Written evidence submitted by Professor Jonathan Portes (PBM0002)

Immigration after Brexit

The issues with respect to a new post-Brexit immigration system are discussed in detail in Portes (2016).  However, I thought it might be helpful to the Committee if I briefly set out some key, policy-relevant points. My accompanying note discusses the economic evidence on the impact of immigration to the UK.

First, it is important to debunk two popular misconceptions that are relevant to any serious discussion of the post-Brexit system. I then outline some of the key issues which will need to be decided.

"Ending free movement means we’ll be able to have 'only the [high-skilled] immigrants we want/need'”

It is often claimed that if the UK could impose restrictions on migration from the EU, the impact would be to reduce migration for unskilled and/or low paid work, while having no impact on skilled migration; possibly even allowing an increase.  This ignores the nature both of migration systems and outcomes.  In particular, it is flawed here, for three reasons:

• It is often claimed that the majority of EU migrants (or of migrants overall) work in “low-skilled” or low-paid jobs; for example, Lord Green (Migration Watch) stated, falsely, that “80% of EU workers who have arrived in the last ten years are in low-skilled, low-paid jobs.  In fact, as ONS data shows, it is only about 1 in 4.  Most migrants, like most Brits, are in “medium-skilled” jobs;

• No system can select perfectly, or even close to it. The view that we can devise an immigration system that allows in those, and only those ‘immigrants that have the skills we need’ assumes that the government – in practice, civil servants and economists in Whitehall – can specify the skills and occupations the UK labour market needs, more or less in real time.  As a former senior civil servant, government economist and labour market specialist, I am confident that this is not a realistic aspiration.

• it also ignores the fact that migration is not just a matter of the UK choosing migrants; migrants have to choose us. Even if we wish to remain open to skilled migrants from elsewhere in the EU post-Brexit, they may not choose to come here (or remain here).  Almost any system will increase in bureaucracy and reduce the rights of those who come; including those of their spouses to work and study, of their children to citizenship, access to the NHS and so on.  And beyond this are the wider psychological and attitudinal consequences of Brexit.

Developments since the Brexit vote have already – even in the absence of any legal or policy changes to free movement rules – illustrated all of these points.  

“Ending free movement will enable to take back control of our borders”

Immigration control (of EEA nationals) does not (mostly) mean border control. It does not seem likely that we would restrict EEA nationals’ right to enter the UK without a visa. A fully fledged visa regime for EEA nationals would be hugely disruptive to trade, travel and tourism - even leaving aside the obvious point that this would mean UK nationals would require visas to travel to continental Europe. And it would mean that they were treated worse than, for example, Americans or Australians, who do not need a visa to enter the UK.

So EEA nationals (like UK nationals) already have their passports checked at entry and this will continue; equally, they are only denied entry in rare circumstances; these may be somewhat less rare in future, but will still apply only to a very small minority of travellers.  So talking about ‘border controls’ for EEA nationals or reintroducing ‘controls’ over ‘who enters the country’ misses the point almost entirely, at least as regards the vast majority of visitors and migrants.

This means that control over how many and which EEA nationals are allowed to work (and study, retire etc) in the UK will not, in practice, be applied at the border in the vast majority of cases. As with other non-visa nationals, like Americans or Australians, it will be applied in the workplace; employers will have to verify that EEA nationals are entitled to work in the UK, just as they currently do for non-EEA nationals. 

Similarly, of course, landlords, banks, public services and so on will have to apply the same controls for EEA nationals that they currently are obliged to apply to UK nationals. However, this may be (even) more complex since there will be numerous different categories of EEA nationals after Brexit: those with settled status, those with temporary status, those entering with some form of work permit post-Brexit, those entering after Brexit under the citizens’ rights agreement (for example, as family members); and those with no special status at all (and this list is almost certainly incomplete). It is notable that while some large employers and organisations like universities are accustomed to dealing with the immigration system for non-EEA nationals, there are many employers, particularly SMEs, who employ only UK and EEA nationals. They are likely to find this new set of obligations particularly burdensome.

Key issues

The government has accepted that free movement will continue during the “transition” period (actually, to all intents and purposes, better described as a “standstill” period).  It intends to introduce a registration system for EU nationals arriving after March 2019; registration systems are (under certain conditions) legal under current EU law governing free movement, and so the EU may allow this. Moreover, it has now agreed that those arriving during the transition period will be entitled (as those arriving before Brexit Day will be) to continue to reside after the end of the transition (and eventually to acquire residence rights). 

We therefore now have a fair degree of clarity that very little will change before 2021.  But policy is much less advanced on the system that will apply on “full Brexit”, that is after the end of the transition period.   The government initially promised a White Paper in the summer/autumn of 2017; this has now been postponed to the end of 2018. Meanwhile, the government has given an extensive and far-reaching commission to the Migration Advisory Committee, an independent advisory body on the economics of immigration to the UK; this will report in autumn 2018, and it does not seem likely any major decisions will be taken before then.

The default assumption remains that the post-Brexit system will be a variant of the current system that applies to non-EEA nationals: that is, “work permits” (“certificates of sponsorship”) under the Tier 1 and Tier 2 system.  This would be quite different from the registration system for pre-2021 EEA nationals. In other words, EEA nationals after “full Brexit” would be subject solely to UK immigration law, not to the current free movement regime or any variant of it.  However, this leaves several key questions unresolved:

• Will the new system retain any element of “European preference”? Vote Leave proposed that the new system should treat EEA citizens identically to non-EEA citizens; however, the government is at least considering the option of more liberal rules (relating to salary thresholds, shortage occupations, etc) for EEA nationals.  There are reasonable arguments on both sides.  On the one hand, if we determining work-related migration on the basis of certain individual-level criteria, it is not clear why nationality should be relevant.  However, there are clearly complementarities between trade (especially trade in services) and immigration, and it may be beneficial to have a less restrictive approach for EEA nationals, given the strong links that already exist.

• Will there be sector-specific schemes? Promises have been made to sectors ranging from agriculture to financial services that they will not lose access to EEA nationals. However, sector-based schemes add an extra layer of complication and are obviously susceptible to lobbying and gaming.  It is likely to be far more difficult to define the boundaries or to police a scheme for financial services or for construction than for agriculture. At the moment it seems likely that there will be a sector-based scheme for agriculture, but it is unclear whether there will be any other sectoral preferences;

• Will EEA national students be subject to the same Tier 4 visa rules as non-EEA nationals? This is likely to depend on discussions with the EU27 on cooperation in education, student mobility and research post-Brexit.

• Will there be any regional or geographical variation in the system?  There is clearly an economic case for this: if a specific set of individual criteria (salary, occupation, etc) are “right”, that is economically optimal, for one area of the country (relative to labour demand, wage rates, skill levels, etc) they will be wrong for others.  And it is clearly administratively feasible to differentiate, since work permits are tied to an employer and could be tied to a specific workplace/location. But it would add another layer of complexity.

• The place of caps or quotas within the system: as the recent fiasco over the Tier 2 visa cap illustrates, quotas for skilled workers are generally either irrelevant (f the quota is not filled) or require the UK to reject workers who both meet the necessary qualification/salary criteria and have a job offer (so, by definition, are needed and wanted). 

All these choices involve tradeoffs (except for the last one; there is no downside at all in ditching the Tier 2 cap): at present, we have little or no idea how the government intends to approach them.

The target

More broadly, there remains an overarching question about just how liberal or restrictive the system is post-Brexit.  The climate of opinion both within government and the country has clearly shifted, particularly since the general election, as immigration has fallen, and the consequences for business and key sectors (including the NHS) of reduced access to EEA workers has been publicised. It is notable that both this Home Secretary and the previous one only refers to the government’s objective of reducing net migration to the “tens of thousands” when asked a direct question, and the commissioning letter to the MAC ignored it. The new Home Secretary has already announced a number of welcome liberalising measures, including the loosening of the Tier 2 cap.

My view remains that quantitative targets and caps, either for net migration overall (as with the government’s target) or for highly skilled workers (as with the cap on Tier 2 visas) have no place in a sensible immigration policy.  If borders are to be neither fully open nor fully closed, some criteria are necessary for economic migration. But having set the criteria – so that we have defined the people we want to allow to move here for work purposes -  there is no need for a quantitative limit. This is analogous to trade – trade economists much prefer tariffs to quotas in general, and we certainly don’t like having both. 

By definition, a cap will either be non-binding, and hence irrelevant; or it will mean that we exclude people who we want to come here.  The current issues with specialist doctors being denied entry because of the Tier 2 visa cap are not the result of incompetence or malice by Home Office officials; they are an integral part of the system. That is how it is supposed to work; it is the logical result of a system which assumes that the UK labour market and population can be centrally planned from Whitehall.

Free movement and the Single Market

Finally, the analysis above assumes that the current government/broad Brexit policy framework remains in place, and in particular the decision to leave the Single Market.  If this changes, then some significantly different options might become feasible, including an extension of free movement in something much like its current form. As I explained in a recent paper, the UK could seek to modify the operation of free movement of persons in ways that might allow it to remain in the Single Market. 

I concluded that such modifications are both practical and feasible, and could be designed in such a way as to preserve the principle that EEA citizens could move to the UK to look for and take up work, while giving the UK public greater assurance that migration from the rest of the EEA was monitored and, where appropriate, controlled.  In particular, the introduction of a “Swiss-style” system of temporary and targeted regional and/or occupation specific controls might well be feasible. This would not be an “emergency brake”, as originally proposed by David Cameron and more recently by Nick Clegg. It would, however, enable a targeted, temporary and proportionate response to migration pressures.

However, there would however be significant challenges: the EU would have to accept some “bespoke” modifications to the legal framework to accommodate the UK. And the UK would have to implement major administrative changes.  There would be inevitable tradeoffs between increased burdens on business and individuals and the degree of extra “control” afforded by such system. Perhaps most importantly, the negotiability of such changes would depend on the political context and on political will both here and in the EU27.  But it should not be concluded ex ante that they are impossible.

Jonathan Portes

Professor of Economics and Public Policy, King’s College London

June 2018