Brexit and the Labour Market (Economic Affairs Committee Report)

Lord Darling of Roulanish Excerpts

Thursday 8th February 2018 Lords Chamber

[Lord Darling of Roulanish (Lab)]

My Lords, I will not follow the noble Lord, Lord Horam, too far down the road of immigration. I too believe that immigration needs to be controlled, but we also need to look at the benefits that can come from it. To put it another way, if he is concerned about quality of life, as we all are, he should take a good look at a country like Japan which does not have much in the way of immigration and is now facing the serious problem of an ageing population without the workforce to support it. These things can cut in a number of ways.

I should draw the attention of the House to my entry in the Register of Lords’ Interests, in particular that I am a director of Morgan Stanley New York, which is of some relevance to this debate. I do not want to dwell too much on the wholly inadequate nature of the statistics with which we are faced because they were dealt with in detail by the noble Lords, Lord Forsyth and Lord Turnbull. Suffice it to say that if the Government have as their central policy on immigration the reduction of net migration but they do not know the figures on which it is based, then the policy does not add up to very much. We all know that the policy has not been met, and if George Osborne is right, no one in all the Cabinets that he served in prior to moving on to other things believed that it was realistic either. What was obvious from the evidence we heard is that we simply do not know with any degree of accuracy the number of people coming in or going out. That is extraordinary, given that most of us who travel in and out of the country are well used to producing our passports. Someone, usually an airline, knows when you left, and the Immigration Service certainly knows when you come back. It cannot be beyond the wit of this country to try to marry the two up in order to get an accurate picture of who has gone and who is coming back. That is particularly important if we really do want to measure what the net migration figure is.

I want to concentrate on the section of our report that calls on the Government to consult with business and to develop a strategy for what the labour market needs of this country will be post Brexit. That simply has not yet been done and the clock is ticking away quickly. What was obvious to us, as it is to anyone who looks at this subject, is that a number of people, particularly from the European Union, work in this country, contribute and pay their taxes. However, it is not only those with degree-level skills in higher-paid jobs that we should be concerned about because at the present time an awful lot of jobs requiring lower levels of skills are being done by EU nationals. Indeed, the evidence we had is that many of those people would simply not qualify under the non-EU scheme that this country currently operates if they were to apply to come to work here. For example, looking at skill levels, the figures we got show that some 32% of EU nationals are working in lower to middle skills and 24% are working in jobs that would be described as low skilled.

When the Government develop their strategy they have to ask themselves: what does industry need across the piece? If we end up in a situation where after March next year many of these workers cannot come here or they choose to go back—an awful lot of them do go back for perfectly understandable reasons—and are not replaced, many of our industries could find themselves very exposed. It is not just agriculture, manufacturing and the academic world; all these areas depend to a substantial extent on having an adequate supply of labour from not just this country, but the EU. Dare I say it, having people come from different countries with different backgrounds and skills sometimes enriches the workforce. It adds quite a lot to it because we learn from each other.

That is why our recommendation that the Government should consult with business to ask what the skills requirements are is paramount. We simply cannot introduce the system that currently applies to non-EU nationals, where there are skill-level requirements and quotas, for two reasons. Partly, I do not think the Home Office could cope with it. It has struggled under successive Governments and over many years to try to operate schemes like this. All of us who have had experience of dealing with them will know that you sometimes get some extraordinary decisions that are very difficult to understand.

The second thing is that I find quite extraordinary the idea, particularly coming from a Conservative Government, that the state knows how many people we require, what level of skills are required and that it can adjudicate as and when business requirements change. Maybe I am being too new Labour here, but I do not think that that is the job of the state and I do not think it can do that. If that really is what is being proposed—I certainly read in the newspaper today, and I presume it is not fake news, that one of the things that was discussed by the Cabinet sub-committee yesterday was simply to transpose the non-EU regime and make it universal for people coming into this country—I can see all sorts of difficulties. Our economy is growing, but, as we all know, it could be growing an awful lot faster. My belief is that it if we removed the threat of Brexit it would grow significantly faster. This is the last time at which we should be introducing uncertainty for manufacturers, farmers or whatever field as to who they will likely be able to employ in future.

This part of our report is one that the Government need to pay heed to given the cross-party nature of the Economic Affairs Committee and the different views on Brexit in that committee. The Government should draw from that the strong feeling that there needs to be a policy that is coherent and meets the skill requirements of people in this country.

I will say two things in conclusion. First, I want to see as many people in this country as possible employed in whatever their chosen field is. The Economic Affairs Committee is currently engaged in a study of the adequacy of our higher education, further education and apprenticeships. Without pre-empting our findings, it is blindingly obvious to us so far that we have a long way to go, particularly for those people with lower and intermediate skills to get into the labour market. The idea that they can simply step into the gap that will be left by departing EU workers is fanciful.

Secondly, we must remember that this cuts both ways. There are about 1 million UK citizens in the rest of Europe, many of whom are working there. It would be very unfortunate if we got into a situation where we said that only people in Britain can work in Britain and only the French can work in France. That is simply unacceptable on so many different levels.

I hope that the Government will pay heed to that. I hope that they will recognise the need for us to improve the way we gather statistics, especially when immigration is such a contentious and sometimes poisonous issue in our politics. We need to have a basis on the facts, which are there to be found if we only have the will to do so. I hope that the Government will take this report seriously and add some clarity to a policy that at present looks anything but clear.

Budget Statement

Lord Darling of Roulanish Excerpts

Monday 4th December 2017 Lords Chamber

[Lord Darling of Roulanish (Lab)]

My Lords, it is a pleasure to follow the noble Lord. I agree with everything that he said in terms of his last point on the problems that all Governments face with large corporations. I also have some sympathy with what he said about forecasts and Budgets. I presented no fewer than six separate forecasts in my time, during a rather turbulent period, so I understood what he was saying. Before I turn to the Budget, I draw the House’s attention to my entry in the Register of Lords’ Interests in that I chair the Standard Life Foundation and am a director of Morgan Stanley.

Regarding the Budget, on any view the forecasts tell us one thing: that 10 years after the financial crash, our economy has still not returned—or showing any sign of returning—to the growth levels that endured in the preceding years if not decades. That ought to worry us. Whether or not the figures are precisely right, and they probably are not, they give us a fairly strong view of what is happening in the economy—which is that the economic prospects that we thought by now would have been getting a lot better appear to be stagnating, at best, if not deteriorating. Of course, that has implications for us all.

I note simply in passing that it seems a long time ago that I was told that my assumption that you could halve the deficit between 2010 and 2015 was dangerous thinking. Here we are now, where the whole target has slipped back. As I understand it now, we are expecting to balance the books on the never-never—it is just slipping into the distance. There is a problem in that our economy seems to be stagnating, and I think it is absolute fantasy to believe that if only we were free of the European Union at the earliest opportunity, somehow things would get better. Indeed, I would argue that, at the very time when the economy has been limping along, the last possible thing we need is the biggest disruption to our economic prospects since the Second World War.

I want to say a word about infrastructure. Like everybody else, I welcome what the Chancellor said on housing. However, none of this will resolve the fundamental problem, which is that not enough housing is being built. It used to be a badge of honour of successive Governments, Conservative and Labour, after the Second World War, to say how many houses they had built in the preceding five years. Housing policies, rather like industrial policies, went out of fashion in the 1970s and 1980s. Unless and until we resolve the problems in relation to planning permission, the problem will subsist.

My noble friend Lord Tunnicliffe referred to today’s Joseph Rowntree report. One thing that it identified that is causing an increase in poverty is rising rent levels. Fundamentally, that is a problem of a lack of supply. This is not just a London problem: it is a problem in most towns and cities throughout the whole of the United Kingdom. Unless the Government accept that and find a way to speed up the planning process and remove some of the logjams, the problem will simply subsist.

I will say a word, too, about the railways. Yes, it is welcome that the investment in railways is largely being sustained. When we started doing that in the late 1990s it led to the huge increase in the number of passengers using our railways. Last week, however, we saw something that is an issue of good governance. The Government appeared to announce the prospect of reopening a whole bunch of lines closed by Beeching in the 1960s. Actually, I doubt whether we will see any one of them opened in our lifetimes. But buried in the small print of the same announcement was the fact that Virgin Trains East Coast was being allowed to hand back the keys to its franchise three years early because it was finding the going a bit tough.

There is a pattern here. Railway companies are signing up for franchises and making all sorts of assumptions but when it gets difficult, they hand the keys back. If the Government take them back without penalty we will simply see more of this. For four years I tried to make the hybrid system that we have on the railways work. I found at times that it was difficult. Bringing the two, track and train, together is essential, but it was very ad hoc. I am not sure that we have not reached a time when this model is broken and needs to be looked at again. However, we certainly cannot have a situation where all the risk lies with the taxpayer and any profit goes to the individual operator. Noble Lords will know that I am probably not the most ardent Corbynista in my party, but there is a real problem here that we need to address.

I welcome the industrial strategy. However, we are very good in this country at producing industrial strategies—what we have to master is implementing them. This one is welcome. It has lots of the stuff that my noble friend Lord Mandelson published nearly 10 years ago, and I think the coalition Government did too, but we need to do more. Some would argue, and I would argue, that perhaps the best industrial strategy to help our industry and our country would be to avoid the worst effects of Brexit. The second-best strategy would be to have a strategy as to what we want in these Brexit talks, because I cannot see that the Government actually know where they want to go. They talk about transitions but you can transition only if you are going from A to B. If you do not know where you are going, it is little more than a standstill agreement.

Even as we debate this afternoon, discussions are going on over lunch in Brussels. It must be some lunch because I understand that it is still going on. But if it is true that the Government are contemplating saying that Northern Ireland will be in the customs union and the single market in all but name, you begin to ask: why on earth are we getting into this mess in the first place? If we are really saying, “Don’t worry: nothing is going to change in Northern Ireland and the border won’t really exist”, why should not other parts of the United Kingdom get exactly the same treatment? How will it operate in practical terms if someone sends a good from Liverpool to Belfast and it then crosses the border? Obviously, in Liverpool, too, there will be no divergence in terms of construction regulations and so forth. It seems a very odd way of going about things. If it is true, it blows apart the entire argument for Brexit. If we are saying, “Actually, we’re leaving but nothing is going to change except that the European Union will make the rules and we will have no say in what they do”, it seems absolute nonsense.

We will presumably see by the end of lunch and the beginning of dinner where we get to on all of this, but if it is true, the Government need to think long and hard about the implications, as they do about what transition actually means. By the way, I welcome that it now seems to be common ground that we will have a transition agreement if for no other reason than that we have run out of time—which is a warning of where we are and are likely to be in the future.

The last thing I want to touch on—there is no time to develop this theme but we will return to it again and again, and it has been adverted to by previous speakers—is the growing problem of income inequality in this country and the problems between the generations that are now building up. The Joseph Rowntree Foundation report is well worth reading. It is not just about rents. Another issue that it raises is that getting people into work cannot now be assumed to be sufficient in itself to get people out of poverty. The whole question of financial well-being is one reason why I referred to the Standard Life Foundation, which is about to commission research into that issue. We need to look at this because it is a very real problem. Every time we look at Brexit and other such events, people say that this issue must be addressed, but we do not get round to doing so. It is a real problem and one that we cannot afford to ignore.