Immigration Skills Charge (Amendment) Regulations 2022
(Limited Text - Ministerial Extracts only)
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Lord Murray of Blidworth
That the Grand Committee do consider the Immigration Skills Charge (Amendment) Regulations 2022.
The Parliamentary Under-Secretary of State, Home Office (Lord Murray of Blidworth) (Con)
My Lords, these regulations make some simple but important amendments to the Immigration Skills Charge Regulations 2017.
The immigration skills charge incentivises UK businesses to take a long-term view of investment and training in the domestic workforce. It serves to address historic under-investment in training and over-reliance on cheap migrant labour by UK employers. The charge is paid by employers who sponsor migrants on skilled worker visas or global business mobility visas as senior or specialist workers. The charge is paid when the employer issues a certificate of sponsorship. They pay £1,000 per migrant per year for large businesses, or a reduced fee of £364 for small businesses and charities. In the last fiscal year, the charge raised £349 million. This funding helps to maintain the UK’s skills budgets. As education and skills are devolved matters, a portion of the income is shared with each of the devolved nations. It is distributed using the formula devised by Lord Barnett.
While it remains important that the charge is applied to most employers utilising migrant labour, there are good reasons to make exceptions in specific circumstances. For example, workers are currently exempt if they enter the UK for under six months, because they are unlikely to be filling a skills shortage. These regulations will exempt two new cohorts from the charge.
Lord Coaker (Lab)
My Lords, I thank the Minister for his introduction to the regulations. I agree very much with the noble Lord, Lord Palmer, about the SI being interesting for what it does not say as much as for what it does say. I have a couple of brief questions for the Minister; I will make some longer remarks on the next SI.
The SI has been through the other place, so we accept it, but we have certain questions about it. Why have the Government come to the conclusion that these exemptions are needed? In line with the point from the noble Lord, Lord Palmer, about what the SI does not say, what are the Government’s plans, at the same time as bringing forward exemptions such as these, to ensure that there are excellent training and opportunities for our resident workforce? How does this SI fit with the stated, explicit intention of the Home Secretary and the Government to reduce levels of migration, something which we have contested?
As the noble Lord, Lord Palmer, mentioned, an impact assessment for the SI has not been published. The Minister gave some limited explanation, but I would like to know why not, and how will the impacts of the changes in this SI be monitored if an impact assessment is regarded as unnecessary or indeed if one appears in future? We have no idea where we are without impact assessments.
For example, these changes are designed to increase the number of skilled migrants in this area. How many skilled migrants have there been under the scheme so far? With no impact assessment, how can we know how successful this charging scheme has been since it was introduced in 2017? It is supposed to incentivise employers to invest in training and upskilling the resident workforce and reduce reliance on migrant workers. As the noble Lord, Lord Palmer, says, without the impact assessment, how do we know that the Government have achieved their own policy objective? The charge was introduced to discourage employers from seeking the skills they needed abroad. Whatever the rights and wrongs of that, that was the whole purpose. How do we know it has been successful?
What the Government have done is say that they need a couple of further exemptions to plug a skills gap that they have identified. The charge rate is £349 million a year. How is that money spent? From my reading, it appears that it just goes into an amorphous pot of money. How is that used to address the skills gap in the UK? There are skills shortages which we are seeking to plug through this skills exemption scheme, among other measures. Alongside that, there is the paradox that there are huge numbers of unskilled jobs which are unfilled. How will the Government deal with the apparent paradox of a skills shortage and yet millions of unfilled, unskilled jobs? Whatever the SI says, that is surely the policy gap and issue that the Government need to address.
Lord Murray of Blidworth (Con)
My Lords, I am grateful for the contributions from the noble Lords, Lord Palmer and Lord Coaker, and for the opportunity to address some of the questions I have been asked.
I start with the point from the noble Lord, Lord Coaker, on the effect of relaxing immigration controls—if I have paraphrased that part of his question correctly. I acknowledge his concerns that creating new exemptions to the immigration skills charge appears contrary to the objectives of reducing net migration and ensuring that employers prioritise investment in resident workers. These are targeted exemptions, however. The Prime Minister recently spoke of the need to promote innovation in the economy and we think it sensible to ensure that sustained-growth businesses benefit from some easement of the usual requirements of the immigration system. That is why we have introduced the scale-up visa and why a disapplication of this charge is part of that package.
Similarly, we wish to promote cross-border trade and inward investment from overseas, and the rules that apply to movements of intra-company transferees fall within the scope of trade negotiations. In the case of the EU, we reached a reciprocal agreement that such charges should not apply to intra-company movements, and UK businesses with a presence in the EU will benefit from the certainty that that agreement provides.
I will address the point raised by both the noble Lords, Lord Palmer and Lord Coaker, on the impact assessment. Clearly, the immigration skills charge is a tax and it is therefore not subject to a formal impact assessment process. The Government have considered this matter carefully and any impacts will be minor. The scale-up visa route is new and was never planned to be subject to the charge; as such, a waiver is in place and so its exemption will not contribute to any reduction in revenue.
The number of EU intra-company workers who will be exempted from the charge is expected to be about 2,000 annually. This will account for a reduction of income in the region of £3.3 million per year—less than 1% of the total annual income from the charge.
I turn to the question posed by the noble Lord, Lord Palmer, on the Explanatory Memorandum and its attestation on the European convention. Paragraph 5.1 reads,
“The Minister for Immigration, Tom Pursglove, has made the following statement regarding Human Rights: ‘In my view the provisions of the Immigration Skills Charge (Amendment) Regulations 2022 are compatible with the Convention rights.’”
I submit that he was the correct person to make the declaration at the time that it was made.
I turn to the question of reciprocal benefit with the European Union. It is understood that arrangements are being made in various parts of the EU, including France, where a €200 charge for British intra-company workers is being removed to comply with obligations under the agreement.
A general question asked by the noble Lord, Lord Coaker, was on how the money is spent on skills. The money is paid into the Consolidated Fund and then allocated to the devolved nations in accordance with the Barnett formula, as I said. The skills budget is well known to the noble Lord and is used, in that way, to alleviate any skills deficit.
The costs of collection was one issue touched on by the noble Lord, Lord Palmer. The Home Office publishes annual accounts setting out financial details, including the total costs for collection of the immigration skills charge and immigration civil penalties. For the financial year 2021-22, the cost associated with collection was £7.7 million. Details relating to what is included within the cost of collection are also contained in the annual accounts report. The costs include payment of handling charges associated with collecting the immigration skills charge, as well as the cost of staff involved in administering the charge and preparing the trust statement.
Lord Palmer of Childs Hill (LD)
Just to take up the points that the Minister kindly referred to, he said that this would not involve additional costs. Surely an impact assessment would have talked about how much take-up there would be. If the take-up is different, the costs will be different, because more people will seek the relief. Without empirical examples, we do not know.
The Minister said that the relevant Minister was correct when he said that this was compatible with the European convention. I would have thought this was a legal matter and should have had a report from the Attorney-General, rather than a Minister who was implicitly involved in it.
Lord Murray of Blidworth (Con)
I will deal first with the point about the impact assessment. As I say, as a matter of practice on taxes, the requirement to hold an impact assessment in the sense described by the noble Lord is not normally followed. However, as I say, the department closely scrutinised this question and came to the conclusions I already outlined.
On the obligation to the European Convention on Human Rights at paragraph 5 of the Explanatory Memorandum, Section 19 of the Human Rights Act requires a Minister presenting a piece of legislation to certify whether it is compatible. It is not normal practice that that attestation is signed by the Attorney-General. Plainly, all these matters are subject to legal advice, as the noble Lord would expect.