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

Part of the debate – in the House of Lords at 11:51 am on 8th February 2018.

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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.