Immigration cap still doesn’t add up

Theresa May yesterday announced the introduction of a temporary cap on skilled immigration to the UK, a policy which the FT estimates will cost every UK household £300 a year in extra taxes or reduced spending.

Theresa May yesterday announced the introduction of a temporary cap on skilled immigration to the UK.  A fairly modest set of changes to Tiers 1 and 2 of the Points-Based System (which govern highly-skilled migration to the UK from outside the European Union) will reduce the number of visas issued in some categories with the aim of making sure that 2010 flows do not exceed 2009 levels.

Some important categories of Tiers 1 and 2 (e.g. international transfers within companies) will be excluded from this temporary cap. Temporary migration under the Points-Based System (e.g. students) is also excluded, as is all non-economic migration (e.g. family formation and asylum) and migration from the EU.

This is a stop-gap measure to prevent a ‘closing down sale’ effect ahead of the introduction of a permanent cap in April – presumably (no data has yet been released), visa applications have increased since the election of the Government as would-be migrants (and employers) seek to fast-track applications ahead of the cap. 

Ironically, had the Government not announced its intention to cap immigration, applications would, in all likelihood, have fallen faster than they now will under the temporary cap – almost all categories of immigration are currently declining (including through the Points-Based System). So, in sum, this temporary cap on immigration seems unlikely to have a significant impact on immigration flows.

However, the temporary cap is a prequel to a permanent (and possibly more comprehensive and/or drastic) cap on skilled immigration. The home secretary has reiterated the Government’s commitment to drastic reductions in net immigration ‘back to the levels of the 1990s – to tens of thousands rather than hundreds of thousands’.

In fact, a cap on skilled immigration risks failing on the Government’s own terms because so much immigration will be outside the scope of even the permanent cap. Of the roughly 500,000 people (British and non-British) who moved to the UK between October 2008 and September 2009, only just over 100,000 (including dependents) came through Tiers 1 and 2 of the Points-Based System.

Ippr analysis suggests that the Government could get net immigration to the UK under 100,000 by implementing policy changes planned by the last government and making some minor changes to policy. (The latest data show net immigration of just over 140,000 in the year to September 2009 and in fact, rapid declines in immigration may mean that net immigration is already below 100,000.)

But to get net immigration down to the levels of the early-mid 1990s (under 50,000 a year) would require drastic reductions in migration to the UK for work and study. Any cap that would deliver the Government’s overall ambition to reduce net immigration levels would mean putting very severe limits on the ability of employers to recruit highly-skilled staff from outside the EU.

Any cap of this sort could damage the UK’s fragile economic recovery, and also put more strain on the public finances.  Even the declines in immigration that have already been seen have led the Office of Budget Responsibility to revise its predictions of future growth downwards, and the Financial Times has estimated that the Government’s immigration policy will cost every UK household £300 a year in extra taxes or reduced spending.

The Government have created a rod for their own backs with their immigration cap policy – the 12-week consultation launched today can be expected to generate significant resistance from business and parts of the public sector.

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