Rt Hon Lord Lilley

    Date of Proceeding: 24.04.2008
    Reference: 474 c1561-3
    Member: Lilley, Peter
    Title: Points-Based Immigration System
    Description: It is a pleasure to follow the hon. Member for Hendon (Mr. Dismore), who speaks with great knowledge about Chinese restaurants. He mentioned in passing that one of the problems, as he saw it, was that the pay of people working in Chinese restaurants had gone up by 35 per cent. I can see that that may not be welcomed by the employers, but I am rather surprised that on the Labour Back Benches it is considered deplorable that people in Chinese restaurants are seeing their pay go up to a level better reflecting that of the rest of the economy.

    One distinctive feature of policy under the Government is that it is usually designed to create an impression, which is often very different from the effect that it is supposed to have on the reality. Nothing could better reflect that than the points-based system-the Australian-like points-based system to which the Government often refer-which is presented as though it will severely restrict immigration into this country. If that is its intention, could the Minister tell us his broad estimate of the effect that it will have on the level of net immigration into this country? Is that the Government’s intention? Is the policy in line with the arguments that they use to justify the large-scale immigration that we have had since 1997?

    The Government use two kinds of arguments to justify that mass immigration. The first set of arguments imply that the economic benefits resulting from immigration are proportionate to the number of people coming into the country to work. Their argument, for example, that it contributes to the gross domestic product implies that the more people who come, the more the contribution to the GDP. The argument that there is a net contribution to the budget of the country implies that the more people coming in, the greater the net benefit for the rest of us. The argument that immigrants will be paying for our pensions implies that the more who come, the higher our pensions will be. Clearly, the implication is that we should not restrict immigration and that we should, in the words of a Home Office document, encourage, sustain and increase the level of lawful immigration into this country. The implication is that there should be no case for using a points-based system, or any other, to reduce immigration. I shall come back shortly to those specific arguments and how they have been demolished by the House of Lords report.

    Another set of arguments implies that there is a finite need for immigration. I am thinking particularly of the argument that there are shortages of certain categories of employee. That is relevant and could, at least in theory, justify the Government’s proposals.

    However, initially I want to discuss the first set of arguments-that net immigration adds £6 billion to the gross domestic product every year. The way in which the Government normally present the issue is to say that immigrants contribute £6 billion to the economy every year. The implication is that, generously, immigrants are giving us £6 billion, from which the rest of us benefit. That is a very false impression, because the Government are giving the gross figure. They do not say to us that immigrants, as well as producing added value worth £6 billion, expect-quite reasonably, in my view-to be paid for their work. They are paid a value that in the national income statistics shows up as exactly equal, at £6 billion.

    According to how these things are calculated, those immigrants will consume, or remit to their home countries, exactly what they earn-£6 billion. So their net contribution to the economy is zero. Just like all of us, they put in what they get out. None of us gives things to other people for free; we expect to be paid for them. We do not make other people better off by making the economy a bit bigger by being here. Unless and until the Government are prepared to recognise that people are consumers as well as producers, they will not make much sense.

    Chris Huhne: Is the right hon. Gentleman not forgetting the element of profit in the income measure? That could stay within the UK and would be attributed to other people.

    Mr. Lilley: I would have thought that the hon. Gentleman was a good enough economist to know that value added equals income equals consumption. There is not some loss by profit; if the people are earning profits, that is an income and they will consume it.

    Chris Huhne: It is not an income to them.

    Mr. Lilley: Well, if they are not earning the profit, someone else is getting the profit from employing people, and they could employ other people instead.

    Chris Huhne indicated dissent.

    Mr. Lilley: If the hon. Gentleman is saying that a marginal element of the £6 billion is a net contribution that has somehow been given to us, let us cut the figure down to that small part of the £6 billion.

    The House of Lords Committee rightly demolished the argument that I mentioned-the fiscal contribution argument and the pensions argument. No one could do that more authoritatively than Lord Adair Turner, the Government’s own adviser on the subject. He submitted a paper to the Committee, as well as being a member of it.

    Keith Vaz: I had this exchange with the hon. Member for Ashford (Damian Green) earlier. The right hon. Gentleman is focusing on the House of Lords report. Has he seen today’s report from the Work Foundation, which says the opposite of what the House of Lords said?

    Mr. Lilley: No, I have not, but I will read it with great interest in due course. I doubt whether it is as authoritative or broadly based as the one produced by the House of Lords.

    The shortages argument is plausible. It implies that we want a fixed number of people, should work out who they are and let them in, and that will be fine. Several years ago, Tony Blair, while Prime Minister, said that there were 600,000 vacancies in this country and that we needed net immigration to fill them. Since then, we have had several million people come into this country, and we still have 600,000 vacancies. Why? Because immigrants are not just producers but consumers-they consume as much as they produce. The essence of the fallacy on which the Government rely is exactly the same as the “lump of labour” fallacy that the British National party relies on when it says that immigrants take British jobs, implying that there is a fixed amount of work to be done and a fixed number of jobs, and that immigrants take them and therefore render the domestic population unemployed. That is a fallacy, and the Government recognise that. However, by the same token it is a fallacy to assume that when
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    immigrants come into this country they will fill those jobs without creating an additional demand for more jobs, as all the evidence suggests that they have over time.

    Another fallacy behind the “shortage” argument to which I drew the Minister’s attention-in his agreeable way, he simply accepted it even though it entirely demolished his own argument-is that in a free and flexible market, where the value of each skill is allowed to reach its market-clearing level, there will not be a shortage, because the market-clearing level is by definition the level of pay, salary or remuneration that equates demand and supply with that level of skill. For a while, we held down the value of nurses’ pay below the market-clearing level, and we had to fill the resulting shortage from abroad. When we started paying nurses a more realistic amount-as I had long urged that we should-we found that we did not have any intrinsic shortage, and indeed had a surplus. However, that has not stopped us in the meantime importing 60,000 nurses from sub-Saharan Africa at a time when the Government’s official policy was not to recruit any nurses from Africa at all. If we maintain pay below the market-clearing level, we have to rely on sources of supply from outside on an ongoing basis, and at the same time we fail to give employers or employees the incentive to acquire those skills domestically. That is one of the powerful arguments that the House of Lords uses when it says that

    “there is a clear danger that immigration has some adverse impact on training…offered to British workers”.

    Let me focus on the essential feature of this points-based system. The Government present it as a system of control, so how will they actually use it? We already know that, because they have introduced a points-based system-the highly skilled migrant programme. That was an innovation, because up until that point someone could come to this country with a work permit only if they had an offer of a job. In 2002, the Government set the level of points that were required for someone to come to this country under that programme looking for a job. It so happened that they initially set the level of qualifications required to get sufficient points to be allowed in at a level that led to very few people applying. Did they say, “Oh, that’s fine-there aren’t many people with the qualifications that we think are necessary, so we’ll just accept that that is the small number who are going to come here?” No; in June 2004, they promptly reduced the number of points required and reduced the skill level needed-still calling it the highly skilled migrant programme-and a year later they had been totally swamped by the numbers coming in under that programme. We must therefore have no expectation that in practice the Government will use this as a method of control.

    Is there, therefore, no need for any immigration? No; there are certain categories of skill which by definition we do not have in this country and cannot simply acquire by offering a certain sum of money or making a certain training programme available. Above all, they are job-specific and firm-specific skills. A company such as IBM may have a specific accounting procedure, and when it is setting up a process here it will want to bring in its accountancy staff to set it up and train people to run it. After five or 10 years, they will probably go home again. Another firm, such as Nissan,
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    might be setting up a factory and has its own way of running it. Initially its people will be brought in to set it up, train the indigenous people, transfer those skills, and then return home. That was the primary source of work permits until 1997. They were issued to those with firm, specific skills to bring to this country. We will always need that flow, and it is usually a two-way one in the long run. The suggestion, however, that skills that British people have, could acquire more of and should be trained to acquire more of should be provided by importing cheap labour from abroad is a fallacy that underlies the Government’s programme, meaning that it will not be used to control immigration but to maintain an unacceptably and unnecessarily high level of mass immigration into this country.