UK Edition
What a points-based immigration system would mean for the economy
The thorny subject of immigration has dictated every step of Britain’s departure from the EU. It pushed Leave over the line in the referendum, defined the terms of the Brexit deal and now Boris Johnson hopes it will help secure him a majority.
While some voters will lap up promises for tighter border controls, businesses and economists are decidedly more cautious.
Business leaders raised concerns over the weekend that the prime minister has promised to pull up the drawbridge for vital lower skilled workers as part of his final pre-election push. An Australia-style points system is the centrepiece of the Conservatives’ proposals but aside from being an electioneering cliche what would it entail?
The points system is a method of selecting migrants based on a variety of factors, such as language proficiency, education and work experience. In the Australian “skilled independent” visa, the most popular route, migrants must earn a minimum score of 65. An applicant could get a maximum of 30 points for being between the ages of 25 and 32, 20 points for strong English skills and 20 points for educational qualifications.
Johnson said he will offer three different levels: a fast-track entry for “exceptional” workers, a second category requiring a job offer for “skilled workers” and a third level for low-skilled workers in industries with a labour shortage.
Madeleine Sumption, director of the Migration Observatory, says the plans would represent a “slight liberalisation” for non-EU workers. But it would likely “significantly reduce EU migration” as applicants move from a “very liberal system” to one with more restrictions, bureaucracy and costs.
“It is a pretty mainstream system by international standards,” she says. “The Australian system doesn’t guarantee any numbers. A points system is just a way of prioritising applications and you can do that in a very liberal way, like Australia does, or it could be done in a more restrictive way.”
The UK already has a similar method for choosing migrants from outside the EU while Canada and New Zealand also use the system. But these are flexible systems and the devil will be in the detail, of which there is very little thus far.
With unemployment at its lowest level for 45 years and skills gaps widening, the issue of immigration has raced up the list of priorities for skills-starved industries, such as construction, IT and hospitality. They worry that this lurch away from freedom of movement will be steered by politics rather than the needs of business.
The UK is moving from a market-driven system dictated by the forces of supply and demand (at least within Europe) to one where bureaucrats in Whitehall would likely decide how many overseas workers businesses will need.
Prof Jonathan Portes, a senior fellow at think tank The UK in a Changing Europe, warns that such a system would be “a big expansion of state control over the economy”.
Portes, who was chief economist at the Department for Work and Pensions and the Cabinet Office, says: “Putting someone like me or my successor in charge of saying ‘how many abattoir workers or skilled machinists the country might need next year, let’s let that many in’, that’s not, in my view, a very good way of running the economy.”
Demand for workers in the construction industry, for example, is highly volatile, making it difficult to predict in advance the number of workers needed. The industry is heavily reliant on EU workers, particularly in cities.
Portes adds that the public debate wrongly assumes that workers are split between low-skilled and high-skilled, the likes of fruit pickers and doctors. Whether they are British or immigrants, the majority fall in between the two extremes.
“Most people do jobs that are not skilled enough necessarily to able to come in through a strict skilled migration system but equally do require some training, some qualification and some knowledge,” he says.
Construction is just one industry that leans heavily on the flow of workers from the EU. Around a third of workers on production lines to process goods like food and drink are from the EU, data from the Office for National Statistics indicates. Some 36pc account for jobs to pack products while 21pc make up those working in warehouses.
Douglas McWilliams, chief executive of the Centre for Economics and Business Reform, warns replacing this flow of workers could also push up prices.
“We’re going to have to get people doing these jobs and the prices of these things will go up, because we’re going to have to pay quite decent wages to get the Brits to go and do these jobs - and we won’t necessarily get the very best people in the world to go and do them,” he says.
“We’ll probably end up with more old people working, because they tend to have more of a work ethic and a willingness to go to work than younger people.”
Rather than letting market forces decide, the prime minister risks making his immigration policy too reactionary and thus too slow to adapt for our economy.
Sumption says that the fine print expected to be announced next year will have “a big impact". Details on whether there will be salary thresholds or whether a worker will be tied to an employer could be key for businesses, for example.
Johnson could be playing a delicate balancing act over immigration ahead of the election to lure in voters. But many British businesses fear they will soon be hostage to the whims of Whitehall.