“Early indications are that the imposition of an interim limit on non-EU economic migration is already causing businesses significant recruitment problems.”
London mayor Boris Johnson, in a letter to Home Secretary Theresa May, 7 September 2010
Cathy Newman checks it out
The relationship between David Cameron and Boris Johnson is being compared in Whitehall circles with the years of rivalry between Tony Blair and Gordon Brown. The animosity doesn’t come close.
But it’s striking that the mayor of London appears to delight in setting himself against the prime minister. First Boris let it be known he’d had a bust-up with the government over the spending cuts planned in the capital.
Now, he’s told the home secretary in no uncertain terms just what he thinks of a cap on the number of immigrants coming from outside the EU. A letter he’s sent to Theresa May, and his response to a Home Office consultation, have been seen by the FactCheck team.
He argues that the policy will “put the economic recovery at risk”, and that a temporary limit on non-EU immigration is already hampering business. So is he right?
The claim
In his submission to the Home Office, the mayor doesn’t mince his words. He says the cap is “likely to have a significant negative and disproportionate impact on London” and “put the economic recovery at risk by creating skills gaps and placing London at a competitive disadvantage in the global competition for talent and inward investment”.
He says that the “economic harm” of limiting the influx of workers from outside the European Union (EU) “would be substantial given their vital contribution to UK economy, and disproportionately felt in London given their concentration in the capital”.
Calling for “a major rethink of government policy”, he says business is firmly on his side. Leading companies are “unanimous in their opposition and hostile to the proposal…they warn that the limit will damage small, medium and large businesses, prevent inward investment, talent and trade opportunities coming to London, and thereby materially damage London’s competitiveness”.
The evidence, the mayor says, is there for all to see. An interim cap is “already causing businesses significant recruitment problems”.
The analysis
The coalition government has imposed a temporary cap on the number of skilled and highly-skilled people coming to work in the UK from outside the EU. That figure – to prevent a rush of applications before a permanent limit is introduced in January – has been set at 24,100 between June 2010 and April 2011. The permanent cap aims to reduce net migration to below 100,000 by the next election.
The latest official figures, released in August, show a 20 per cent rise in net migration – the difference between people leaving the country and those arriving – last year. That’s up from 163,000 to 196,000 and includes people from the EU and outside the EU. This rise was largely because fewer Britons left home to settle abroad, and the number of foreign students arriving here rose by 35 per cent.
However, when you look at the number of non-EU workers, rather than students, coming here, the figures tell a different story. More people are leaving than arriving. The latest available yearly figures from the Office for National Statistics reveal that in 2008, 66,000 non-EU migrants arrived in this country, but 74,000 left.
Home Secretary
The government says it wants to get net migration back down to the levels of the 1990s – tens of thousands each year, not hundreds of thousands. But in a statement to the House of Commons in June, the Home Secretary, Theresa May, said the government was keen on attracting talented people to Britain.
“Of course, it is necessary to attract the world’s very best talent to come to the UK to drive strong economic growth, but unlimited migration has placed unacceptable pressure on public services and, worse, severely damaged public confidence in our immigration system,” she said.
Coalition tensions
There are tensions, though, within the Conservative-Liberal Democrat coalition government over the issue, with the Business Secretary, Vince Cable, telling the Financial Times in August: “It’s very clear from the figures that the increase in recorded immigration has nothing to do with the number of non-EU work permits issued; they actually declined.
“I’ve full confidence that my colleagues understand the need for immigration control measures that support business recovery and economic growth.”
Mr Cable was more explicit during a visit to India in July, when he said: “It’s no great secret that in my department and me personally, we want to see an open economy, and as liberal an immigration policy as it’s possible to have.”
The last thing the government wants to see is economic recovery compromised, but is it sowing the seeds that make this more likely? The mayor of London believes so, and says business shares his concerns.
What business thinks
Channel 4 News has been finding out what business thinks. A spokesman for the employers’ body, the Confederation of British Industry, told us: “We are comfortable with the idea of a cap, but there are considerations to bear in mind. It must be set at the right level.”
Other business organisations are much more critical. London First, which represents many of the capital’s leading companies, says in its submission to the consultation: “The current interim cap is discriminating against economically beneficial high-value-add immigration, even though this group accounted for less than 15 per cent of net immigration in 2009.
“It places an immediate disadvantage on UK based businesses as they seek to win international business, and in doing so need to deploy internationally sought-after talent… this is the worst of all times to constrain business in its ability to access the skilled global talent it needs to support this growth.”
It added: “Global businesses, including London First members, prevented by an artificial cap from meeting their need for skilled migrants to fill global positions or specialist knowledge and expertise that will never be available locally, will not recruit local workers with second rate skills.
” They will keep the roles vacant, impacting on their growth and the growth of their supply chain, and the economic benefit that the local service industry would have experienced. Alternatively, they will be more likely to off shore staff or consider relocating their offices out of the UK.”
Baroness Jo Valentine, chief executive of London First, told Channel 4 News the cap was “ludicrous”.
Skills shortages
The Chartered Institute of Personnel and Development (CIPD) is also worried. In August, it warned that the “abrupt introduction” of a cap on skilled workers from outside the EU would lead to skills shortages in Britain – and “tempt employers with global operations to offshore jobs, where they can find the skills”.
The CIPD said: “In the context of current migration measures that are working, the CIPD argues that the abrupt introduction of a cap on skilled migration from outside the EU would have damaging effects on organisations looking to hire in areas where there is a UK skills shortage, such as engineering.”
A joint CIPD/KPMG quarterly labour market survey, released in August, found that 45 per cent of the 600 employers contacted reported that they were having difficulties filling vacancies from within the indigenous labour market, with 21 per cent saying they were recruiting migrant workers for engineering jobs, and 18 per cent for IT and accountancy/finance positions.
A fifth intended to recruit migrant workers in the third quarter of 2010. In the previous three months, 21 per cent of employers recruited migrant workers, with 37 per cent of these people coming from outside the European Economic Area (EEA). More than half of migrant workers hired by the financial sector came from outside the EEA.
John Philpott, chief economic adviser to the CIPD, told Channel 4 News said a cap would damage the economy. “It would mean slower growth in the short and long run, higher inflation, which would mean higher interest rates, fewer people in work and unfilled vacancies,” he said.
Cathy Newman’s verdict
Some of David Cameron’s allies suspect the prime minister’s old Etonian associate of posturing for political advantage. However, there’s nothing to be gained at the ballot box from opposing tough measures on immigration.
So Boris Johnson’s decision to oppose the government’s flagship immigration policy won’t win him votes on the right. But in the capital city, where he earns his bread and butter, the cap on immigration makes no economic sense. His warnings about the dangers of limiting the numbers of skilled workers coming from outside the EU appear to be well-founded.
