Examination of Witnesses (Questions 520
TUESDAY 15 JANUARY 2008
Mr Liam Byrne, Mr John Elliott and Mr Jonathan Portes
Q520 Lord Paul:
The Government has also argued that migrants are "needed
to fill labour and skills shortages" in the UK. Why has the
Government facilitated large-scale immigration in response to
alleged labour shortages, rather than letting wages rise to attract
British workers to fill the vacancies or, where possible, leaving
companies to engage in mechanisation and off-shoring? The Government
is absolutely right in allowing that. I say that as Chairman of
a company that employs 3,500 people in the manufacturing industry.
Can I also declare that I am an immigrant.
Mr Byrne: I am really the grandson of immigrants.
There are three points that I wanted to make in response to this.
The first point here is obviously that the employment rate for
UK nationals in Britain has risen by about 1.6 percentage points
over the last ten years. The overall employment rate is now the
third or fourth highest in Europe and that is no mean feat. What
has been quite interesting about the performance of the British
economy over the last decade is that you have not only had an
increase in the employment rate but you have also had an increase
in average wages. The average wage growth over the last ten years
has been 3.4%, which is quite high. That increase in employment
has gone alongside the increase in wages which in turn has gone
alongside an increase in productivity. That is a very unusual
combination. Again, if you look across OECD countries, that is
quite a rare combination. It is not simply a case of facilitating
immigration in order to fill vacancies but as a broader strategy
for productivity growth in the economy. On Lord Lawson's question
about whether GDP per capita growth is the key thing to look at,
I think it is probably the first among equals, but it would be
wrong to ignore the overall impact of migration on growth and,
crucially, the overall impact of migration on productivity growth
because again that will be what is really important in growing
GDP per capita over the long term.
Mr Elliott: Although I have not examined the
data, I would hazard that it might be easier to raise productivity
and GDP per capita in a growing economy. So although I agree with
Lord Lawson that GDP per capita is probably the most important
thing or at least the first amongst equals, having a growing total
GDP beneath that is going to be pretty important.
Q521 Lord Moonie:
Does not high immigration risk discouraging British employers
from investing in training and skills boosting? How does the Government
intend to ensure that the London Olympics and other flagship projects
stimulate necessary domestic employment and skills development
rather than just a demand for more migrant labour?
Mr Byrne: Training is at an all-time high and
actually the commitment of the Government to invest in training
over the next few years I do not think has been matched in recent
history. The Leitch Review into this question I think underlines
the risk that there is a danger of what you highlight, not at
the mid to high end of the labour market but at the low end and
that is one of the reasons why I have said that when the points
system is introduced we will obviously honour our obligations
under the Free Movement Directive within Europe, but I do not
see a need for low skilled migration from outside Europe. One
of the things that we can do to protect wage growth at the lower
end of the income distribution in the labour market and to guard
against the risk that employers do not invest in training in that
particular part of the economy is to ensure that there is not
low skilled migration from outside the EU. It is not a particularly
popular policy with some parts of our economy. I do not know if
the Committee has had a chance to hear from the National Farmers'
Union and from agricultural businesses as well, but certainly
in my own region in the West Midlands I have been assiduously
lobbied by the NFU and local farmers who make the point that low
skilled labour from outside the new EU is really important to
getting their job done. We have to try and weigh these things
up. If the Leitch Review is underlining this risk, then I think
it is right that we guard against it. From the DWP's point of
view, you are playing a key part in ensuring the Government's
policy is delivered in this area.
Mr Portes: I think that is absolutely right.
There clearly is a risk here that too much migration in some of
the wrong sectors would indeed reduce the incentives, which is
why we established the Migration Advisory Committee and we will
ask them to take this risk into account amongst other factors
in advising on which sectors migrants might help to fill in terms
of labour market shortages. MAC is going to work together with
the new Commission for Employment and Skills, which is the joint
DWP/DIUS body which is trying to meet the challenge set out by
the Leitch Review of ensuring that we do fill that gap at low
and medium skilled levels of the labour market. I think that the
policy mix hangs together very coherently.
Q522 Lord Skidelsky:
What evidence has come out of the new Migration Impacts Forum
and elsewhere concerning the impact of immigration on the costs
of providing public services such as education and public health
care? How do these costs affect the economic case for migration
to the UK? What measures is the Government taking to ensure that
local councils have adequate funds to provide public services?
Mr Byrne: I would be happy to provide the Committee
with a statement of some of the key points that have come out
of the Migrant Impacts Forum. The starting point for this answer
is to point to the IPPR study which looked at the contribution
to the tax-take of migrants and contrast it to estimates about
public service consumption, and no doubt that is something that
will detain those who are drafting the Committee's report at some
length and you will no doubt go into some of the debates about
what constitutes a migrant when it comes to a child even if they
are born here with two parents and that is all very complicated.
The reason that the Migration Impacts Forum was set up was so
that we could begin for the first time to try and corral the evidence
that we did feel was out there about the impact of migration on
public services. I have been very upfront by saying that I do
think there are wider impacts of migration on public services.
I serve an inner-city community in Birmingham where we have quite
high rates of migration, a quite high rate of demographic turnover
and I do think that that affects the ability of public servants
to deliver education and health services. People were very interested
when I said this for the first time but it struck me as blindingly
obvious. The Migration Impacts Forum is an attempt to try and
bring together public service professionals from across the UK,
so we ask individuals to represent not just a particular part
of public services but also to represent a part of the country.
Very often what we are finding is that people are not able to
produce hard statistical evidence that would necessarily allow
us to put together a very neat cost-benefit analysis of different
patterns of migration. That has not put me off because I do sometimes
think that front-line public service professionals pick up trends
before they show up in statistics and we do know that sometimes
Government statistics are not right. I know that will shock and
horrify the Committee, but sometimes I have learned, in my short
career in politics, that is the case. We decided that it was ultimately
for politicians to take the final decision about migration decisions
and to be held accountable for those, but some of the points that
have come up from the Committee include these. In housing, there
were four out of eight areas that had noted increased pressure
on private housing rather than social housing. In education, most
regions that we surveyed noted an increase in pupils who needed
help with English as an additional language. Two regions that
we surveyed noted an increase of pupils arriving and leaving early
within the school year. This is something that has been raised
in particular by Rodney Green who is an excellent Chief Executive
of Leicester City Council. Rodney makes the point that one of
the most difficult issues to manage in some schools is actually
the churn in pupils inside the year. In health, actually most
regions came back and said that they had not really noticed an
impact of migration on the health service because most migrants
who were living and working in their communities were quite young
and healthy and vigorous and full of vitality and were not drawing
too heavily on the health service. There was some evidence of
inappropriate use of A&E services by migrants but it was quite
limited. Two regions noted an increase in some GP caseloads. On
community cohesion the evidence again was very patchy. Three regions
reported some tensions. On crime and disorder, most areas did
note an increase in translation costs. One or two areas noted
some reports of increases in certain low level crimes like driving
offences. That very brief reprise, which I can provide in more
length for the Committee, gives you a flavour that the evidence
remains not so much anecdotal but lacking a statistically robust
evidence base, but nonetheless I think it is vitally important
that we do begin the work of corralling the evidence base in this
area so that politicians are able to demonstrate that we are not
just looking at the economic benefits of migration but we are
taking into account the wider impacts of migration.
Q523 Lord Griffiths of Fforestfach:
Minister, the Government has made affordable housing one of its
priorities and it forecasts that by 2026 something like a third
of all new houses will be immigrant households. Do you think from
that there is a case for curtailing immigration in order to reduce
housing demand and make housing more affordable?
Mr Byrne: I was about to say that one of the
big challenges in managing this policy effectively is obviously
that migrants move faster than ministers! Communities can change
faster than local councils can sometimes react. That is why I
think in some communities the pace of change has been deeply unsettling
and I would include my own city in there. I do not think that
we should be running migration policy in the exclusive interests
of the housing market. I think there are a number of interests
that we have to balance in the conduct of our immigration policy.
There will be evidence that has been presented and will be presented
to this Committee that I think will point to a revision in some
of the projections about the number of houses that are required
because of migration growth. That is not simply because ONS has
produced more recent migration projections which have raised the
net balance from 145,000 to about 190,000, but there have been
quite big changes in the fertility rates of British people and
there have also been changes in life expectancy. We do await the
DCLG's new projections and what they will show. There are a number
of things that will obviously affect the availability of affordable
housing, not least the policies of different local authorities
towards the right housing mix for their particular communities.
The final very interesting point on housing policy is that sometimes
in the national debate we lose sight of the ambition of some local
authorities and some local communities to grow their population.
In Scotland, for example, a part of the UK that has been suffering
depopulation for some time, there is an ambition to grow the population.
When I was going round the country at the end of 2006 people in
Newcastle were saying, "We've got big ambitions to grow the
population here. As hard as we try, we're not going to achieve
that target by encouraging the good denizens of Newcastle to breed
faster, we will need migration to help." Birmingham has got
ambitions to grow its population by 100,000 over the next decade.
When you poll the public and ask if migration is the problem nationally,
many will say yes. When you ask people if migration is the problem
locally, only 25 or 26% will say yes. It is important in answering
this question to look not just at a national picture but at some
of the ambitions that local communities will have as well.
(House of Commons Division The Minister left the room).
Q524 Lord Oakeshott of Seagrove Bay:
The Office for National Statistics are projecting the UK population
will increase to over 71 million by 2031, with about half of that
increase accounted for by net migration. Is there a desirable
rate of population growth or an optimum level of population for
the UK? If either of those things is true, what are the implications
for immigration policy?
Mr Elliott: My answer to that question would
be that it would not be easy to try and estimate what the optimum
population would be. One could think in principle how it might
be done. One might start with the current level of population
and then look at the costs and benefits of moving either side
of that level, as migration and population change for other reasons.
Many of the economic things that would change could be quantified
and many of the other things that would change, such as the community
cohesion that the Minister was referring to earlier, could not
be so quantified. Firstly, it would be very difficult to arrive
at that position. Secondly, I have the sense that any optimal
rate of population growth or an optimal level of population growth
would be heavily influenced by where we are now because it would
be quite difficult to say at this point if we would actually be
better off if the country only had 40 million people or 80 million
people because you are then moving a long way from your current
range of experience and the quantification gets quite difficult.
Mr Portes: Clearly, the desirability of any
particular level of population, leaving aside whether it is an
optimum, depends crucially on how it is distributed. If everybody
wanted to live in London and the South East, that would have quite
different implications to a much more even spread, eg the fact
that the most recent significant wave of migration, that coming
from the new A8 Member States, has been much more dispersed and
much less concentrated in London than the previous waves of migration,
has significant implications for what you might say about the
impact. Just to look at the overall UK level in itself is clearly
not going to be enough; you also need to know about the distribution
both of migrants and of the existing population. On pensions,
the Government's position is clearly that we do not think that
solving the pensions problem or addressing the issue of the long-term
sustainability of pensions is the objective of migration policy.
Nevertheless it is a fact that some level of positive net migration
does ease the long-term financing constraint for the pension system
and in that respect makes a positive contribution, although that
is clearly not a driver of policy in itself.
Lord Oakeshott of Seagrove Bay: I think
you would both make very good ministers. I am taking both answers
as a no!
Q525 Lord Best:
An article in the Economist suggested that the new points-based
system will only cover about 40% of migrant workers coming into
the UK and a very much smaller percentage of all migration into
the UK. How do you expect the introduction of the new system to
affect the overall number and skill levels of migrants coming
in? How big an influence would this have on totals?
Mr Elliott: I think it is too early to say at
this stage exactly what effect the points-based system will have
because it is still being developed. The Minister has said previously
that he expects that the points-based system will cover close
to six out of ten non-British immigrants flowing into the country,
because it will cover not only those people that are coming to
work but also students and the dependents of those people will
also be in scope. The impact of the PBS will be to enable us to
manage that total volume of non-British inflow, that is excluding
EU citizens, these will have to be non-EU.
(The Minister returned).
Q526 Lord MacGregor of Pulham Market:
My question was really related to your answers to both the points
on education and health care and housing, which I thought were
very interesting. I think you said you would give us another paper.
You indicated that 25% of the people in the survey you were doing
in the regions indicated real concern and we know that about 65%
of immigrants work and live in the London area. That raises a
whole series of issues away from the purely macro-economic ones.
You cannot make it a condition of a visa that you have to go and
live and work in Newcastle, the area you suggested. In the paper,
could you make a distinction between the regions that are really
impacted and, within that, localities that are particularly impacted,
and in so doing deal with the question that you were asked about
what was Government doing to ensure that local councils have adequate
funds to provide public services in these areas that are most
Mr Byrne: I will certainly break down the feedback
to the extent that I can. The point I was making about concerns
about migration locally was thatthat was a MORI pollonly
25 or 26% said they thought immigration was a big issue locally.
It is just quite an interesting contrast with the number of people
who are concerned about immigration for the UK.
Q527 Lord MacGregor of Pulham Market:
Which makes the point about regional and local impacts even greater?
Mr Byrne: Absolutely right. What DCLG ministers
would tell you if they were sitting here is that the support to
local government has been increased very considerably over the
last ten years. £5 billion or so has now been consolidated
from different kinds of grants. There is much more flexibility
now available as ring-fences have been taken off. One of the conclusions
from the Commission for Integration was that funding for community
cohesion activities was increased markedly and actually that funding
has been increased quite dramatically from £2 million around
a decade ago to something like £50 million over the next
three years. That is quite a considerable increase.
Q528 Lord Oakeshott of Seagrove Bay:
I would like to ask one last question on the points-based system.
You were asked a question when you were talking about spouses
about how important it was that immigrants should be able to speak
English. Why is it that investors of a million or more in regulated
institutions are exempt from being able to speak English? Is it
not quite important if we want the best in this country that they
should be able to speak English?
Mr Byrne: What we do not want to do is cut off
the opportunity of bringing in large amounts of capital that are
going to be invested in productive things from the UK. As with
all questions in the migration system, I think you have got to
apply a balance. I think that the number of investors that we
perceive coming in would actually be quite small. If the Committee
would find it useful I would be happy to give the number of people
coming in through that route over the last few years. I cannot
remember what it is but it is quite small. You run into those
questions in all sorts of different categories. If you take sports
people, who will be one of the categories within Tier 2, should
we be insisting that absolutely all footballers or indeed England
managers should be able to pass an English test before they come
in? At the moment I am afraid our proposal is that they should.
Let me give you a different example. If you look, for example,
at people coming in through intra-company transfers; intra-company
transfers are about 25% of work permits that were issued last
year. If you talk to many Japanese investors, they will say that
people coming over under an intra-company transfer from a Japanese
company, skilled engineers contributing quite considerably to
the strength of the UK manufacturing base, are quite nervous about
the kinds of English requirements that we would insist on. You
cannot look at migration policy purely in terms of the economics;
I think you do have to look in terms of the wider impact that
migration has on Britain and that is why the Prime Minister has
been right to stress the ability to speak English.
Q529 Lord Lawson of Blaby:
He is right to stress that succinctly. I believe the Canadian
points system does have the English language as quite an important
component of it. I would like to ask you a question about the
points system. Many people think there are too many foreign footballers
in our Premier League and it is not doing any team any good, certainly
the England team is not doing any good. I would have thought,
judging by what they earn, they would come in easily under Tier
1, so I do not think you need Tier 2 for that. Why do you need
Tier 2 at all? I do not understand this. Tier 1 is the genuine
points system, rather like the Canadian system where you are trying
to choose those immigrants who are likely to be most beneficial
to the economy of this country. That seems to me perfectly rational
and sensible. Why do you need Tier 2? How do you balance one against
the other? Why not have what the Canadians do, a single system,
which is a genuine points system? Why not have only Tier 1? I
thought it was a very sensible thing when you said you were going
to introduce that. Why do you want anything else?
Mr Byrne: I am going to disappoint you even
further and say there are two more tiers: one is the tier for
students and the other is for temporary workers.
Q530 Lord Lawson of Blaby:
What we are talking about in this context is permanent settlement.
Mr Byrne: Tier 1 applicants will not require
a sponsor in the UK. There is a group of people globally who we
think it is in the UK's interest to either retain in the UK once
they have graduated from college or university or we want to attract
to the UK as they have such a level of qualifications or earnings
capacity that we think they should be perfectly able and perfectly
free to find their own place in the labour market. In order to
try and get the policy as correct as possible, we have published
a statement of intent on how we see that working. There will be
questions that we need to iron out. For example, if you are looking
at past earnings, how do you translate those past earnings into
UK earnings, because obviously people are coming from different
kinds of economies? In Tier 2 however, we want people to be linked
to a sponsor, a business which has conducted the "resident
labour market" test on the job that it is offering to the
individual from abroad or which is employing people in a shortage
occupation. I think the Committee is going to hear from the chair
of the Migration Advisory Committee. I suspect the lion's share
of the Migration Advisory Committee will be advising government
upon where in the economy there are genuine shortage occupations
places which can "sensibly" be filled by migration.
We did want to create a difference in the points system between
those individuals that we thought should find their own place
in the labour market and those that we thought ought to be tied
to a particular employer. It could be that in the future, as the
system evolves, everything moves to the kind of regime that we
envisage for Tier 2.
Q531 Lord Lawson of Blaby:
For Tier 2?
Mr Byrne: For Tier 2. I cannot actually foresee
a situation where we are just letting anybody come in and find
their own place in the labour market. I think that might create
administrative difficulties of its own. I think the challenge
is absolutely right. What I wanted to do is start with what is
deliberately a two-tier approach.
Chairman: Can I bring Lord Lamont in
Q532 Lord Lamont of Lerwick:
Could I just come back, if I might, to the very, very beginning
and your theory of the benefits
Mr Byrne: It is not my theory.
Lord Lamont of Lerwick: Well, the theory
which you said was pure Adam Smith and you drew the analogy between
labour and trade in goods and services. What I am not clear about
is why you are not in favour of unlimited immigration. It seems
to me that the limitations you have argued for are entirely arbitrary.
You have said, well, let us have a limit on non-EU immigration
as opposed to EU immigration, in order not to have an impact on
domestic wages, as though EU immigration did not have an impact
on domestic wages. You have said, let us have a limitation outside
the EU because of the wider impact on things like housing, as
though immigration did not already have an impact on what you
call the wider effects. Is not the limit you are seeking to draw
Chairman: Can I just group a couple more
points before we finish. If I could bring in Lord Skidelsky and
then Lord Griffiths as well, and then perhaps you could take the
Lord Skidelsky: My question is complementary
to Lord Lamont's. You say that you cannot envisage a system in
which everyone is free to find their place in the labour market,
but in fact that is the system for EU migrants. Why then do you
need a Tier 2? Why can they not actually fill all these shortages
just through normal market supply and demand within a huge market
where everyone is free to move? Just adding to that very briefly,
when you, rightly, talk about the importance of clusters, that
tells you nothing about the size of the overall population at
all; it is simply about its distribution.
Chairman: Lord Griffiths and then finally
Lord Lawson, and then we can have a ministerial sweep-up.
Lord Griffiths of Fforestfach: Mine is
about the points-based system. It seems to me there is a spectrum.
On one side of the spectrum you have a free-for-all, a free market,
people come in and they find themselves and wages adjust and so
on. At the other extreme you have manpower planning. Mr Elliott
was with the Manpower Services Commission. My impressionand
I need to go back and look at some thingsis that manpower
planning did not really work and what I am not clear about is
where conceptually the points-based system is on that spectrum.
Is it quite near a free market approach or is it nearer a manpower
Chairman: Lord Lawson?
Q533 Lord Lawson of Blaby:
Yes, I agree with Lord Griffiths. This is, curiously, the only
relic of the planned economy which the Government continues to
Mr Byrne: There must be others!
Lord Lawson of Blaby: And I would also
agree with Lord Skidelsky, that insofar as even if you do have
a Tier 2, you could get skilled people, not just unskilled people,
from the European Union; they are quite civilised people there!
And so I am completely puzzled by this idea that there are these
shortages. Of course there are employers, both in the public sector
and the private sector, who would like to get cheap labour, but
in fact that does not prove anything at all. What is more instructive,
if you look at a country like France for example, we are told
that the Health Service needs all these people, and presumably
a lot of them are going to come under Tier 2I think that
is what the Home Secretary said in his speech a few weeks agoFrance
has immigration but on a far smaller scale than ours, and yet
their health service is at least as good and probably better than
ours. So there cannot be any reason why in fact you need the Tier
2, whether it is for the Health Service or anything else.
Mr Byrne: The World Bank put this rather well,
I thought, in Global Economic Prospects 2006, where it
made the point that if you introduced complete free movement of
labour around the world, it would probably have a more positive
impact on GDP growth across the world economy than lifting all
trade restrictions. So you are absolutely right to say that an
unfettered labour market is going to be economically more efficient,
but the point that I have consistently made is that we are not
actually running British immigration policy in the exclusive interests
of the British business community. I have gone on the record consistently
over the last year and a half to two years, to say that I think
that migration brings wider impacts on British national life,
British public services, and local communities that need to be
managed. What that means is what we have to try and do is manage
the pace of change. It is not a scientific process but what we
should be trying to do is adopt a couple of principles, first
the principle of flexibility; we need to be able to change the
system and the system management in response to the way in which
the world changes. The second is accountabilityI think
that politicians in a question like immigration should be held
to account for the decisions that they make. The third is evidence,
and that is what we are trying to do with the Migration Advisory
Committee and the Migration Impact Forum, to put in place a much
more robust evidence base than we have had before. The fourth
is transparency. We need to try and make this evidence as transparent
as possible so that politicians can be held to account for the
decisions that they take, but also, frankly, so that we can have
a more rational debate in this country about the benefits and
the costs of migration. It is quite true to say that we have a
completely different policy for the EU to everybody else. That
happened to be a decision that was so important that we actually
had a referendum on it, and over the course of the years since
we joined the EU there have been nine Directives that have driven
forward free movement. Seven of those Directives were under Conservative
Governments; two of them were under Labour Governments. They were
consolidated in 2004 and when those Regulations were laid they
were not opposed by any party. Thus it is quite true to say that
the EU is a special case, but I think there was a pretty clear
decision by the British people made on it. Markets will take time
to adjust. Although there has been considerable migration from
Eastern Europe, when you look at, for example, the British agricultural
industry, given the size and scale of the European labour market,
I think you would be expecting to see many of those pressure points,
those rubbing points, in the British agricultural industry that
the NFU and others are talking about, filled by people from the
European Union. But for some reason that is not happening, and
I think what is going on is it is simply taking time for markets
to adjust. All of that is a long way from saying that we should
be running British migration policy in order to maximise the business
case, if you like, for the economy. I do think that there are
wider costs to take into account. Many of those costs are difficult
to manage. What we will try and do, though, is do that in a much
more open and transparent way and in a way that strikes a new
balance in the years to come.
Thank you, Minister. I am sure any questions that you feel need
amplification we will get from your Department in writing. Apologies
for keeping you longer than we had intended to. One of the benefits
of young ministers is clearly the speed with which they get here,
so thank you very much for that.
Mr Byrne: Thank you very much.