Immigration (EAC Report)

Part of the debate – in the House of Lords at 1:30 pm on 14th November 2008.

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Photo of Lord Peston Lord Peston Labour 1:30 pm, 14th November 2008

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 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 or not 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 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:

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

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.

I have two final comments. A much better economist than me is Jeffrey Sachs. In his recent book—he has no problems at all with the enormous benefits of skilled workers—he says categorically:

"Migration of low-skilled workers is a win for the source country, a win for the host country and a win for the migrant".

He proceeds to set out his arguments. It is win, win and win. That is diametrically opposed to the view of the Economic Affairs Committee. His argument is to do with non-competing forms of service, complementarity and that sort of thing. Noble Lords can read his book and note that devastating comment.

I end on a more positive note. I congratulate the right reverend Prelate on his maiden speech, in which he referred to humanity. I was thinking of something slightly different. I have been reading a book on Robert Oppenheimer and Einstein. Robert Oppenheimer was the head of Los Alamos, which produced the atomic bomb, and head of the Institute for Advanced Study at Princeton. He was a brilliant physicist. The right reverend Prelate used the word "humanity". Oppenheimer referred to something similar, namely ethical standards. He said that if we look only at ethical standards, we become utopians and rather ineffective, but if we look only at reality and never look at ethical standards, we create a way of life that is not worth living. That is my interpretation of what the right reverend Prelate said.