Brexit and the Labour Market (Economic Affairs Committee Report) - Motion to Take Note

– in the House of Lords at 11:37 am on 8th February 2018.

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Moved by Lord Forsyth of Drumlean

That this House takes note of the Report from the Economic Affairs Committee Brexit and the Labour Market (1st Report, HL Paper 11).

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee

My Lords, although the Motion stands in my name on the Order Paper, it was in fact my predecessor as chairman, the noble Lord, Lord Hollick, who shepherded the committee through much of this topic. Unfortunately, the noble Lord cannot be here to speak in the debate on this, his final inquiry as chairman. I say as chairman that we miss him on the committee but I understand that he has been drafted into the report on artificial intelligence, for which he is very well equipped.

Before I introduce the report and its key conclusions, it is perhaps necessary to set it in context. The committee commenced this inquiry in January 2017, less than seven months after the EU referendum, which seems so long ago. Much excellent work was being undertaken by committees of this House and the other place on the impact of the referendum, which we aimed to complement. As we noted in our call for evidence:

“The vote to leave the EU presents the UK with an opportunity to restructure immigration policy”.

At that time, though, business anxiety remained high and, as we said:

“Some sectors … have stated that continued access to migrant labour is crucial for the success of their businesses”.

The committee wished to examine the competing claims about EU migration and the labour market. Taking as a starting point that EU migration would be reduced, we set out to identify practical measures that government and businesses could take to mitigate the impact of this change.

The issue that emerged and threaded its way through much of our inquiry was problems with data underlying many assumptions about the UK’s reliance on migrant workers. One witness told us:

“Evidence-based policy-making needs data that is fit for purpose”.

It was a great surprise to me and others on the committee how unfit for purpose many of the immigration statistics were.

The headline immigration figure that we hear announced at regular intervals is that for annual net migration, and the most recently available numbers show that for the year to June 2017, net migration to the UK was 230,000. But where do these figures come from? The answer is Office for National Statistics workers interviewing 4,000 to 5,000 at 19 airports and some other points of entry. It will not come as a surprise that this survey-based approach has problems. Who is counted; who is not?

Professor Portes suggested that,

“when you come into the country as an immigrant”,

you might,

“have better things to do than stop and chat with an ONS official for 20 minutes”.

We know that those arriving on overnight flights are missed, as are those travelling across the Irish land border. Student departures are radically underestimated, and the definition of migrant means that only those changing residence for 12 months or more are captured, missing seasonal and short-term workers.

The committee examined other sources of immigration data to see whether they could assist in overcoming those deficiencies. The Labour Force Survey details workers’ nationality and country of birth, but cannot provide anything more than a broad-brush approach to the number of EU workers employed in each sector. Its methodology leaves out short-term and seasonal workers and those living in communal households.

National insurance numbers should provide an objective check: every overseas adult registering for a number is captured. But these, too, are limited: we know only how many are issued, not how many are in active use by workers.

The next obvious thought is: can we count people in and count them out? The Government have introduced exit checks and collect information on those entering and exiting the United Kingdom, but again, this is limited. The most recent report on exit checks is enlightening, but covers only non-EEA nationals and is limited to whether or not they obeyed their visa conditions.

We considered how this could be improved. The Government hold the necessary information about workers. National insurance numbers can be linked to passport data and tax and PAYE returns to show who is employed and where. The data should be married up to produce a coherent picture, but this will be a lengthy and painstaking process.

Another radical way mentioned in evidence to the committee is the introduction of a single method of national identification used by all. I am sorry that the noble Lord, Lord Campbell-Savours, is not in his place, and very much hope that the Senior Deputy Speaker will think it appropriate to look at this issue in a special Select Committee in the coming year.

These points are of interest not just to those poring over spreadsheets of economic data. They have a real impact on how future policy can be formulated. As we noted in our report, there is limited reliable data on how reliant businesses and industries are on EU immigration. Much of the evidence we heard is based on anecdote. I take one example that featured in our committee’s evidence sessions: the food and agriculture sector. How reliant is that sector on EU workers? How can it adapt to changes in labour laws? How many workers will be needed to ensure that Scottish raspberries are picked and that London workers can receive their morning coffee?

The most specific sector figures provided to us by the ONS suggest that 20,000 workers, or 5.7% of the workforce, in agriculture, forestry and fishing were EU nationals. The NFU supplied data suggesting that 115,000 EU nationals work in the agricultural sector alone—some 20% of the workforce. At the other end of the food chain, so to speak, Pret a Manger, the mainly London-based coffee and food shop, told us that one in 50 applications for jobs in its stores were British. Of its employees as a whole, 65% were from the EU.

The Government’s recently—and finally—released sectoral report for agriculture, relied on sources including the NFU and the British Veterinary Association for its analysis:

“The ONS estimate that 6 per cent of agricultural employees were from the EU in 2015. However, this likely ignores many seasonal workers (estimated at 67,000). Both a recent NFU report and the 2013 Migration Advisory Committee report suggest that the vast majority are EU migrants … In addition, around 95 per cent of Official Veterinarians in the meat hygiene sector are from the EU”.

This is just one example of a problem that affects many sectors. Noble Lords will see from the report that there is quite startling evidence from the construction sector and others.

The Government seem to have recognised this issue. They have asked the independent Migration Advisory Committee to provide advice and evidence on the current patterns of EU migration and the role of migration in the economy. This wide-ranging analysis is expected to cover the labour market, looking at specific sectors, skills, and regions, current and future trends and the impact of a reduction in migration. The MAC is expected to produce this work by September this year. The Government indicated that they will be conducting their own,

“extensive programme of engagement and evidence gathering”,

and will form a new immigration policy once that process is complete.

On the data side, the ONS is working to improve the data and has a programme in place to increasingly present information based on administrative data and to move to reliance on these sources by 2019. Again, all this is very welcome, but the UK is moving towards Brexit day, and there are some steps we recommend that can be taken now, while consultation is ongoing, to ensure an orderly transition to a new policy.

First, we must ensure a proper implementation period to give businesses time to plan and adjust. They must, the committee concluded, have proper notice—probably a number of years will be required—and this period may be different across sectors and regions. Secondly, we need to promote better use of the domestic workforce and encourage capital investment. As the committee is discovering in its current inquiry, technical training outside universities in the UK is confused, and something of a disgrace. Further, companies may need to increase the use of automation to fill gaps in labour, and perhaps financial and tax incentives should be encouraged.

I turn now to the final section of our report: how is the success of any policy to be measured? The Government have their own chosen measure: the commitment—interestingly, they avoided in evidence and in their written response the use of the word “target”—to reduce migration to sustainable levels. As the then Minister for Immigration told us, this means reducing it to the tens of thousands—in other words, below 100,000. This, once again, brings us to the data: this target—or commitment—falls squarely on the shaking shoulders of the International Passenger Survey. It is not fit to bear that weight. At the most basic level, as one witness pointed out, due to the large margin of error in the current net migration figures, the Government may never be able to say with certainty that they have hit the target. I quote the witness, who said,

“you might think you have got [net migration] down to 99,000, but actually you only had it at 140,000”.

If the commitment remains, the committee offered suggestions to improve it: count students separately and, above all, ensure that the target is flexible. The objective of having migration at sustainable levels is unlikely to be best achieved by the strict use of an annual numerical target for net migration. Instead, such a target runs the risk of causing considerable disruption by failing to allow the United Kingdom to respond flexibly to labour market needs and economic conditions. The objective of reducing migration to sustainable levels should be implemented flexibly and be able to take account of labour market needs, particularly during the implementation period.

I hope the Government will listen to the voices of experience on the committee and expedite steps to, first, improve the data; secondly, provide certainty so that businesses can adapt to change; thirdly, invest in domestic training and capital; and, fourthly, ensure that policy is not straitjacketed by an inflexible commitment that overrides all other considerations. I beg to move.

Photo of Lord Livermore Lord Livermore Labour 11:51 am, 8th February 2018

My Lords, in the UK, as elsewhere, politics has taken a nativist turn, and the debate about immigration has become a conversation only about how far and how fast it should be controlled. There is almost no discussion about its benefits, nor about the nature and the extent of our economy’s need for it to continue. As a result, we have a political debate in this country that is failing to serve the interests of the public. Although there is continuing strong support among voters for reducing immigration, there is little or no consideration of the consequences of doing so for national prosperity, individual living standards, or specific sectors of the economy. Certainly, the debate about immigration during the EU referendum campaign strained the boundaries of acceptable public discourse. Nevertheless, the Government decided that it was central to the referendum’s outcome, and chose to make a red line for the negotiations not growth, jobs and living standards, but reducing immigration regardless of the economic cost.

This perspective—that the economic well-being of the nation matters less than the politics of control—has driven the Prime Minister to pursue the hardest interpretation of Brexit. Her argument is not that it will make Britain more prosperous but that controlling immigration is so important that it is worth pulling Britain out of the single market and customs union to achieve. So this report from the Economic Affairs Committee, of which I am a member, feels timely, both to scrutinise the Government’s intentions in the EU (Withdrawal) Bill and as we await the much-delayed immigration White Paper.

It is right that we should ask whether EU migration has had the negative labour market consequences often claimed by its detractors, and it is right that we should examine the impact that reducing immigration would have—in particular, whether it would achieve the benefits that those who support Brexit claim. As we do so, it is vital that we proceed on the basis of facts, and I wholeheartedly endorse the comments of the Justice Minister, Dr Phillip Lee, when he said:

“The next phase of Brexit has to be all about the evidence …there would be a serious question over whether a government could legitimately lead a country along a path that the evidence and rational consideration indicate would be damaging”.

He went on to say:

“It’s time for evidence, not dogma, to show the way. We must act for our country’s best interests, not ideology and populism, or history will judge us harshly”.

So it is fitting that our report begins by voicing concern about the absence of facts and, specifically, the poor quality of the available migration data. We were astonished to hear witnesses repeatedly tell us how little accurate data is collected, how haphazardly it is done, and how great is the margin of error. As our report says, the data,

“fail to provide an accurate number of migrants entering or leaving the country … The data, based upon flawed sample surveys, are wholly inadequate for policy making and measuring the success or otherwise of the policies adopted”.

Whatever your view about the levels of immigration, surely, as the chairman of the committee, the noble Lord, Lord Forsyth, said when our report was published, and again in his speech today, the Government must have reliable statistics before they formulate their new policy, otherwise they will be making crucial decisions of vital importance completely in the dark.

In this respect, the Government’s response to our report is disappointing. They describe the International Passenger Survey as,

“the best source of information to measure long-term international migration”.

We certainly did not meet many witnesses who agreed with that. Instead, our report calls for the reintroduction of counting those entering and leaving the UK and the better sharing of data, such as national insurance data, across departments.

What evidence, then, did we find to support the claim that EU migration has a negative impact on the UK labour market? I have always found it odd that anti-immigrant tabloid propaganda accuses EU nationals simultaneously of coming here to sit about on benefits and, at the same time, taking all our jobs. Presumably it would need to be one or the other. The more likely explanation of course is that it is neither. There was little evidence presented to us that foreign workers took jobs that British workers wanted. Many witnesses told us of an unwillingness among British workers to carry out particular types of work. We learned that only one in 50 applicants for vacancies at Pret A Manger, for example, is British, and the Agriculture and Horticulture Development Board told us:

“Attempts to fill vacancies with UK workers have proved difficult in the past”.

Neither does it seem that domestic workers have been priced out of the labour market. Professor Jonathan Portes from King’s College said that,

“the emerging consensus is that recent immigration has had little or no impact overall”,

while Stephen Clarke from the Resolution Foundation told us that it would be wrong to say that any negative effect had been large.

The evidence is scarce because—although it is one of the great unsayable truths of British politics—the fact is that immigration is good for our economy. The benefits are clear: it increases growth, provides more tax revenue and helps pay for an ageing society. By raising aggregate demand it creates new job opportunities, brings skills into our economy and makes us more competitive. Indeed, there is substantial evidence that reducing immigration would damage our economy and would, by lowering tax receipts, put great strain on our public services. The Office for Budget Responsibility has shown that we would need to borrow an additional £16 billion by 2020 to make up for the reduced tax take from falling migration, with a further cost of £8 billion every year thereafter. The Government’s own secret Brexit impact analysis, leaked last week, sets out clearly the cost to the British economy of cutting migration from the EU.

Those who support the Government’s policy talk in delphic terms about how the economy will “adjust” and how businesses will “adapt”. Our report acknowledges that what this actually means is higher prices for consumers. But even we fail to say that these adaptations and adjustments will too often be reduced production, diminished competiveness or increased mechanisation—in all cases meaning fewer jobs.

At a time when it is so vital for the UK to remain a globally dynamic economy reaching out to the world, the national interest requires politicians of all parties to speak the truth and to have the courage to make the positive case for immigration. This includes those who support continued membership of the European Union, as I do, who now need to make a strong positive argument for the continued free movement of people to and from the EU, rather than accepting the characterisation of this as a “price worth paying” for single market membership.

As a first and immediate step, our report calls on the Government to secure an early agreement on the rights of EU nationals currently in the UK in order to prevent an unwanted exodus from our country. Unfortunately, the “common understanding” reached in phase 1 of the negotiations fails to sufficiently protect Europeans in the UK and British people in the EU. Just last week, the Prime Minister again sought to play politics with people’s lives, claiming that she would not extend EU citizens’ rights in any transition period, when she knows full well that she will eventually have to back down to secure the transition she needs. Our report was equally clear that the Government’s target of cutting net migration to the tens of thousands is the wrong approach. We recommend that the Government refrain from setting artificial numerical targets for net migration because, as our report says,

“such a target runs the risk of causing considerable disruption by failing to allow the UK to respond flexibly to labour market needs and economic conditions”.

We also recommend that students should not be included in the net migration figures.

Much of the evidence we collected during our inquiry also suggests that making substantial cuts to immigration is not just undesirable but will prove extremely difficult to achieve. Several witnesses highlighted that there are large numbers of migrant workers who will not easily be replaced by domestic workers. Many parts of the UK are already experiencing significant levels of labour shortages and many sectors, such as hospitality and tourism, and farming and food processing, are already on a cliff edge. Our report therefore recommends that any new immigration system should not make an arbitrary distinction between higher-skilled and lower-skilled work on the basis of whether a job requires an undergraduate degree. We believe that British business must have access to expertise and skills in areas such as agriculture and construction that would at present be categorised as lower-skilled occupations. We also ask the Government to acknowledge that, in order to achieve some of their other policy objectives such as their homebuilding target, continued lower-skilled immigration may well be needed to provide the necessary labour.

Taking all this together, it seems entirely possible that, as the economic consequences become clear, the debate on immigration may move from how we reduce it to how we ensure that it is sufficient for the needs of our country. This report is convincing in its argument that the Government’s policy of reducing immigration will have many deeply undesirable impacts on our labour market and our economy—but it is the political impact of the Government’s approach that could have many more far-reaching consequences. It remains the case that the greatest hostility to immigration, and the greatest support for reducing it, are to be found in those parts of our country where there are fewest immigrants. Despite politicians of both main parties advocating immigration control to solve the problems of these areas, the reality is that the problems will not be solved in this way, despite the promises made, because the problems were never caused by immigration in the first place. We will therefore damage our economy by leaving the single market, only to find that the supposed political dividend of control was itself a fiction. In this gap between expectation and reality, the politics of extremism lies in wait. There is now an urgent need to change the terms of debate, focusing not on offering false solutions or raising expectations that can never be met but instead on seeking genuine solutions to the very real problems that the people of this country face.

Photo of Lord Sharkey Lord Sharkey Liberal Democrat 12:01 pm, 8th February 2018

My Lords, I have the privilege of being a member of the committee that produced this report under the chairmanships of the redoubtable noble Lords, Lord Hollick and Lord Forsyth. There were three areas of conclusions and recommendations in the report: the first was about net migration statistics; the second was about adapting the UK labour market; and the third was about the net migration target.

In the area of migration statistics, our report emphasised the very poor quality of the data available to inform decision-making, as the noble Lords, Lord Forsyth and Lord Livermore, have graphically illustrated. The obvious and real defects in our current measurement system do not provide a sound basis for any assessment of the success of government policy. Both the Government and the ONS acknowledge these defects. In the Government’s case, this acknowledgment was rather in passing in response to our report. The ONS has done better and deserves some credit. It has published a timetable for the improvement of immigration statistics overall, so that by 2020 we may at last have reliable overall net migration figures, and it very helpfully published on 24 August last year new data on the number of non-EU students who actually stay on after finishing their courses.

We observed in our report:

“The objective of having migration at sustainable levels is unlikely to be best achieved by the strict use of an annual numerical target for net migration”.

Having such strict targets is a political error and a policy millstone, and is probably unworkable or economically disastrous or both: much better, as we recommended, to set an objective for migration that can be flexibly implemented and is able to take account of varying and variable labour market needs. This is an urgent requirement. Business and the public sector need clarity about their ability and need to recruit foreign workers once a transition period ends and need time to begin to adjust their businesses before the end of that transition period.

For example, we need to decide whether there should be caps by sector, how these caps should be arrived at and what their consequences might be. We also need to give early warning of thinking on these areas to allow time for employers to adapt to changes in the availability of both labour and skills, and we need to have a clear assessment of the differential regional impact of any new immigration control regime. We should think carefully about the capital needs of SMEs, especially in the agricultural sector, when they are faced with reductions in the supply of labour.

We will need better data than we currently have to do any of this. For example, last Tuesday the ONS published a report on labour in the agricultural industry, which explicitly recognised our inability to measure the number of seasonal workers, 99% of whom, according to the NFU, are in fact from the EU. If we are to have an immigration policy linked to industry needs, we must have this kind of sectoral data to drive it.

I believe that the Government accept that a new immigration regime will accelerate the need for upskilling in the UK workforce. In their response to our report, the Government pointed to T-levels, apprenticeships and lifelong learning as means of achieving this upskilling. Perhaps I could ask the Minister a couple of questions about this. The T-levels require three months of employment experience as a key part of the course. What evidence is there that a sufficient number of employers will be able to provide a meaningful three-month experience? As for apprenticeships, do not recent events suggest that the scheme needs a thorough overhaul? The actual take-up of apprenticeships dropped by an astonishing 61% from quarter 4 of 2016 to quarter 4 of 2017, and there is a huge delay in approving the standards needed before apprenticeship courses can even begin. As of last week, there were 305 sets of standards in the queue for approval, and Ofsted reports that around half of all registered apprenticeship providers inspected were inadequate or required improvement. If the Ofsted sample was representative, that means that we currently have 37,000 students being taught by inadequate providers. Ofsted also said that it did not have the resources to widen its inspection base. This is a pretty awful mess. Can the Minister say what is being done about all this?

In their response to our report, the Government said:

“We are working to understand the potential impacts of any proposed changes”— to future immigration arrangements—

“on the economy and labour market. We will build a comprehensive picture of the needs and interests of all parts of the UK and look to develop a system which works for all”.

There is an obvious “as opposed to what?” response to that. But what the Government have actually done is to commission the Migration Advisory Committee to do this work. The brief was comprehensive and detailed, except in one vital respect. It contains no policy variants to test. This seems to me to be a fundamental mistake. It is surely obvious that policy choices should be influenced by their likely outcomes. The MAC has not been asked to consider this.

In July last year, the Home Secretary asked the MAC to report by September this year and for interim reports to be delivered. Can the Minister say whether there have been any interim reports? Can she tell the House whether these reports, interim and final, will be published as the Home Secretary receives them? Can she also say whether she is confident that the full report is in fact on schedule for September?

Timing is an absolutely critical consideration. On Monday, the chair of the EU Parliament’s Committee on Constitutional Affairs, Danuta Hübner, said that the EU Parliament would require to see a firm and reasonably fleshed out framework proposal for our future relationship by the end of October. It is hard to see how the Government can meet this timetable when it comes to immigration controls if the MAC report arrives at the end of September. It will be harder still if the report is delayed—and everything seems to be delayed, including the immigration White Paper.

The Minister also asked the MAC, on the same deadline, to report on international students. Our report dealt with this issue. We concluded that the Government should expedite measures to assess accurately the number of students who leave the UK at the end of their courses and to monitor the impact on local housing by asking universities to provide information on the accommodation provided to international students so we could assess the effect on local housing markets. We said:

“Once this information is available students should not be included in any short-term net migration figures for public policy purposes”.

We now have the first measure. We now know that the number of students who stay on after completing their courses is much lower than previously thought. In fact, in its August report the ONS concluded that,

“there is no evidence of a major issue of non-EU students overstaying their entitlement to stay”.

Have the Government asked the universities for the accommodation data, as we recommended?

Our universities are among the most successful in the world. They form a vital part of our economy now and will play an even more important role in the future. They are a source of influence around the world and a source of a huge amount of world-class research. To make international students and researchers unwelcome or to make them feel unwelcome has been, and will continue to be, a very big mistake. I hope that the fact that the Prime Minister recently pointed to the success in closing down bogus colleges with bogus students and the fact that the number overstaying is so low may herald an imminent change in policy.

In a post-Brexit world, we will need a flexible immigration policy that allows our businesses and public services to operate without damaging constraints and our world-class universities to continue to attract the very best students and researchers. For that to be possible, we need to know the shape of that immigration policy very soon.

Photo of Lord Turnbull Lord Turnbull Crossbench 12:10 pm, 8th February 2018

My Lords, this was a very difficult report to prepare, the main sources of difficulty being the unsatisfactory evidence base and confused policy objectives. The noble Lord, Lord Forsyth, has highlighted the deficiencies in the statistics. The main source of the figures is the International Passenger Survey, based on 20-minute interviews—which I do not think are compulsory—with a sample of passengers passing through 19 airports and ports. Of those, only 4,000 to 5,000 were identified as migrants. It is on that that this whole policy is based.

The data on those leaving is acknowledged to be especially poor. We go through airports and our passports are swiped. This, I believe, is part of a control measure so that the right people get on the plane; I do not think that as yet it forms part of the evidence base. We also have problems with the number of students and how long they stay. Therefore, not enough is known about why people come, what they will do, what skills they have and how long they will stay. If migration is such a high-priority issue, I too am left wondering whether the UK should reconsider its traditional hostility to registration of identity, regardless of whether it is embodied in a card.

The confusion extends into the policy objectives. We were told that the Government wanted to reduce net migration to under 100,000 per year from over 250,000 to 300,000 in recent years, although, as has been mentioned, the Government were unclear about whether to call this a target. It would have been better if the study commissioned from the Migration Advisory Committee, referred to in the Government’s response, had been undertaken before the figure of 100,000 had been plucked out of thin air.

Part of the justification for Brexit was the need to take back control of our borders. However, only control of migration from the EU would be enhanced by Brexit. This channel has accounted for just under half of the total, and its level has fallen significantly since we reported. So, even if EU migration were reduced to zero, we would still not achieve the target unless new measures were brought forward to tackle non-EU migration.

Two phrases came up repeatedly in the referendum: “regaining sovereignty” and “taking back control”. They sound like synonyms, but they are not. One can regain sovereignty—that is, the ability to make one’s own laws—but that may not improve control if it reduces the co-operation that we get from other countries. For example, we could tighten laws against inflows across the channel but find that we were getting less help from France. We should not lose sight of the fact that collaboration with other countries is one of the instruments for advancing our objectives.

The third problem with the target of less than 100,000 is that it is not rooted in the structure of the labour market. The evidence that we saw showed the extent to which some sectors have, over the last two decades, become extremely heavily dependent on workers from overseas, notably health and care, construction, agriculture and food processing, and hospitality.

At this point, we need to recognise the difference between stocks and flows. Even if net migration were zero, there would still be about 5.6 million EU and non-EU nationals in the UK, of whom about 3.6 million or two-thirds are working. If we control net migration, there will still be a large stock of overseas labour to call on. Nevertheless, any attempt to reduce net migration rapidly has to take account of how fast employers would be able to train and recruit UK nationals or provide investment to mechanise production. The best example is housing. It is difficult to imagine that the Government’s objective of increasing the number of houses being built from 200,000 to 300,000 will be achieved without any increase in overseas workers. It will require a massive increase in construction training to turn this around.

The issue of overseas students came up frequently, with many arguing that students should be excluded from the statistics. This muddles up two concepts: the statistics and how the policy target is specified. Students should be in the migration statistics because they are a component of the population and net migration is meant to measure the increment to the population each year. But they do not need to be in the metric used for designing policy. There are many examples of where we take a statistic as measured by the ONS, using agreed definitions, some of them international, but then modify it in setting policy objectives: for example, RPI minus X; the public expenditure planning total minus privatisation proceeds; CO2 emissions excluding aviation and shipping. Students should not be in the metric used to measure the Government’s progress in reducing immigration. Overseas students in our schools and universities earn foreign exchange; they are like click-and-collect exports, where the buyer comes to us rather than our sending the product abroad. Normally, we want to promote exports rather than constrain them. I think this is helpfully acknowledged in the Government’s response. If student movement is outside the target, it will still need to be monitored. If it turns out that the rate of students staying on is significantly different from what was expected, then an adjustment to the target would need to be made.

Finally, there is one issue on which I agree with the Government’s response. Our report, in an effort to produce consensus, said that there might be some merit in issuing work permits on a regional basis—for example, for Scotland or London. I always thought, and made the argument but lost, that this made no sense. Take a construction firm based, say, in Ealing. If there were London-only permits, does that mean that any of its overseas workers could work only inside the M25? Could British Gas engineers based in London service boilers in Windsor? What kind of apparatus would be needed to check that employers were deploying people only inside the designated region? We have a flexible labour market nationwide and issuing permits which bear no relation to travel-to-work areas makes no sense.

In conclusion, it would be ironic if, between the referendum in 2016, in which “taking back control” featured so prominently, and our exit in 2019, the net EU migration figures fell to zero—I am inclined to bet that that might happen—rendering the whole exercise pointless. But then there would be crises in many areas of our economy: in public services, in the housing sector, in agriculture and in food processing. Supporters of Brexit should be careful what they wish for.

Photo of Lord Horam Lord Horam Conservative 12:18 pm, 8th February 2018

My Lords, I too congratulate the Economic Affairs Committee on another good report. It is crisp, logical and even eminently readable. It is, therefore, rather the reverse of most government papers we have had in recent times, which have been remarkable for their impenetrability. In the case of Brexit, that may have been deliberate, for all I know.

The report starts by reviewing the immigration statistics. My noble friend Lord Forsyth expressed his surprise at the difficulties and problems here. Those of us who have followed this area of information are not at all surprised. It has been obvious for years that the collection of immigration statistics has been extremely faulty. That is why many of us have been extremely grateful for the efforts of the noble Lord, Lord Green of Deddington, who I am glad to see in his place. Migration Watch, which he started, was, for a long time, ahead of the Government in having a feel for what was actually happening in the area of immigration and emigration.

I am strongly in favour of a firm control of immigration policy, as I think are most British people. My main reason for being in favour of control of immigration is the quality of life in this country. My colleague the noble Lord, Lord Hodgson of Astley Abbotts, produced an excellent document recently entitled Britain’s Demographic Challenge, which I recommend to anyone who has not read it. In it he points out that England already is twice as heavily populated per acre of land as Germany and four times as heavily populated as France. On the current Office for National Statistics evidence projections, we will have 9.7 million more people by 2039 than we have now, raising the population to 74-75 million people. This will predominantly, I expect, come in London and the south-east and will affect the quality of life in our part of the world.

As an economist I hate to admit that quality of life is about not only economics but a whole range of other things and I am pleased that in recent months people have begun to question the validity of the gross domestic product as a measure of our standard of living. It has many elements other than the purely economic, and the press of numbers in the south-east of England, in particular, is a real problem.

Immigration undoubtedly causes problems of social cohesion. I was born and brought up in a northern textile town and over many years in my lifetime I have seen that work out in ways which are bad for the collective feeling in such towns.

When considering immigration we should not think only of ourselves in the United Kingdom. For example, I remember from a parliamentary trip to Botswana at the height of the AIDS problem in southern Africa the terrible issues there. I went to some of the hospitals and community centres which were trying to deal with this and hand out drugs to the affected people and found that there was a shortage of nurses. I asked where these nurses were and was told that they were in England in the NHS—they could not keep them in Botswana. Recently I talked to a Jamaican politician who said, “How do you seriously expect us to build a modern country when over half our graduates disappear to America or Europe on graduation? How do you do it”? We have to look at migration on a big scale and from the point of view of other people in the world and not only through self-interest, which we too often do.

People in the UK were reasonably content with the immigration situation when it was in the tens of thousands. During the 1970s, 1980s, 1990s and most of my lifetime it was in the tens of thousands, and sometimes it was almost negligible. However, after the Labour Government came in in 1997 it climbed to six figure levels and, in some cases, to big six figure levels, and that alarmed people. Politically, it is one of the ironies of our time that it was precisely that level of immigration which fuelled the leave vote in the referendum, and then the Labour leaders at that time bemoaned the consequences of that. Frankly, it is a question of the biter bit.

Economically, as the report pointed out, the effect on business of having a large number of intelligent and sensible people available to deploy in its workforce was that we neglected the skills of our own people—a point made not only in this report but, presciently, in the economic affairs report in 2008 which predicted precisely that this was happening and would continue to happen. We have lost out in terms of automation, innovation and skills, as well as seeing an effect on wages. I therefore welcome the Government’s industrial strategy which focuses precisely on the areas of skills, automation, innovation and so forth, and I hope that they can get a cross-party consensus because they will certainly need it.

The curious aspect of all this is that we are exiting from the European Union and thus in effect doubling up on the economic challenge that this country faces. We would have to do a lot of this stuff anyway, but Brexit will make it even more important that we get it right. As the report rightly says, companies will have to adapt their business models to a new situation in which there will not be quite so much immigrant labour, and that will take time. My noble friend Lord Forsyth himself said that the implementation period or transition period—whatever you like to call it—will take quite a time, and indeed may take even longer than two years for some industries. That may well be the case and I certainly think that it will take at least two years to bring about the sort of effect that we need.

None the less, I think that we can get out of the situation we are confronting. In our debate on the industrial strategy some weeks ago, my noble friend Lord Willetts made the point that we have cracked this problem in a number of areas. The automotive industry is a hugely successful renaissance sector in this country now while not only finance but services more widely are doing very well. Britain has led in the mobile phone industry and telephony more generally. Medical research and the life sciences are an area of great promise and success for the UK. I would add to that we need a big export drive. There was a slogan after the Second World War: “Export or Die”. It is not quite that, but by heavens it is going to be important as we face a trade deficit of considerable proportions and which may get worse in the immediate aftermath of Brexit. I remain optimistic but we need to get our act together, and this report shows us how we have to do it in relation to the labour market.

Photo of Lord Darling of Roulanish Lord Darling of Roulanish Labour 12:26 pm, 8th February 2018

My Lords, I will not follow the noble Lord, Lord Horam, too far down the road of immigration. I too believe that immigration needs to be controlled, but we also need to look at the benefits that can come from it. To put it another way, if he is concerned about quality of life, as we all are, he should take a good look at a country like Japan which does not have much in the way of immigration and is now facing the serious problem of an ageing population without the workforce to support it. These things can cut in a number of ways.

I should draw the attention of the House to my entry in the Register of Lords’ Interests, in particular that I am a director of Morgan Stanley New York, which is of some relevance to this debate. I do not want to dwell too much on the wholly inadequate nature of the statistics with which we are faced because they were dealt with in detail by the noble Lords, Lord Forsyth and Lord Turnbull. Suffice it to say that if the Government have as their central policy on immigration the reduction of net migration but they do not know the figures on which it is based, then the policy does not add up to very much. We all know that the policy has not been met, and if George Osborne is right, no one in all the Cabinets that he served in prior to moving on to other things believed that it was realistic either. What was obvious from the evidence we heard is that we simply do not know with any degree of accuracy the number of people coming in or going out. That is extraordinary, given that most of us who travel in and out of the country are well used to producing our passports. Someone, usually an airline, knows when you left, and the Immigration Service certainly knows when you come back. It cannot be beyond the wit of this country to try to marry the two up in order to get an accurate picture of who has gone and who is coming back. That is particularly important if we really do want to measure what the net migration figure is.

I want to concentrate on the section of our report that calls on the Government to consult with business and to develop a strategy for what the labour market needs of this country will be post Brexit. That simply has not yet been done and the clock is ticking away quickly. What was obvious to us, as it is to anyone who looks at this subject, is that a number of people, particularly from the European Union, work in this country, contribute and pay their taxes. However, it is not only those with degree-level skills in higher paid jobs that we should be concerned about because at the present time an awful lot of jobs requiring lower levels of skills are being done by EU nationals. Indeed, the evidence we had is that many of those people would simply not qualify under the non-EU scheme that this country currently operates if they were to apply to come to work here. For example, looking at skill levels, the figures we got show that some 32% of EU nationals are working in lower to middle skills and 24% are working in jobs that would be described as low skilled.

When the Government develop their strategy they have to ask themselves: what does industry need across the piece? If we end up in a situation where after March next year many of these workers cannot come here or they choose to go back—an awful lot of them do go back for perfectly understandable reasons—and are not replaced, many of our industries could find themselves very exposed. It is not just agriculture, manufacturing and the academic world; all these areas depend to a substantial extent on having an adequate supply of labour from not just this country, but the EU. Dare I say it, having people come from different countries with different backgrounds and skills sometimes enriches the workforce. It adds quite a lot to it because we learn from each other.

That is why our recommendation that the Government should consult with business to ask what the skills requirements are is paramount. We simply cannot introduce the system that currently applies to non-EU nationals, where there are skill-level requirements and quotas, for two reasons. Partly, I do not think the Home Office could cope with it. It has struggled under successive Governments and over many years to try to operate schemes like this. All of us who have had experience of dealing with them will know that you sometimes get some extraordinary decisions that are very difficult to understand.

The second thing is that I find quite extraordinary the idea, particularly coming from a Conservative Government, that the state knows how many people we require, what level of skills are required and that it can adjudicate as and when business requirements change. Maybe I am being too new Labour here, but I do not think that that is the job of the state and I do not think it can do that. If that really is what is being proposed—I certainly read in the newspaper today, and I presume it is not fake news, that one of the things that was discussed by the Cabinet sub-committee yesterday was simply to transpose the non-EU regime and make it universal for people coming into this country—I can see all sorts of difficulties. Our economy is growing, but, as we all know, it could be growing an awful lot faster. My belief is that it if we removed the threat of Brexit it would grow significantly faster. This is the last time at which we should be introducing uncertainty for manufacturers, farmers or whatever field as to who they will likely be able to employ in future.

This part of our report is one that the Government need to pay heed to given the cross-party nature of the Economic Affairs Committee and the different views on Brexit in that committee. The Government should draw from that the strong feeling that there needs to be a policy that is coherent and meets the skill requirements of people in this country.

I will say two things in conclusion. First, I want to see as many people in this country as possible employed in whatever their chosen field is. The Economic Affairs Committee is currently engaged in a study of the adequacy of our higher education, further education and apprenticeships. Without pre-empting our findings, it is blindingly obvious to us so far that we have a long way to go, particularly for those people with lower and intermediate skills to get into the labour market. The idea that they can simply step into the gap that will be left by departing EU workers is fanciful.

Secondly, we must remember that this cuts both ways. There are about 1 million UK citizens in the rest of Europe, many of whom are working there. It would be very unfortunate if we got into a situation where we said that only people in Britain can work in Britain and only the French can work in France. That is simply unacceptable on so many different levels.

I hope that the Government will pay heed to that. I hope that they will recognise the need for us to improve the way we gather statistics, especially when immigration is such a contentious and sometimes poisonous issue in our politics. We need to have a basis on the facts, which are there to be found if we only have the will to do so. I hope that the Government will take this report seriously and add some clarity to a policy that at present looks anything but clear.

Photo of Lord Burns Lord Burns Chair, Lord Speaker's committee on the size of the House 12:35 pm, 8th February 2018

My Lords, I too am grateful to the noble Lord, Lord Forsyth, for securing and introducing this debate, and to the noble Lord, Lord Hollick, who chaired the committee during much of our deliberation on this sensitive issue.

The UK labour market we see today is the result of adapting over many years to membership of the EU; we must not underestimate that. The emergence of the single market, the expansion of the EU to 28 countries and the increased rate of migration from the enlarged EU to the UK have all contributed to this. Such forces are evident in businesses that have flourished but also in those that have suffered—certainly, we can see it in the growth of certain industries where integrated supply chains are important; for example, the car industry. In other industries and services it is less evident, but we can see effects both positive and negative.

We have also seen a significant increase in the size of the UK population over this period, with increased demand for many services in both private and public sectors. Of course, the increased rate of migration to the UK has brought us workers who have filled many of the vacancies generated by such developments. One extremely welcome development is that increased migration has not created an unemployment problem, as many feared it might—the total number of people in work has risen and unemployment remains at very low levels.

The committee looked at a number of the impacts of this, although in many cases the evidence was really quite sketchy. We looked at whether wage levels in established activities had been held down. The evidence there was that it was possible, but the likelihood was that it was less than was often claimed. In other areas, migrant labour may have been willing to work for lower wages than would UK nationals and in the process have generated a new market for new kinds of services. As a consequence, in addition to increased migration of highly skilled workers, we have seen a sharp increase in the number of certain types of lower-skilled, lower-productivity services, particularly in the hospitality sector but also elsewhere, a development which might well have had some impact on reducing the average levels of productivity in the economy.

In some other areas—for example, agriculture—it was pointed out that production may have continued, supported by low-paid workers, when otherwise the products might have been imported rather than be produced in this country. It was also suggested to us in evidence that the inflow of trained staff from the EU in some industries and companies may have meant less pressure on those industries to train additional staff in this country, and that it was having a significant impact.

We then turned our attention to the issue of how easy it would be following Brexit to unwind and possibly put into reverse such incentives, which have now been generated over a long period, and whether it could be done quickly and without considerable dislocation. The general view of the committee was that there were indeed many problems with anything that attempted to make us adjust too rapidly.

I support the view that it is impossible at this point to be precise about these forces or how quickly the labour market can adjust to life outside the EU. Now that it has been agreed that EU nationals currently in the UK will retain their right to remain here, some of the concern has been lifted, but in other areas there are still great uncertainties and there could be difficulties, as previous speakers have mentioned. Many of those sectors most reliant on EU nationals tend to be classed as lower-skilled, and there may a temptation to seek to design an immigration policy based on attracting the brightest and the best. The committee came to the conclusion that any new immigration system should not make an arbitrary distinction between high-skilled and low-skilled work; we should recognise that non-graduate skilled migrants might be just as important during the adjustment phase as so-called skilled workers.

The second problem is that many of the industries employing low-skilled workers experience very high rates of turnover. An either over-rigid or bureaucratic system of control will leave them in substantial difficulty. Just as the economy has adapted to the increased flow of migrant labour, it is possible to envisage that over time it would be capable of responding to a reduction in the flow: I do not want to be too pessimistic about that. Of course, not all the ways in which the economy will adapt will necessarily be welcome to everyone and in some respects it will require adjustments to government policy. We may see increasing pay and prices to the consumer in some sectors, which in turn will affect the demand for their products. Government will have to adapt. As speakers have pointed out, better training and retraining of the domestic workforce, particularly a better system of technical education, becomes even more urgent to provide some of the skills the economy requires.

The noble Lords, Lord Forsyth and Lord Darling, mentioned that our committee is now examining some of these issues. So far, what we have learned has not been encouraging: that is probably the best I can say. In a number of areas there will have to be substantial changes if we are to have a labour force capable of taking these challenges on. I was pleased to read in the Government’s response a recognition that this process of adjustment will take time: I hope that they really mean that. They have also agreed that shifting to a high-skill, high-productivity economy is important and that people should have access to training throughout their working lives. These are also things that are going to be important.

We have to be very cautious about the mechanisms that we use to seek to bring greater control over migration to the UK. I do not object too much to the notion that we should have a view about the sustainable rate of net migration. That seems a very sensible way to approach this policy, but the committee was very strongly of the view that any strict targets for numbers, particularly on a yearly basis, will quickly run into trouble and will probably be impossible to deliver. Like the noble Lord, Lord Forsyth, I am somewhat comforted by the language in the Government’s response of a “net migration commitment” rather than a target. I would be grateful if the Minister confirmed this in her response.

One issue on which the committee came to an early agreement was that of reliable information. We have heard a number of speeches refer to this today. We were all very strongly of the view that a sensible migration policy will require much better statistics about those entering the country, those leaving and the total number of temporary migrants working here. The noble Lord, Lord Forsyth, dealt with this in detail and I will say only that I agree with him. I hope that people become much more aware of this problem as we come to the implementation of a net migration policy. The information we investigated clearly does not deliver this at the moment. The Government have responded and argued that the Home Office is already working with the ONS to develop better exit data and to improve the quality of data, but we cannot stress too strongly that the problems in attempting to design and implement an immigration policy in the absence of much more reliable data will be extraordinarily difficult. A number of us are still somewhat cautious, having seen what can be described only as the relatively lukewarm response of the Government in terms of the urgency of this issue.

Finally, whether students should be included in net migration figures has aroused a lot of debate. The committee came to the view that students should not be included in any short-term migration figures, for public policy purposes. I still support this recommendation; however, I note that it would be necessary only if the Government were tempted to put limits on the number of students able to study in the UK in order to reach the short-term net migration target, or if they sought to make it much more difficult for those wishing to remain in the UK for a period after completing their studies. I was given some hope from the Government’s response that this is not their intention. It insists:

“There is no limit on the number of genuine international students who can come to study in the UK and the Government has been clear that it has no intention of imposing such a limit”.

Can the Minister confirm that that this means that no limits will be introduced, even in circumstances where the Government are having difficulty achieving their overall net migration objectives?

There is a slightly more threatening phrase afterwards in the response:

“so long as students go home at the end of their studies, it is perfectly possible to increase the number of international students in the UK without adding to net migration”.

My concern here is twofold. First, we have no accurate measure of whether students go home at the end of their study and, secondly, it can often be of considerable benefit to the economy for graduates to remain here after their period of study. If the Minister can confirm that the only reason the Government do not accept our conclusion that students should be excluded from the figures for the purposes of public policy is that they believe it is not necessary, universities can put to rest their fears that this might have an impact on the number of genuine international students having access to our universities.

Photo of Lord Suri Lord Suri Conservative 12:45 pm, 8th February 2018

My Lords, I thank noble Lords who wrote this report. It has been an interesting read and there are plenty of important points to look at for the next round of the Brexit negotiations.

I was pleased to see the report call for a more pragmatic approach to foreign student numbers, something I have consistently advocated in this place. The public do not want students included in the immigration figures. Many senior Ministers do not. The other place would vote to liberalise it tomorrow, and yet we are stuck with a system that inflates numbers and does not enjoy public support. I find it hard to believe that an amendment to the relevant legislation will not soon be tabled to move towards this goal. In this stubbornness, the Government are needlessly setting themselves up for failure, and I hope they will be in listening mode as further Bills move through this House and the other place.

I wholeheartedly support the committee’s recommendations on establishing a better system for monitoring student numbers and working with universities. Much unnecessary friction has been created between university leaders and the political class of late, and moving forward on some areas of consensus would be welcomed by the sector. Let us continue to champion our world-beating universities.

I was also heartened by the recommendation to scrap the immigration target. The futility of trying to place such a fluid variable into a single block figure has never struck me as a sensible way of carrying out policy. In my business, the need for additional workers ebbs with the economy, and annualising the figures makes little sense. However, I agree that part of the referendum result was a call for lower immigration. It was about more than control; it was about numbers too. Numbers will have to be brought down, and the most effective way of doing so is to implement limited quotas for low-skilled workers. For too long, employers have relied heavily on a reserve force of easily mobile labour from Europe, which is very useful for them, but not for domestic workers.

I might find Members opposite agree that the lack of impetus to invest in workers to drive growth has caused some of our productivity slump. It is of course a complex matter, and there are a number of other factors, but this is important. The Minister for Immigration makes a good point in paragraph 86 when she notes our low level of capital investment. I read many stories in the media about the plight of fruit or vegetable farmers who need seasonal workers, but it cannot be beyond the wit of man to create some way of fully or partly mechanising this process in less than a decade. Indeed, it can be a new arrow in the quiver of the industrial strategy, when that eventually comes before this place.

In addition, any strategy must take into account overall economic need as well as income. A nurse may earn less than another worker but be more structurally important to our overall economy. Does the Minister agree with me that migration policy should focus on our economic need as well as income?

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour 12:51 pm, 8th February 2018

My Lords, the debate about Brexit is becoming a debate about what are settling down to be three broad options for the country. The first is a hard Brexit, by which I mean pulling up more of a drawbridge on migration. At the opposite end, the second is the status quo as near as possible. The third, which I would put somewhere in the middle, is the European Economic Area option, where you still have the four freedoms but with some degree of tweaking of the agreed criteria on migration. That is where there is at least a 50% chance we will wind up, as it is in our national interest—certainly our economic interest—for the reasons stated by every speaker, beginning with my noble friends Lord Livermore and Lord Darling, moving through to the noble Lords, Lord Burns and Lord Turnbull.

It has been said by many people that we need the flexibility we currently have. We certainly cannot overnight, say, treat all the Poles the same as those from the rest of the world. It would just be a catastrophe for the economy. There is a labour market in Europe, and I am a bit surprised that the report did not pay some attention to the nature of that market. One or two noble Lords spoke about this at the edges, saying that of course people may go back to Poland for whatever reason. Those reasons include the state of the Polish economy; for people from Portugal, it depends in part on the state of the Portuguese economy.

As for the trade union movement—I speak in the presence of a former general-secretary of the European Trade Union Confederation, my noble friend Lord Monks—we have European works councils in hundreds of firms, where we meet and discuss matters and people get to know best practice in all the different countries. I wish the report had paid more attention to the nature of the European labour market. The most obvious example, which everyone can understand, is the single factory floor in big component-supplying companies along with the final output in Rolls-Royce, Airbus and Jaguar Land Rover. Then there are logistical companies, as well as those dealing with food and pharmaceuticals and so on, for example Unilever. They are not only in one enterprise; they move around many of them all the time. We are having this debate against a background where even today a newspaper says that the majority of the Cabinet want a migration policy that would be the same for Europeans as for the rest of the world. I repeat that that would be a catastrophe. However, I do not think it will happen; reality will overtake it, and the Conservative Party will have to sort itself out.

There is a question over why we have so many problems in our own labour supply. People have mentioned education, but I would like to refer to the lax behaviour of British management in many of these questions. You get to do all sorts of things when you are a TUC official, and for some time I was secretary of the construction committee. I remember going one day to Canary Wharf, which was under construction, with the boss there, Mr Reichmann, and the secretary of the construction union, Albert Williams. Mr Reichmann said on an informal basis, as we admired the view of London from the top floor, “Mr Williams, I’ve got an issue. I’m short of spidermen”. Mr Williams said after a time, “Well, Mr Reichmann, we’ve had cowboys in the industry for many years. You can get these spidermen from the Rockies, so I don’t think there’s any problem if we have a few more Indians”. Perhaps that anecdote is not politically correct these days, but the reality is that there is an international labour market in different ways. Think of Toscanini, or someone who has transferred from Real Madrid to Manchester United—perhaps we need one or two more of those. That is another aspect of the labour market, and I am in favour of a greater degree of manpower planning in that area. I look forward to hearing the latest take on this from Migration Watch.

We have gone to the extremely liberal non-regulated end of the idea of having our own standards of obligation on training. We have a different situation now with the structure of our corporations; there was a letter in the Financial Times the other day from directors saying that we need new corporations to deal with PFI-type companies, with different stakeholders involved. The fact is that the likes of Carillion are not interested in the quality of the labour supply because they are not really a company at all in the old sense: there are those at the top who are earning a few bob, and below them are the actual construction companies. So, because of the obsession in the City of London with takeovers and mergers, we in this country have a company structure that is very much in need of reform. All these factors come into play.

Labour markets can give us a picture of where we are in the economy, so simply to stop it all up would be very ill advised. Take the Anglo-Irish labour market. We have known all our lives how that works and will have to go on working. I do not think there is any doubt about that. Indeed, we are now committed to it and the Government will have to get off their high horse and sign up to the formula that Michel Barnier has more or less written out. There is a flow backwards and forwards. When the Irish economy had its last boom—it is coming to another one now—more people wanted to go back to work in Ireland; more wanted to come this way on other occasions. Whether it is academics or conductors of symphony orchestras, we have to think of the European labour market.

Finally on labour standards, we had the Taylor report yesterday. There are posted workers within companies. We need to update the formula to deal with workers who cross frontiers, and we can do that only if in some central areas we do not take back control but share sensible ways to determine an agreed policy. That is why we need to pay attention to this being, in many respects, a European labour market.

Photo of Lord Shipley Lord Shipley Liberal Democrat 1:01 pm, 8th February 2018

My Lords, we should be grateful to the Economic Affairs Committee for undertaking this work. As the noble Lord, Lord Forsyth, said, it has taken a while for the report to be debated in the Chamber, but there is an advantage in that, in that we can review the progress made by government and review Brexit as a whole in terms of the labour market. Yesterday’s revelations about lower forecast growth are deeply worrying, not least for my region, the north-east of England, which is very dependent on exporting to the European Union. The evidence of yesterday’s official report suggests that it might be helpful if the Economic Affairs Committee would consider doing some further work. This report began its life, I think, largely on the subject of migration. It has covered other things but actually, as the noble Lord, Lord Darling, pointed out, a much broader impact on the labour market now needs to be considered.

There are two specific recommendations in the report that I thought were particularly important. The first has been mentioned: it is the recognition that any new system for controlling immigration from the European Union must avoid the blunt definition of high-skilled work that the current system for non-EU migration employs. That is very important, because job skills matter, not just degrees.

Secondly, I was struck by the reference in paragraph 8 of the summary of conclusions and recommendations of the committee’s 2008 report on immigration which said that the employment of migrant workers could lead to businesses neglecting skills and training for British workers. This report says that the committee was prescient, and indeed it was. As the example of nursing highlights—there are many other examples—and as this report says, training for the domestic workforce needs urgently to be given a higher priority.

The aim of the British Government should be to employ more UK residents in better-paid jobs; that is our primary duty. Therefore, the Government are right to say in their reply to the committee in November that there needs to be,

“a genuine partnership between business and the government to unlock the potential of our young people and adults and deliver the skilled workforce that employers and the economy need”.

Indeed.

We would all agree with that, but I noticed a recent survey by the Lloyds Banking Group which says that more than two-thirds of construction companies are investing in staff development and just over half are setting up apprenticeship schemes. That begs an important question: what are the rest doing, given the labour shortage in the construction industry? I do not understand why apprenticeship starts have fallen by 25% in the third quarter of 2017 compared to the same period a year before. That skills gap must be plugged if we are to hit the construction target of 300,000 homes—which, I remind the House, is a net not a gross figure. We have an ageing workforce in construction as fewer young people are trained; a third of British-born construction workers are now over the age of 50.

I heard on the radio this morning a discussion of the importance to tourism of inward migration from the EU. Our major areas of tourism in the UK are hugely dependent on EU nationals. It is the Government’s objective to expand and grow tourism. When the Government produce their proposals on immigration, they must be clear how they will meet the Labour needs of tourist areas, given that unemployment is very low in most of our major tourist areas and the higher rates of unemployment are far from those areas.

The report talks a lot about the problems faced by the health service, which I shall not repeat. Suffice it to say that we are hugely dependent on EU workers, and when the BMA tells us that nearly half of EEA doctors surveyed are considering leaving the UK we should be concerned.

I return briefly to construction. I was impressed by a report by the Federation of Master Builders which says that more than two-thirds of construction SMEs are struggling to hire bricklayers and 63% are struggling to hire carpenters and joiners, and that those are the highest figures since records began in 2008. It also says that the number of firms reporting difficulty hiring plumbers and electricians is very high at 48%, 46% have problems hiring plasterers and 30% have problems hiring floorers. Those are all at record highs. Noble Lords may visit the exhibition by the construction industry on the Committee Corridor. On one board, it says that the construction industry plans to expand by 1.7% every year for the next five years, which begs the question of where the labour force will come from.

I accept the logic of the submission of the Federation of Master Builders to the Government that, without skilled labour from the EU, the skills shortages that we will face will be considerably worse. Having said that, of course we need to encourage more young British people to train as construction workers. I think that the current apprenticeship system for construction is intrinsically flawed. It seems to favour 16 to 18 year-olds and to have a strong gender bias. That statement came from a report written after a conference held in Wales. There is an issue with the current apprenticeship system. Could we get the construction industry to work more closely with schools to encourage younger children to be attracted into an apprenticeship in construction? Would the Government also look at a further incentive for colleges to offer construction courses? Not all courses run by further education colleges cost the same to run, and construction is notoriously expensive.

Very briefly, I will make two points on immigration. I will not repeat what has been said about immigration and foreign students. The noble Lord, Lord Forsyth, said himself that we had to count such students separately, and indeed we do. There was mention earlier of regional immigration. In the absence of an immigration Bill, the Government have said that they will not introduce a regional immigration system for Scotland and London but that there will be a UK-wide immigration system taking account of the different parts of the UK. I hope that the Government will look a little further at that because the needs of London and Scotland may prove more complex. However, different parts of England, Wales and Northern Ireland may have very specific needs. I hope that the Government will give greater clarity on this issue because it could matter, particularly in areas such as tourism, which I addressed a moment ago.

Finally, because we are debating Brexit and the labour market, there are issues around employment rights post Brexit. We need to protect the European working time directive, and I hope that the Government will confirm that not only EU-derived equality, employment, and health and safety standards will remain in place and will not be diluted in the future. Issues around health and safety standards, rights for parents and carers, and pay all matter profoundly and I hope Ministers will be able to confirm that those protections will stay in place.

Photo of Lord Green of Deddington Lord Green of Deddington Crossbench 1:11 pm, 8th February 2018

My Lords, I declare an interest as chairman of Migration Watch, a post that I have occupied on a voluntary basis for nearly 17 years. Indeed, it was in that capacity that I give evidence to the committee when it was preparing its report.

The noble Lord, Lord Forsyth, in his magisterial survey, stressed the weakness of the immigration statistics, as did a number of noble Lords. He is right that the statistics now are simply not accurate enough to bear the kind of analysis needed for an economically driven system, and I accept that. At the broader level, it is worth bearing in mind that they tie in with the annual population survey and with the census, except for a period in the 2000s when they failed to count east Europeans. It says that it has now dealt with that. What that means is that the overall net migration figure, which has averaged 250,000 in the last 10 years, and is still at that level, is roughly right. That in turn leads to the increasing population and the consequences that the noble Lord, Lord Horam, so eloquently described, and which the public in general are very concerned about, whether noble Lords like it or not.

I shall start with a word about the economics of migration, then the future framework for EU migration and finally, the immigration target, which many noble Lords have mentioned. The House will recall that this committee’s landmark report of 2008 opened with the statement that,

“we have found no evidence for the argument, made by the Government, business and many others, that net immigration … generates significant economic benefits for the existing UK population”.

The immigration lobby has tried to ignore the central finding ever since. Yet surely it is at the heart of any policy on immigration and the labour market. Has new evidence emerged in the last nearly 10 years on this? What did the committee find? Apparently it did not find such evidence. The report includes, buried in paragraph 111, only a watered-down version of the earlier report. It says that,

“large-scale immigration, whilst increasing GDP, did not have the same effect on GDP per person”.

That sounds like an endorsement, and it is about right.

I suggest to noble Lords that it is absolutely wrong to say that immigration is good for the economy. It is not. It is not in dispute that highly skilled immigration is indeed good for our economy but there is certainly no evidence whatever for the UK—I stress the UK—that very high levels of migration into lower skilled or lower paid work over the past decade have enhanced either productivity or GDP. If anyone has that evidence, I would be most interested to see it. Meanwhile, in 2015, a report from the Bank of England concluded that large-scale inflows of cheap foreign labour may have put downward pressure on the pay of some low-paid UK workers. More recently, last month, Michael Saunders, a member of the Monetary Policy Committee made a very similar point.

The key to economic prosperity is not mass immigration but improved productivity. Indeed, UK productivity has barely grown since the recession, despite the overall number of immigrant workers increasing by more than 2 million and the migrant share of the workforce nearly doubling. That is not necessarily cause and effect, but I note that my noble friend Lord Burns touched on that point earlier. Better pay and the upskilling of UK workers are the keys to improving business models. Reducing immigration will add an important incentive for employers to take action in this regard. Certainly, their performance in the past decade has been frankly abysmal.

I turn now to the question of the future framework for EU migration. We can now expect an interim period of two years so that employers will have three years in which to make the necessary changes. Now that the status of EU citizens is almost settled, the Government should come forward soon with an outline of the immigration system that they propose for EU citizens so that business can make the necessary plans. The Home Secretary indicated, I think at the weekend, that unfortunately they do not plan to do this until the late autumn. That is bad news all round.

For our part, as Migration Watch, we have put forward proposals for such a system that would continue to allow businesses to recruit the best and the brightest from Europe, but which would also lead to a significant reduction in net migration from the EU. What we need is a work permit system that will sharply cut back the 80% of EU workers who are not in the highly skilled categories—that is, who would qualify if they were non-EU for a work permit. That is quite a high level, but if we cut those out, we could reduce net migration from Europe by something of the order of 100,000 a year from the record level. It may be necessary for a period to have work permits available for those with intermediate skills, such as construction workers. The noble Lord, Lord Shipley, was eloquent on that point, but they need to be time-limited. We believe that there should be an increasing annual charge on employers to encourage them to train local replacements. If there is not a financial spur, they will not do it. We have seen that for the last 10 years.

We should also encourage social and cultural links between young people. We should expand the youth mobility scheme to include young EU citizens, and allow them to stay for up to two years, but with no extensions and no access to public funds. Meanwhile, tourism has been touched on. Of course, ease of travel should be maintained for tourists, family visitors, business visitors and students who, in total, amount to 35 million passengers a year.

I will conclude with a word or two about the immigration target, which many noble Lords have mentioned. The committee’s report concludes that sustainable levels of immigration, as many have mentioned, are,

“unlikely to be best achieved by the strict use of an annual numerical target for net migration”.

Clearly those words were very carefully considered, and in some respects it is hard to challenge them. In fact, there has been no such strict use of a target, except possibly for tier 2 visas, but, in general, there has not been a strict target because the complexities involved in the different routes simply do not permit it. That is part of their own argument. But the benefit of an overall target is that it provides a focus for many strands of government policy that contribute to net migration, and provides a yardstick, of course, for the public to judge the Government’s performance. That, of course, is rather uncomfortable, if you are not meeting the target, but it is not a reason for abandoning it, particularly not when it is a major issue for a very considerable portion of the population, whether they vote for that side or this side.

If we drift into acceptance of the current level of immigration, we will, as the noble Lord, Lord Horam, said, grow by 10 million in the next 25 years, with serious consequences for our infrastructure and public services. For those who have ears to hear, public opinion is very clear—indeed, it was a major factor and arguably a decisive one in the outcome of the referendum that brought us to this point. Brexit now gives us the opportunity to put in place an immigration system that encourages the training of British workers, provides for the genuine needs of employers and, crucially, commands the support of the public.

Photo of Lord Balfe Lord Balfe Conservative 1:20 pm, 8th February 2018

My Lords, I draw attention to my entries in the register. I thank my noble friend Lord Forsyth for introducing the report. This reminds me of 50 years ago when we debated import controls—a subject that was well past its sell-by date when it was being debated, quite ferociously by, among others, a person who holds a senior position in the Labour Party today. When I read a lot of this report, I just think, “Sorry, the world has moved on”. We are in Europe; we are not in a siege economy. If the noble Lord, Lord Green, had been in charge when my father came to Britain, he probably would not have been allowed in. I certainly managed to complete my education without a single O-level, so I certainly would not have been allowed in. I wonder whether the Minister would have been allowed in, since she comes from the same country that my family came from. I like to think that she would, because she makes a great contribution to the public polity of this House—but I wonder.

Photo of Lord Green of Deddington Lord Green of Deddington Crossbench

Is the noble Lord aware that there has been a common travel area with Ireland since 1920? You are entirely welcome to come from Ireland—there has never been a problem.

Photo of Lord Balfe Lord Balfe Conservative

I am pleased that the noble Lord said that, because in his speech he talked about the European Union. Ireland is going to remain in the European Union, so maybe the noble Lord is indicating that there is going to be a back door, and that those who speak Ireland’s second language—namely, Polish—will be able to come into the United Kingdom in a very easy way by walking across the border. But let us wait and see.

I was struck—it has been mentioned already—by the state of the data, which are not in any shape to make any policy at all. They are,

“wholly inadequate for policy making and measuring the success or otherwise of the policies adopted”.

So we need to start off with some decent data. I would imagine that—if we work hard—we are looking at an annual net migration of 133,000 from the EU out of 250,000 overall. So roughly half of the problem that we are facing—if we define it as a problem, which actually I do not—is not covered by these proposals anyway. If we want to get the figures correct, I suggest that using national insurance and income tax data is probably the best way forward, because it is after all collected very rigorously, in that people—most people, anyway—pay their taxes.

To look slightly outside this report, since Brexit was decided I have travelled quite extensively and, wherever I go, whether it be Australia, Canada, the United States or Turkey, the common cry I get is, “If you want a trade agreement, we want an easier visa regime”. That was said to me by the Minister in Australia, by a very senior Canadian politician, by a number of people in the United States when I was there and by senior government officials in Turkey. They say, “If you want a trade agreement, we want a simpler visa regime”. I can tell noble Lords that the visa regime for people from outside the EU to get into the United Kingdom is absolutely horrendous, and certainly not fit for purpose.

On another point, the report rightly says that,

“24 per cent of EU nationals working in the UK are engaged in work considered to be ‘low-skilled’”.

But the 24% who are doing that work are not necessarily low-skilled. I know quite a few people who work in the city of Cambridge, where I live, and go to the same church as I go to who are doing low-skilled jobs, but they are certainly not low-skilled. Many of them are here to improve their English language skills to go back, or to make some money to go back—and, despite all our legislation, it is quite easy to work 60 hours a week in Cambridge in some of the lower-skilled jobs and to make money. So let us not confuse low-skilled jobs with low-skilled labour.

Of course, it normally falls to this side of the House to mention the demands of the TUC and the labour movement. The TUC evidence quotes from the government White Paper, which states:

“As we convert the body of EU law into our domestic legislation, we will ensure the continued protection of workers’ rights”.

That is a quote from the government White Paper, which we are all pleased to see. But I have two questions for the Minister. I shall quote from the TUC, which says:

“We take this to mean that all regulations (including employment related provisions) introduced under the 1972 European Communities Act shall continue to take effect”.

Will the Minister confirm that that is her understanding of that statement in the White Paper?

Secondly, the TUC says:

“In order to protect workers’ existing rights to equal pay, it will also be important to transpose Article 157 of the Treaty for the European Union which guarantees equal pay for work of equal value. It will also be important to ensure that valuable progress made through judgements of the European Court of Justice are retained as part of UK law”.

I hope that the Minister will also confirm that that is her understanding of matters.

There are a number of things that need looking at. The TUC rightly looks to the establishment of modern wages councils. It is not the first time in this House that I have raised the problem of domestic and care workers. You can talk about all the productivity improvements you like but you cannot change an elderly person’s bathing regime by applying productivity. There are more people getting old; there is more need for care in the community—and one of the great neglected areas is protection for carers. The people who are standing at the bus stop at 7.30 in the morning and going from client to client, often unpaid for the journey, are among the least protected workers in this country, and they need looking after.

I pay tribute to the TUC for the Unionlearn programme, which of course could not survive without support from this Government, and it is a great credit to this Government that they have continued to support that programme, which indulges in training, literacy skills and other skills, particularly for migrant workers. They help them to become part of our society, which is extremely valuable and has to carry on.

Finally, we need to make sure that the national minimum wage and the Gangmasters and Labour Abuse Authority continues to be well funded. If we are going to have a migration policy, we have to protect the people who are most likely to be exploited.

I will close with one other point. It would be a shame to ask just my own Front Bench, so I also ask the spokesman for the Labour Party for an observation. The Institute of Employment Rights—situated, very appropriately, in Jack Jones House in Liverpool—points out that one advantage of leaving the EU is that the collective bargaining rights that have been undermined by recent cases in the EFTA Court and ECJ could be restored. Indeed, the last Labour manifesto promised to restore these, pointing out that this could be done when we leave the European Union. Will the noble Lord who will shortly speak for the Labour Party confirm that this remains a policy of the Labour Party? It is important that people who are looking for new collective bargaining rights know that the Labour Party is behind this particular policy—otherwise it would be a great shame.

I will conclude with this remark. I do not see why, when 60 or 70 years ago people came from Gateshead to London for a job, they should not now come from Gdansk to London for a job. I see the future of Europe in a way that is not in conformity with the Brexit referendum. We are all in it together and we have to build a European community, a European entity—and it will boil down to us all working together. I would, frankly, keep free movement, I would simplify the visa regime and I would look for ways forward that did not rely on what often seems—for me, personally, although I am not accusing anyone of anything—to verge on the xenophobic.

Photo of Lord Liddle Lord Liddle Labour 1:31 pm, 8th February 2018

My Lords, this has been a very interesting debate. I am not sure that I have that much to add to it, to be honest, but I regard it as a clarion call for improving the statistics in this area, so that we can have evidence-based policy-making when decisions are taken on immigration policy in the future. Given the way that the Government have been reluctant to disclose the evidence base for their policy-making in the rest of the area of Brexit, I should like assurance from the Minister, if possible, that the work that the Home Secretary has commissioned from the Migration Advisory Committee will be fully and publicly available as a basis for thinking about future migration policy.

Last night, I and some other noble Lords attended an interesting meeting that the Lord Speaker held with businesspeople on their concerns about Brexit. The noble Lord, Lord Forsyth, was there as well. The message that comes across all the time is, “You politicians are putting us in a position of impossible uncertainty—we need to know where we are going”. There has been a lot of controversy in the last weeks about the uncertainty over the degree of regulatory alignment we will have with the EU after Brexit. But there is a far bigger uncertainty for a lot of businesses, which is far more important to them, about what the Government’s immigration policy will be. Before too long, the Government really must face up to the clash between politics and the economic reality and needs of business, and give greater clarity about their long-term aims. Surely, we cannot remain committed in the long term to the idea of a target in the tens of thousands; it just makes no sense.

Like my noble friend Lord Livermore and my former noble friend, the noble Lord, Lord Balfe, I am a strong supporter of free movement. It is the right policy within the European Union and has been of great benefit to Britain. It is not just economic benefit; there is merit in diversity. I speak as chair of Lancaster University, and free movement enables many of our lecturers and researchers to come easily from the European Union. This is a tremendous plus in advancing knowledge and research. Free movement is a great benefit.

I also think that migration is one reason why our London schools have been so successful in improving their performance in the last decade and a half. We should therefore be willing to accept these things. I have three points on migration. I accept that there are serious problems of integration in certain parts of the country, as the noble Lord, Lord Horam, talked about, but in the main it is not a problem of EU migration but of non-EU migration. It is a serious problem for the country which has to be addressed. Secondly, the relationship between immigration and the leave vote in the referendum is complex. The fact is, most of the areas of the country that have seen the most immigration—I am sure the noble Lord, Lord Green, is aware of this—are areas such as London and parts of the south-east that voted to remain in the EU. I admit that there are some other parts of the country that have seen sudden increases in immigration, such as Lincolnshire, where there was a strong leave vote but, in my part of the world in Cumbria, where there was also a strong leave vote, there has been very little EU migration. I suggest that, although people gave immigration as a reason for voting leave, what was in fact in their minds were deeper frustrations about life today, particularly the way our labour market has functioned in the last two or three decades. Migration is a consequence of weaknesses in our labour market structures; it is not the cause.

If I have a criticism of the report that the committee prepared, it is that I do not think it looked sufficiently at these structural questions in the labour market. I have, from the 1980s onwards, always supported the flexible labour market. I spent my youth working on questions of incomes policy and industrial democracy and trying to make us into a Nordic-model economy but, after 1979, it appeared that the only way that we could run ourselves was with a more flexible labour market. The Labour Government are owed credit for what they did to strengthen protections in the labour market through the Social Chapter and national minimum wage.

We have benefited from a flexible labour market, but we now ought to be thinking about what further changes we need to make in labour market structures. Certainly, the problem with skills results from deep problems in the British education system. You have to look at the whole system, not just ask, “How do we tackle the problem of the lack of construction skills?” We need to look seriously at maths teaching in secondary schools and at early years opportunities in areas of high deprivation. As I have said in this Chamber before, we need to consider seriously the gross regional imbalances in our economy, which result in the paradox that people cannot move to well-paid jobs, or to jobs in general, and the only labour that is available in London and the south-east is immigrant labour. We also need to look at whether we need to strengthen the balance of power in the labour market, and whether that should shift. That issue is of pressing concern but that is for another day. All those issues are important. If they were addressed and reforms were introduced, people’s worries about immigration would lessen.

I welcome this debate and hope that it is a clarion call to the Government to establish a clearer policy based on clearer evidence. I hope we will think much more about the structural issues in the labour market that need addressing, rather than attacking free movement as the source of all the problems.

Photo of Lord Reid of Cardowan Lord Reid of Cardowan Labour 1:41 pm, 8th February 2018

My Lords, I wish to make three simple points. However, I have a feeling of déjà-vu as these issues were argued about, certainly internally, when the last Labour Government were in office. I confess that I lost on two of them.

First, I think it is right for the Government to take a view on immigration numbers and the level of immigration. I disagree with my noble friend Lord Darling: I do not see anything anti-New Labour in that. To find a middle way between the unfettered free market and central diktat is typically New Labour. Therefore, I welcome the Government’s intention in this regard, although I am not saying that I agree with any specific mechanisms. Incidentally, I have never understood why everyone accepts that it is correct to shape the flow of capital or investment through fixing interest rates but somehow it is terrible to try to do the same thing with the flow of labour. I recall that within a week of becoming Home Secretary, I suggested that and merited an editorial in the Guardian accusing me of trying to impose a Soviet-style system on Britain. Unfortunately, that kind of extreme cliché mars this whole debate.

My second point on the value of immigration is equally simple. I for one do not doubt the value of immigration as a whole, at a macro level, to the country’s GDP. The Treasury constantly argued this case throughout the tenures of different Governments. It found it too indelicate to mention publicly the fact that immigration also brought down wages hugely, but it always talked about the increase in GDP. The problem with that argument is twofold. First, you cannot estimate the value of immigration without weighing on the other side the social costs. Secondly, the value is always estimated at a macro level but the social costs apply at the micro level: they hit people and local communities. All other things being equal, an influx of large numbers of people reduces the services that local people get and their access to housing, a doctor, roads, flats and education. That cannot be wished away by branding people as somehow inherently racist. It is not a perception based on racism; it is based on people’s own self-interest and their standard of living, which they see being reduced. Therefore, I have always believed that if you are to have even managed migration, you also have to have a managed differential distribution of resources to those areas where the largest numbers of immigrants arrive and live. That brings me to my third point because, to do that, you need to be able to measure immigration.

One of the phrases that has, unfortunately, stuck with me for the last 15 years is “unfit for purpose” as regards the immigration department of the Home Office. I am glad that it has at least stood the test of time, as I think the noble Lord, Lord Forsyth, used it four times when he referred to the lack of empirical data due to the flawed nature of the statistics. It is an area where I won an argument, along with colleagues in the Labour Government. Unfortunately, that was not followed up by the then leader of the Lib Dems, who, on coming to power, immediately abolished the system of ID cards—I might add, without paying compensation to those who had voluntarily paid to have them. I predict that the Government will not be able to manage, measure or operate an immigration system in the absence of biometric ID cards and biometric visas. This is not a case of surveillance being carried out on the population. It is not merely a mechanism to counter terrorism and theft or to protect individuals’ identity, which is now the subject of increasing theft. It is an elementary mechanism for making sure that we have a managed and humane immigration policy that combines increasing the value to the country through immigrants and the skills they bring with maintaining services to individuals in their localities.

Photo of Baroness Smith of Newnham Baroness Smith of Newnham Liberal Democrat 1:46 pm, 8th February 2018

My Lords, like other noble Lords, I thank the noble Lords, Lord Forsyth and Lord Hollick, for the report. I had intended to say that on many of the issues we appear to have considerable agreement. Then the noble Lord, Lord Reid, spoke and brought in a range of issues on which we may not have quite so much agreement. The Liberal Democrats have not yet changed our minds on identity cards. We have not discussed that issue within the party for several weeks but I do not imagine that there will be any change in our position on that any time soon.

I was intrigued by the fact that when the Labour Party was in power the noble Lord, Lord Reid, had come up with an idea for controlling immigration and had been accused of seeking to adopt a Soviet-style system. I wonder whether the noble Lord, Lord Green, has ever been accused of adopting a Soviet-style approach given that his views may be somewhat similar.

The report contains some key lessons with which I think your Lordships all agree: namely, the fact that the data are not fit for purpose, it is very difficult to know who is actually in this country, we do not know who is working, or whether people are using their national insurance numbers or have claimed a number and perhaps gone back to their home country. That is an issue on which there is clearly some agreement. The Liberal Democrat Benches can certainly agree with two issues in the report: namely, taking students out of the statistics for the purposes of public policy, and getting rid of arbitrary targets.

In opening the debate, the noble Lord, Lord Forsyth, pointed out that the Brexit vote already seems a long time ago. I declare my interest as an employee of the University of Cambridge. Like other Members of your Lordships’ House, I have always found that Brexit has basically been a job creation scheme for academics, lawyers, perhaps for trade negotiators, and certainly for Members of your Lordships’ House and members of committees in your Lordships’ House and in the other place. They seem to have produced so many reports on Brexit since June 2016, that one begins to wonder where all the evidence and the expertise was to be found before the referendum, and whether some of that work could not have been done before June 2016 rather than now.

I also have a brief secondary declaration in that in the past I have been the beneficiary of the right of free movement of people. In the 1990s I had a scholarship to be in Germany and I went back and forth; I was quite homesick, so I visited the United Kingdom on many occasions. I flew in and out of the country, and nobody asked me what I was doing or whether I was a student or working. It appears that the border agency of the 1990s was no better or worse than the situation we have now. If the Government can come forward with ways to improve the data, that would be enormously welcome.

We have already heard that there is a change in the number of EU citizens resident in the United Kingdom. The net numbers are already falling. As the noble Lord, Lord Turnbull, pointed out, perhaps we should be careful what we wish for. The impact on the labour force is significant and the vote to leave the European Union has created uncertainty in the minds of EU citizens resident in the United Kingdom, some of whom have already taken the decision to leave, others of whom may decide to leave, and many of whom are saying, “We are still not sure that the United Kingdom really wants us”. The interim agreement made in December 2017 does not give the certainty that EU migrants need to ensure that they will remain in the United Kingdom. Therefore we are already seeing a loss of EU migrants. Is that really what we want? Not necessarily.

The report recommends that the Government provide,

“a suitable implementation period during which businesses retain access to the European labour market”.

That would clearly appear to give certainty to businesses, and it has been welcomed across the House. However, what does an implementation period mean? In particular, the noble Lord, Lord Forsyth, and other noble Lords suggested that the implementation period might be for “several years”. So far, we have heard about an implementation period which Theresa May suggested would last two years, and which the EU 27 suggest would be 21 months. If an implementation period as regards access to the European labour market needs to be for several years, can the Minister explain to us how the Government might come forward with a policy on that? Will that be part of the proposed immigration White Paper and the immigration Bill, which we are likely to see later this year, or do the Government object to the idea that an implementation period of multiple years for access to the labour market is desirable?

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee

I suspect that I may be responsible for the confusion here by having used the word “implementation”. I was talking about the implementation of an immigration policy which took account of the needs of specific businesses, which is quite different from the transitional implementation period that is currently under discussion.

Photo of Baroness Smith of Newnham Baroness Smith of Newnham Liberal Democrat

I thank the noble Lord for that clarification. That raises two questions. What do the Government propose to bring in? If the implementation period for a new immigration policy was about access to the European labour market, there is still the question of what the Government propose to do. If the committee’s proposals are taken on board, is there a suggestion of having an interim period in which there are more liberal policies for EEA nationals than for third-country nationals? That might be welcome, but are the Government thinking about that? Also, are the Government willing to think about a wider range of implementation periods and transitional periods then we have heard so far? The use of the words “implementation” or “transition” suggests that the Government have a process and an idea of where they are going. So far, there is not a great deal of clarity on where the United Kingdom will be beyond 29 March 2019. The noble Lord, Lord Lea, would like us still to be in the single market, in which case many of these questions do not arise. However, assuming that the Prime Minister does not take on board the Chancellor’s idea that the United Kingdom should remain linked as closely as possible to the single market, what sort of immigration policy do the Government propose? To what extent are they willing to open up to the idea of having a policy that is based on the needs of the labour market, not on arbitrary targets? With the possible exception of the noble Lord, Lord Green, we are united in saying that arbitrary targets are not necessary or desirable. Therefore, to what extent will the Home Office be flexible?

We on these Benches very much welcome the amendment moved by the noble Lord, Lord Forsyth, in Committee, which has therefore been brought forward in this report, on the situation of students and the idea that they should not be included in short-term immigration statistics for public policy. I know that the Minister will say, as her noble friend Lady Vere said on Monday in answer to comments on a Statement, that students have to be included in the numbers because that is what happens in the OECD. But for public policy purposes, other countries, including the United States, do not consider students in the migration statistics. The noble Lord, Lord Hannay, pointed that out again on Monday and got the stock answer from the noble Baroness, Lady Vere, and the same answer is in the Government’s response to the Economic Affairs Committee’s report. Can the Minister please think about giving us an answer today that goes beyond the stock answer and which recognises that students are important and benefit the UK economy? In addition, the standard answer we get is not correct. We keep being told that there is no cap on student numbers, but if there is a commitment to a figure of net migration, and all of a sudden we say, “We want another 100,000 students this year”, does that mean that there are 100,000 workers who cannot come?

Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Opposition Whip (Lords), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Housing) 1:56 pm, 8th February 2018

My Lords, I congratulate the noble Lord, Lord Forsyth, and the Economic Affairs Committee and thank them for this timely report on Brexit and the Labour Market. I am also pleased to see that we have had a response to the report from the Government, which is helpful for our deliberations today.

The report was published just over six months ago but the issues it contains are very much alive, and, as with much of the debate around Brexit, it does not feel as though the Government have come to many conclusions on the way forward. Whatever your view of Brexit, whether you were leave or remain, no one voted to make themselves or our nation poorer, but the attitude of the Government often makes it seem as if we are determined to make things as difficult as we possibly can for ourselves as a country.

The report focuses on three main areas. It looks at the reliability of data on migration and makes recommendations to improve the data, then sets out the consequences for businesses of a reduction in EU labour and recommends measures to help businesses adapt, and, finally, looks at the future of the net migration target. All these issues, which have been discussed in your Lordships’ House many times before, are still very much alive today.

The report identifies that there is not one simple measure of migration, that the picture of migration is built up from a number of sources and there is a considerable margin of error, and that we currently have no wholly reliable migration statistics, with UK migration measured through a series of surveys undertaken by the Office for National Statistics as well as data published by both the Home Office and the Department for Work and Pensions. My noble friend Lord Livermore made reference to the poor quality of the data relied on by the Government.

The Government partly recognise this problem in the response to the report from Brandon Lewis MP, when he referenced the fact that the ONS has recognised that more can be done to improve migration data. However, I do not think there was a complete acceptance of the weaknesses of the data collected presently. That is disappointing, because if you are inputting or analysing data to inform your policy decisions and assess them, and if what you are using can be described as “flawed”, that is not a good place to be and does not give you the rich source of data that the Immigration Minister referred to in his letter.

It would be useful if the noble Baroness, Lady Williams of Trafford, could update the House, following on from the letter from Brandon Lewis in November last year, on what further action has been taken and on what the Government will do to improve the migration data collected, which is used to inform government policy and decision-making. In particular, can the Minister comment on the new exit data and on what more is being done across government to deliver this agenda? The noble Lord, Lord Sharkey, also made reference to the inadequacy of the data that the Government are relying on to inform their policy decisions.

I very much agree with paragraph 19 of the committee’s report. It expresses an opinion which is shared by others in the House and elsewhere: that the International Passenger Survey cannot bear the burden placed on it and cannot be relied upon to provide accurate estimates of net migration. The report goes on to call for the Government to prioritise plans for comprehensive data sharing across departments. That seems a very wise move, as it will give us a much better understanding of the movements of immigrants within the UK economy.

Paragraph 27 of the report identifies three specific sources of data which, among others, should be analysed. These are the matching of PAYE and national insurance number registrations, the matching of self-assessment records for self-employed migrants and sole traders issued with national insurance numbers, and using data on benefit claimants and tax credits to ascertain whether those with unused national insurance numbers remain in the UK claiming benefits. I believe that those are rich sources of data which could really help to inform this debate and government policy, and I hope that the noble Baroness can respond to this recommendation in her closing speech.

In Chapter 3, the focus moves on to adapting the UK labour market and addresses how a reduction in immigration from Europe will affect British businesses. It was interesting to note that the number of immigrants from either the EU or outside the EU was approximately 10% of the UK workforce. The number of EU nationals working in particular sectors and in London highlight the regional differences in the overall figures. The case study of Pret A Manger, which the noble Lord, Lord Forsyth, referred to, was very interesting. Having been a customer on many occasions, I was always clear that a large number of EU nationals worked there, but I had no idea that only one in 50 of the people who apply for a job there is described as British. I found that amazing.

I agree with the committee that it is important to get an early agreement on the rights of EU nationals in the UK. The Government sometimes make progress on this, but the problems that the Government are clearly having in coping with the complexity of Brexit, the lack of a coherent position with conflicting views from Minster to Minister, the off-the-record briefings and the weakness of the Prime Minster mean that just when you think that we have made progress, the policy positions are undermined with a usually unhelpful intervention.

The report correctly identifies that the sectors estimated to be most reliant on EU nationals as part of the workforce tend to be those classed as requiring lower-skilled workers, with 24% of individuals working in jobs categorised as such. Tables 5 and 6 in the report highlight this fact in particular. I agree with the committee’s recommendation in paragraph 52 that the Government must address the needs of business and that any new immigration policy developed and implemented after we leave the European Union should not be based on this arbitrary distinction between higher and lower-skilled workers or whether a job requires a university degree. The noble Lord, Lord Shipley, made reference to this. The construction industry and the agriculture and hospitality sectors need to have policies in place from the Government that protect them and avoid the cliff-edge scenario that the hospitality industry, for example, fears. Similar problems will be faced by the social care sector and the health service if the Government do not get this right—and quickly.

The report also highlights the problems that some industries face in recruiting British workers, who do not see working in agriculture or parts of the hospitality industry as desirable. It points to the fact that replacing migrant workers with domestic workers will prove very difficult. The case study looking at seasonal workers in the agriculture industry was most informative in this respect, and I was not at all surprised at the findings. It is worrying when organisations in the industry cast doubt on the ability to grow, pack or harvest crops grown in Britain without this workforce. A solution needs to be found as higher prices, labour shortages and a reduction in our productivity are not good for anyone and not good for the UK. It will make us all poorer and it cannot be allowed to happen.

Clearly, having a skilled workforce is important. In the past we have been poor at delivering the technical skills that are required to produce a workforce ready to meet the challenges that the future will bring. The noble Lord, Lord Green of Deddington, suggested that the availability of EU nationals might have discouraged firms in some industries from investing in training. He also made reference to the committee’s 2008 report, suggesting that this could also be a possible consequence of immigration. However, I would contend that we have not been good at ensuring sufficient training for some considerable time. We have the examples of other countries. Germany, for example, has very similar challenges but has been much better than the UK at long-term planning to deliver a diverse and skilled workforce. The noble Lord, Lord Horam, made an important point about our collective failure to upskill our workforce.

My noble friend Lord Darling commented on the necessity for the Government to consult with business about its needs to ensure that we have the right skillsets post Brexit. I have visited Rolls-Royce in Derby and in Dahlewitz outside Berlin. There is great co-operation between the two factories, with workers and products moving back and forth between the two, but that will be at risk if we get Brexit wrong.

I also noted that the noble Lord, Lord Green, suggested that we should aim to be self-sufficient in most sectors. There is nothing wrong with that as an aim but it is much more difficult to make that objective a reality when you have to grapple with years of government policy, industrial strategy, the attitude of industry, the attitude of business and the skills of an underused workforce. However, it would be a tragedy if we ended up with the situation highlighted in the report of not growing certain crops in any great quantity but, instead, buying them from other countries in the European Union as companies adapt to the changing position.

The noble Lord, Lord Green of Deddington, made a number of points. As I said before, I can see no evidence of swathes of British workers wanting to work in certain industries—for example, picking cabbages in Lincolnshire, potatoes in Suffolk or strawberries in Kent. The same can be said of the social care sector, which, I contend, will need a significant injection of funds to significantly boost the pay of workers and attract more people. A huge number of vacancies are unfilled, with no stampede of workers wanting to work in this industry. Generally, this sector runs at a vacancy rate of 30%. I very much agreed with the noble Lord, Lord Balfe, when he spoke about the vulnerable position of these workers. He was absolutely right. It is clear to me that the noble Lord reads the Labour manifesto much more closely than I have ever done—which would not be hard. I assure noble Lords that it is not my usual holiday or bedtime reading.

I am very clear that the best place for Britain, for the British economy and for British workers is to remain in the European Union. When we leave the EU, we should seek to have the closest possible alignment with the institution and remain a member of the single market and the customs union. That would help us to protect standards across a whole range of issues. Anything else runs the risk of making us all poorer. There is no benefit for workers or any other group of people in the UK in having low skills, poor regulation and poor standards.

I agree with the section of the report on automation. It highlights the challenge that this will bring and the risk that migrant workers will be replaced not by domestic workers but by automation and mechanisation. This challenge will move from sector to sector quicker than we think. Industries with a high reliance on low-skilled labour will be affected as technology and processes improve, and that will challenge us all.

The implementation period for a new immigration policy, as detailed in paragraph 95, will have to be addressed by the Government. Moves to retrain and upskill the British workforce will take time and cannot happen overnight. It would be good if the noble Baroness could address that point when she responds to the debate, along with the issue raised in paragraph 96—the challenge of other policy objectives, such as the building of 300,000 new homes a year. I have raised that many times at the Dispatch Box. If you do not have the workforce—the bricklayers, carpenters and plumbers—to build these much-needed homes, how will that target be achieved? Again, can the noble Baroness address that? It was raised by a number of noble Lords, including the noble Lords, Lord Turnbull and Lord Shipley.

The issue of students being included in the net migration figures has been raised many times in debates and Questions and it is raised again in this report. I know that the noble Baroness will say that there is no limit on the number of students who can come here to study from abroad, but the reality and how the situation is reported are often very different. Other noble Lords have called for the student figures to be taken out of the immigration figures. The Government’s intransigence in this regard has caused real problems and has made this a less attractive place for students to come and study. As the noble Lord, Lord Forsyth, said, the target needs to be flexible to address the challenges that we face—a point made also by the noble Lords, Lord Sharkey and Lord Turnbull.

In conclusion, I thank the noble Lord, Lord Forsyth, and the committee for their report. It is an excellent document which has proved valuable in our ongoing debate.

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Minister of State, Home Department, Minister for Equalities (Department for International Development) 2:09 pm, 8th February 2018

My Lords, I join other noble Lords in thanking my noble friend Lord Forsyth for bringing this debate to your Lordships’ House. It has been a very interesting debate and I shall endeavour to respond to as many questions as possible. At the outset, however, I will make a number of general remarks.

I thank the Economic Affairs Committee for its report, Brexit and the Labour Market, published last summer. The committee has done a great service by producing a thoughtful report which covers a number of key issues facing the Government as we prepare to leave the European Union. The Government produced a full response to the committee’s report in the autumn, in the form of a letter from the then Immigration Minister, Brandon Lewis. I do not intend to repeat everything that was said in that document.

The noble Lords, Lord Livermore and Lord Darling, and my noble friend Lord Forsyth, asked about the net migration target and talked about immigration concerns not recognising economic issues and the national interest. The Government are clear that there are many benefits to immigration: economic, social and cultural. The noble Lord, Lord Reid, pointed out those and also the subtleties beneath them. But we must not underestimate the legitimate and real concerns of the public about the impact of unrestricted immigration from the EU on jobs, wages and public services. These concerns were clearly expressed during the referendum campaign and it would be remiss of us to dismiss them or to suppose that we know better.

Photo of Lord Reid of Cardowan Lord Reid of Cardowan Labour

I am grateful to the Minister for giving way. I understand her awareness of the concerns of the public. But about a year and a half ago I asked her if the Government distinguished between the free movement of people and the free movement of labour. In other words, there are already existing provisions under the European Union regulations which allow the Government to take steps if people come here but do not work. Why have the Government never used those regulations?

Photo of Baroness Williams of Trafford Baroness Williams of Trafford The Minister of State, Home Department, Minister for Equalities (Department for International Development)

The noble Lord has a point—but nor did the previous Government use the regulations, and the concerns were growing at that time. But I take his point: perhaps we would be in a totally different place if successive Governments had looked at that.

On citizens’ rights, I begin by emphasising the significant contribution that EU citizens make to our national life and that we want them and their families to stay. The Government have been very clear since the start of negotiations with the EU that protecting the rights of EU citizens living here, together with the rights of UK nationals living in EU countries, was their first priority. We have now delivered on that commitment and have reached an agreement with our EU partners on citizens’ rights. The agreement will provide the millions of EU citizens living in the UK with certainty about their future rights and, most importantly, allows them and their families to stay. The noble Lord, Lord Livermore, said that the deal on citizens’ rights reached in December did not provide certainty. They will be able to continue to live their lives broadly as now. We greatly value their contribution to the UK and hope that they will choose to do so.

I turn now to what happens after the UK leaves the EU. Carefully controlled economic migration benefits our economy and has a hugely positive impact on the social and cultural fabric of the UK. With that in mind, we want to ensure that we strike a balance between attracting the right mix of skills to the UK and controlling immigration from the EU in the national interest. Let me be clear: the Government recognise the valuable economic, social and cultural contribution that migrants make, but we must ensure that we are able to control immigration in the national interest, as my noble friend Lord Suri said.

The noble Lords, Lord Lea, Lord Shipley and Lord Kennedy, and others talked about the consideration of the economy as a whole, different EU and non-EU sectors, and areas of the country with high and low skills. There is a real mix in there. I agree that we must consider the economy as a whole and not just EU migration. That is why we explicitly asked the Migration Advisory Committee to do just that. We must take a holistic view of the whole labour market, all parts of the UK including tourist areas, high and low skills, and all sectors of the economy. We will do just that.

I understand the committee’s concerns that we will need suitable time to implement the new immigration system. The Government recognise this and that is why the Prime Minister, in her Florence speech, set out a number of proposals for an implementation period which will allow a smooth transition and provide certainty for businesses. The noble Lord, Lord Livermore, also talked about that. During this period, access to one another’s markets should continue on current terms and people will be able to come to live and work in the UK. However, there will be a registration scheme, which is essential preparation for the future system. The Prime Minister set out that this points to an implementation period of around two years. She also made it clear that those arriving in this period will have different expectations about their ability to stay in the long term, as they will be arriving post Brexit.

I would like to reassure the committee on its recommendation that the Government should consult on the needs of business in any future immigration policy and ensure that businesses have access to the expertise and skills they need. The Government have always been very clear that we will make decisions about future arrangements following discussions with stakeholders, including with businesses and with the EU, and based on evidence.

The noble Lord, Lord Shipley, and my noble friend Lord Balfe talked about the important issue of protecting employment rights after the UK exits the European Union. The PM has been very clear that the Government will ensure that workers’ rights will be maintained after we leave the EU, and indeed enhanced. My noble friend Lord Balfe mentioned the specific issue of equal pay. The Equal Pay Act was of course brought in before the UK became a member of the EU, and we intend to honour and enforce that Act. It is particularly pertinent in this week of the 100-year anniversary of women’s suffrage and the Representation of the People Act that we have equal pay for equal work.

The noble Baroness, Lady Smith, asked when we will publish plans on the implementation period and whether it could be longer than two years. The PM proposed an implementation period of two years but we will keep that under review, not least as we discuss the implementation period with the EU. We will set out proposals for this period and future immigration arrangements over the coming months.

As my noble friend Lord Forsyth and other noble Lords pointed out, we have commissioned the independent Migration Advisory Committee—the MAC, as it is called—to report on the impact of the UK’s exit from the European Union. These recommendations will play a vital role when the Government make any final decisions on the future immigration system. The noble Lord, Lord Sharkey, asked when the MAC report would be published and whether there would be an interim report in September. The MAC is independent, so I cannot formally answer a question on its behalf about an ongoing study—but its reports are always published, including interim reports, and that is what I expect it will do.

I welcome the report’s suggestion that we should carry out a review and be satisfied about the administrative feasibility of a regional immigration system before we seek to implement one. The Government have been clear that we want an immigration system that takes into account the social and economic needs of all parts of the UK. However, it remains a reserved matter and we will consider the needs of the UK as a whole. As I have said before, we are consulting businesses, industry, trades unions and many others from across the UK to ensure that we can do this and that it will complement the MAC’s work. Indeed, the commission to the MAC explicitly asked us to include a consideration of impacts on different parts of the UK.

The noble Lord, Lord Sharkey, asked about the timing of a White Paper. Our first priority was to reach a deal on citizens’ rights, which we did in December, and our focus now is on getting the right deal for the implementation period immediately following the UK’s exit. We are considering a range of options for the future immigration system and we will set out initial plans in the coming months. We will of course consider how we can update the House as negotiations progress.

I am pleased that the committee welcome the Government’s new ambitious modern industrial strategy, which sets out a clear vision for driving an economy that works for everyone and recognises that building the conditions for a competitive, leading centre for innovation, excellence and talent means focusing on developing people and skills in the various sectors. That is why, among other things, we are committed to raising investment in research and development to 2.4% of GDP by 2027 and announcing £725 million in our new industrial strategy challenge fund programmes to drive innovation.

My noble friend Lord Horam made the point that the economy will need to adapt to less EU migration and referred to the importance of skills and training for UK citizens. I agree with his broad sentiments and his welcome for the Government’s strategy. We must continue to promote and develop our dynamic economy. His points about skills and training for UK citizens are important and that is why we continue to invest in schools, our world-class universities and vocational training such as apprenticeships, which are overwhelmingly working well, to ensure that our own citizens have maximum opportunities to develop their skills.

The noble Lord, Lord Sharkey, referred to T-levels and apprenticeships. There have been more than 1.2 million apprenticeship starts since 2015, providing more opportunities to people of all ages and from all backgrounds. We are ensuring that smaller employers understand the benefits of apprenticeship training for their businesses and we are encouraging them to take advantage of the support available. On T-levels, we launched a workplace pilot scheme in September 2017 to test different models and approaches, and this will include an evaluation organisation. The noble Lord criticised inadequate providers. It is important that provision is of the highest quality and seven out of 10 of our further education colleges have been graded as outstanding or good by Ofsted.

Most of the points made today were about the robustness of the migration statistics. These are published by the ONS, as noble Lords have pointed out, and it is confirmed that the international passenger survey continues to be the best source of information to measure long-term international migration. Additionally, the Home Office publishes a wide range of statistics on the control of immigration and is already working with the ONS to analyse the new exit check data and other sources to provide a better understanding of migrant flows.

My noble friend Lord Forsyth talked about the different statistics from different sources, even for the same sectors, and I am glad he recognises the steps that both the Government and the ONS are taking to improve data. It is a complex area and we continue to work on it. That is why we have commissioned the independent Migration Advisory Committee and we look forward to its report in the autumn.

A number of noble Lords referred to the quality of data. We will continue to work with the ONS to improve the quality of data and this will include a variety of data sources, including administrative data from government sources. The ONS is independent of government and it is right to ensure that the public can have confidence in the objectivity of the statistics. We should not underestimate the generally extremely high quality of ONS data.

The noble Lord, Lord Burns, talked about the net migration target/commitment. We are committed to reducing net migration to sustainable levels. Whether it is described as a target, aim, objective or commitment, it is clearly what we want to do to address people’s concerns about migration.

The noble Lord, Lord Darling, asked about Home Office capacity. The Home Office already issues millions of passports and other visas each year. I understand the concerns but we are working hard to improve services.

We have been clear about our commitment to reducing net migration but that does not detract from our determination to ensure that we remain an attractive option for those with the skills and expertise across all sectors of our economy and who play an invaluable role in making the United Kingdom better still.

I again thank my noble friend and all noble Lords who have participated in the debate.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee 2:26 pm, 8th February 2018

My Lords, I am grateful to my noble friend Lady Williams for summing up what has been an excellent debate. It is a relief to have a debate on Brexit where we do not refight the referendum campaign but focus on the issues for the future. I am grateful to everyone who has participated and to the noble Lord, Lord Kennedy, for his constructive and supportive response to the committee’s report. I was struck by a phrase used by the noble Lord, Lord Liddle, when he referred to the clash between politics and economic reality. That has been our experience in considering this matter in the committee.

This is a pretty well unanimous report. My noble friend Lord Lamont forced the first Division in the history of the committee at the first meeting of which I was chairman but we ended up with a unanimous report. This debate has illustrated that the way forward is complex but not impossible. I hope my noble friend Lady Williams and other members of the Government will take on board the recommendations, which are absolutely central to our future economic prosperity.

Motion agreed.