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

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

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Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee, Chair, Economic Affairs Committee 11:37 am, 8th February 2018

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.