solution.
This would be good for society as a whole, as well as the economy,
but requires investment in skills and support for the UK-born
workforce—in line with the findings of the Leitch and Freud
Reviews—and extended working lives, so that actual retirement
ages are more in line with the state pension age.
In your submission you said that migration has
benefited the UK economy. However, we heard evidence last week
that the effect on GDP per head—surely the crucial criterion—is
broadly neutral. How do you respond?
7. The CBI does believe that migration has
a beneficial impact on the wider economy in general; for example,
by raising supply in the economy further than demand. However,
we did not state in our evidence that the effect on GDP per capita
is significantly positive. We do not agree that GDP per head should
be necessarily seen as "the crucial criterion".
8. Firstly, GDP is a measure of either incomes,
output or expenditure (all inter-related) in the economy; it is
likely that many migrants, particularly those that are filling
low=skilled labour shortages, will earn less than the national
average—the IPPR's report suggests that Polish immigrants,
the biggest migrant group after 1996, earn an average £15,750
a year (in comparison to a national average of £21,250)—and
thereby bring down the "per head" figure. This does
not reflect their value to the economy in general in supporting
sustainable growth by filling vacancies in the labour market that
would otherwise remain unfilled.
9. Secondly and closely tied to the previous
point, research has shown that the impact of migrants on GDP per
head is broadly neutral to positive. Iakova[33]
suggest that this profile will change as migrant populations integrate
into the UK and take up higher paid roles.
10. Finally, as we have argued in both our
written and oral evidence to the Committee, the figures for migration,
while greatly improved, are still far from perfect. To be able
to measure GDP per capita it is a pre-requisite that the number
of heads must be a known figure, yet there is not good, reliable
data, leaving this figure as an estimate that is even more problematic
than the estimated in-flow of migrants.
October 2007
32 IPPR "Britain's Immigrants: An economic profile"
September 2007. Back
33
Dora Iakova `The Macroeconomic Effect of Migration from the New
European Member States to the United Kingdom' March 2007 IMF Working
Paper. Back
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