28 February, 2017
1. The regional visa system proposed by the City of London and PwC would require a total overhaul of the immigration system causing unnecessary confusion and chaos and would place a significant additional bureaucratic and administrative burden on employers, local authorities and UK Visas and Immigration. The system would also be extremely difficult to enforce without severely limiting the freedom of individuals once they arrive in the UK. Moreover, the proposal pays no heed to the wishes of the public to reduce overall net migration as well as low skilled migration specifically. The effect of the proposed policy would be to increase net migration. The proposal permits immigration for low skilled migration, which has, at best, a neutral impact on GDP per head, the UK’s fiscal position, productivity and UK-born employment rates.
2. The City of London and PwC have proposed that the UK should introduce a regional work permit system to govern the entry of all non-UK nationals for work, including EU nationals once the UK leaves the European Union. This paper outlines the proposal and highlights the problems with the approach.
3. The City of London/PwC proposal is for the introduction of regional work permits. This is justified on the basis that the needs of business differ across the country and that a regional approach allows ‘the best placed people within the region’ to make decisions affecting the community. Wider benefits are said to include regional development by allowing areas outside of London to become more competitive and better integration of migrants.
4. The City of London/PwC propose that the Home Office be responsible for ‘overall requirement criteria’ meanwhile the regions will be given the freedom to control the number of migrants and the skills that they require for that region.
5. Two possible models to govern the allocation of work permits are suggested.
Model 1 – Governed by local authorities and business needs
Employers would be responsible for submitting a ‘business case’ for regional work visas. Employers would be required to outline the challenges they face in finding suitably skilled workers in the labour market and provide evidence of their efforts to recruit locally and nationally as well as to train locals such as school leavers and apprentices. The case must be backed up with evidence of economic activity (such as contracts) and/or demand for services. The business case would be submitted to the ‘regional local authority office’, which would assess whether a skills deficit exists taking into account other local factors. If validated the local authority would recommend to UK Visas and Immigration (UKVI) that it allocate regional work visas to particular employers. It would then be up to UKVI to assess the local authority recommendation and if approved it allocates a set number of regional visas to each business in line with the recommendation. Non-UK nationals can then apply for the visa under the scheme.
Model 2 – Governed by UK Visas and Immigration
Similar to the above but the business case compiled by employers would be submitted directly to UKVI. Hub casework teams would then assess the cases using their local knowledge and release a set number of regional visas which would be allocated to businesses in the region. Non-UK nationals could then apply for visas under the scheme as above.
6. Two types of work visa are proposed:
Short term skills deficit visa – limited to 12 months
Long term skills deficit visa. – granted for an initial three year period, extendable to a maximum of six years
7. Under the system, it would be a requirement for visa holders to live in the relevant region. Home ownership outside of the region would be restricted - it is proposed that mortgage applications for property outside of the region be denied. Meanwhile, existing landlord checks would be adapted to ensure that visa holders only rent property in the relevant region. The proposal also includes controls on the ports of entry and it is suggested that visa holders enter the country within the region (i.e. a London airport for those granted a London visa), although the authors do note the potential practical difficulties with this.
8. Visa holders would be entitled to bring their dependents with them who would have unrestricted access to the labour market.
9. Under the proposed system, existing migrants would be permitted to switch into the long term skills deficit visa so long as a regional visa was available. Students would be permitted to switch into both long and short term categories. Long term visa holders could move jobs and regions so long as visas were available in that region. Permanent residence would be available after 5 years (there is no mention of a minimum income threshold for permanent settlement currently set at £35,000 with an exemption for nurses, PhD holders and those in jobs on the Shortage Occupation List) and after that citizenship.
10. A new governance body would be required to review compliance and carry out audits. Non-compliant employers would face civil penalties and revocation of their sponsor licence.
Critique of the Proposal
11. The two proposed new visa categories are not designed to be in addition to the existing work permit system but rather to replace the Tier 2 system as it currently exists. The proposal would therefore require fundamental reform of the immigration system causing unnecessary confusion and chaos for businesses, which are now familiar with the existing system. Inevitably, the introduction of a new work permit system would take time to bed in and would likely cause problems for businesses during this phase as businesses and other organisations involved adapt to a new operating system and new immigration rules.
12. The proposal would require the ‘economic cap’ to be abandoned. The economic cap relates to Certificates of Sponsorship, issued to employers in support of their candidate’s application for a Tier 2 visa. It is likely therefore that the proposal would lead to an increase in net migration rather than a reduction, to which the government committed in its 2015 manifesto.
13. The Executive Summary of the proposal document suggests that the Home Office would have overall control of basic requirement criteria and that the regions would have control over the skills requirement for non-UK workers to the region. However there is no further mention of any minimum skill threshold or a minimum pay threshold. In fact the report goes on to discuss ‘low skill shortages’ suggesting that the regional work visa would be available to those below the current skills threshold of NQF Level 6 (Graduate level). Unless the Home Office was to apply a minimum skills threshold as a basic requirement for the new visas (something which clearly the authors do not envisage) it would be entirely within the rules of the proposal for workers to come to the UK to fill low skilled and low paid jobs. This removes the incentive for employers to assess pay and conditions as a hindrance to local recruitment. The system would also permit low skilled migration for which the Migration Advisory Committee found no positive economic impact but rather 'a neutral impact on UK-born employment rates, fiscal contribution, GDP per head and productivity'.
14. The notion of a ‘low skill shortage’ as highlighted by the authors is itself something of a misnomer/contradiction. The ONS defines low skilled jobs as the following:
15. By their very nature, jobs of these kinds do not require significant education or training and therefore if employers face a dearth of applications this is more to do with the level of pay offered candidates and the conditions associated with such jobs such as the need to be highly flexible i.e. zero hour contracts. Poor pay and conditions makes such jobs unattractive or difficult to occupy for those with families and mortgages who understandably want and need greater job and income security.
16. Requiring employers to make a business case for migrant labour would be cumbersome for employers and places on them a much greater administrative burden than is currently the case under the Tier 2 system. Small and medium sized businesses which do not have large Human Resources departments to deal with immigration would be most affected.
17. It is unclear how often a business case would need to be made to either the local authority or UKVI. If a business case had to be compiled on an annual basis then UKVI would face a huge number of cases to be assessed in a short period of time. At present there are almost 30,000 employers on the approved list of sponsors, a figure which is likely to grow once the UK leaves the European Union. UKVI would have to assess the business case for these employers, a huge administrative task which would likely lead to delays. It would also be very difficult for employers to know exactly how many workers they might need in any given year. Employers might face unforeseen shortages as a result of life choices made by the existing work force, such as moving jobs or leaving jobs to care for children. An annual business case would be inflexible and lead to employers being unable to access the talent they need in a timely fashion.
18. The proposal would add to the complexity of the system, especially for businesses that operate nationally. If a UK wide company with local branches had to submit a business case in each individual region then the administrative burden would be very significant. At the same time, one business case for a UK wide company would be unable to account for local labour market trends.
19. The proposal also has the potential for significant market distortion. The freedom given to regions could allow one local authority area to apply very lax requirements compared to others which might wish to encourage companies to focus on pay and conditions rather than resorting to importing workers. This could give an unfair advantage to some companies who would be able to pay their workers less than in another area.
20. Under the proposed system visa holders would be unable to secure a mortgage on a property outside of their region. This seems impractical and inflexible considering that under the proposal visa holders would be entitled to switch to other regions. Those wishing to rent property would also have to do so within the region for which their visa was issued and it is proposed that governance would be linked to the existing checks that landlords have to conduct on prospective tenants to ensure they have the legal right to remain. This also seems inflexible, especially for those living and working on the edge of two regions. In addition, to enforce such a system civil penalties would have to apply to landlords who rent property to individuals who have a legal right to remain in the UK but whose work permit relates to a different region which would be a most unsatisfactory outcome.
21. It would be impractical to require visa holders to arrive in ports of entry in the region to which their visa is tied. It would be impossible to police and serves no purpose.
22. The authors themselves cite problems with compliance in the three existing models that they cite for comparison, Australia, Canada and the Fresh Start Scotland programme.
23. The proposal would cause chaos and confusion for businesses and would impose on them a significant administrative and bureacratic burden, harming in particular, small and medium sized busiensses without large Human Resources departments to deal specifically with immigration needs. Moroever, the proposal would likely increase net migration to the UK and therefore pays no heed to widespread public concern about the level of net migration to the UK.