Immigration Skills Charge Regulations 2017

Baroness Hamwee Excerpts

Tuesday 21st March 2017 Grand Committee

[Lord Lucas (Con)]

My Lords, I welcome these regulations. They are well targeted, have a good concept, good execution, with a sensible set of exemptions and remission for small businesses. I am disappointed that they do not extend to hospitality and construction, both areas where we have a substantial tendency for employers to bring in people from overseas rather than concentrate on training our own people. However, I entirely understand, given that most of that migration is from the EU, why we do not wish to complicate our Brexit negotiations by trying this on the continent just yet. However, when you talk to hospitality employers, they say, “We have to employ these overseas people because the Brits just don’t know how to treat customers”. I say let us bring back the British Airways charm school, which is what I grew up with. We can do this; we just need to train people properly. I do not think that we should accept the excuses of our hospitality industry. We should apply this principle to it to get it to bring our own people up to speed.

However, within the industries this measure is aimed at, it is an excellent idea. It is largely, I think, aimed in practice at IT and industries round that. I would be very grateful if the Minister or his colleagues would agree to meet me and representatives of the tech industry to discuss how to craft training which will meet the needs of employers who are hit by this levy so that the incentive which is provided by it can be directed at the provision of training which will ensure that the objectives of the levy are realised.

[Baroness Hamwee (LD)]

We are all being so polite. Perhaps we have learned from the charm school with which the noble Lord, Lord Lucas, grew up. We, of course, support investment in skills and training but it is appropriate to put these proposals in the context of the very tight brief which the MAC, as always, was given. It was required to advise on,

“significantly reducing the level of economic migration from outside the EU”,

taking into account the impact on the economy, including on productivity and competitiveness, and was asked to consider five issues, of which a skills levy was one. As the Minister said, at the time of the review the Government had already signalled an intent to introduce the charge. It is fair to acknowledge the MAC endorsement of the proposal. It said in its review:

“We consider that the imposition of an ISC will serve to incentivise employers to reduce their reliance on employing migrant workers and to invest in training and upskilling UK workers”.


But I also observe that, certainly in the health sector, that gives the term “incentivise” a rather new meaning. The Explanatory Memorandum refers to a collapse in training. Will the Minister tell the Committee whether the Government have analysed why that has been the case?

The letter from the Minister, Robert Halfon, to the Secondary Legislation Scrutiny Committee confirms that this is a tax. We know that the Treasury hates hypothecation, but given its rationale it seems to us that those who are paying it must be able to see how it is used and, more than that, be involved in decisions about the application of the funds, because they know what normally works best in their own sectors. There must be a lot of sector-specific experience which should be tapped, as well as this being in the interest of transparency.

The Institute of Directors recognised that “penalising employers” who need to look to the “global talent pool” is,

“not the answer to gaining more home-grown talent”.

To balance that, PwC said:

“The levy will not impact the way that companies recruit as they require the skills they require”.


It raised the spectre of, in the long term,

“parts of businesses moving overseas, if mounting costs become prohibitive and companies risk damaging their brands by providing substandard products or services”.

I recall that during the passage of the Bill an argument used against this, partly in the higher education sector, was that some industries will pay the charge but would not see any benefits because their sectors are not apprenticeship-appropriate. That applied in particular to the health sector. I will leave it to my noble friend Lady Walmsley to deal in detail with the health sector. I know that I will support everything that she says.

During the passage of the Bill we also expressed concern about the costs of the bureaucracy of this exercise. Given the investment that the sectors in question already make in training, there seemed to be a danger of a charge being levied, having administration costs deducted and the balance then returned to them. I have been assured that the deduction will be small because the Home Office visa system will be used, but there will be a deduction. We can add to that the unquantified cost of the loading on to the Home Office, which is overloaded. It probably feels that the light at the end of the tunnel is that ever-present oncoming train.

The MAC also said that,

“it is impossible to conclude, ex ante, whether the benefit arising to employers … will outweigh the costs imposed on Tier 2 sponsors”,

because the Government have not yet determined how the revenue will be reinvested. That is clearly a significant point. It is clear that the health sector has come to a conclusion, and it is not the positive conclusion that the Government want to see. Robert Halfon, in his letter to the Secondary Legislation Scrutiny Committee, said:

“The cost to the healthcare sector and to the NHS in particular has not been estimated”.


That is quite an astonishing statement.

One other area is that of intercompany transfers. The Minister has referred to the exemption in the regulations, but the exemption is limited to trainees. Why is it so limited? Is it simply because they are trainees? That fits in with the thrust of the proposals. I ask that question and make the implied point because we need to do all that we can to attract, retain and not deter international companies basing themselves in the UK. I do not think that I need to fill in the gaps between the lines there.

There are steps that the Government can take after taking through these regulations, particularly by way of exemptions and by working with different sectors, which would make them more palatable to those who find them unpalatable, and more effective, and might help to avoid unintended consequences, as these charges are clearly going to be significant for some sectors.

[Baroness Walmsley (LD)]

My Lords, as my noble friend Lady Hamwee said, I would like to say a few words about health and social care. Report after report shows the dire financial straits in which NHS employers find themselves, with 75% of hospitals already in deficit and A&E departments struggling to meet the four-hour target for attending to patients. There is a shortage of nurses, and retention is terrible. Doctors’ rosters are not filled, resulting in cancelled patient treatments, which puts a greater burden on existing staff, who are acting as the shock absorber for the system. GP practices cannot fill vacancies. Care homes providers are handing back local authority contracts because they cannot provide a decent service within the amount of fees that they are paid. The number of care beds is falling while demand is rising, and 1.2 million elderly and disabled people are not receiving the care that they need.

It is in this climate that the Government have decided to tax health and care employers for every worker from outside the EEA who is on a tier 2 visa. You could not make it up. On top of this, they choose to do it at a time when they have removed the nurse training bursary and have no idea of the effect that it will have on the number of nurses in training. It is no wonder that the BMA and the RCN have written to the Home Secretary, laying out the damaging effects of the charge on health and care. The Government may not have calculated how much it is going to cost them, but they have—it is £7.2 million per year, which will deter cash-strapped employers from filling rosters with essential staff, thereby putting patients at risk. I ask myself why the Government could not make those calculations. Perhaps it is because it is so politically embarrassing.

It is little wonder that the Secondary Legislation Scrutiny Committee had serious concerns about the measure, with particular regard to the fact that the memorandum laid with the instrument said nothing about the opposition to the measure voiced by those who were consulted. It was also provided with no information about the impact of the measure, particularly on health and care employers, who are the sector fourth-most affected by the charge. It is no wonder that it was not provided with that information since, in reply to its questions, as my noble friend has just said, Robert Halfon MP confessed that the cost of the charge to the NHS has not been estimated because it is classified as a tax. His letter also shows complete ignorance of the nature of the modern nursing workforce, saying:

“There is no direct impact on employers of care workers as they do not qualify for entry to the UK under the Tier 2 route. Tier 2 has been reserved for graduate occupations since 2011”.


Yes, nursing has been a graduate occupation for a similar length of time. Does the Minister think that care employers do not employ graduate nurses any longer?

The ISC was intended to deter employers recruiting from abroad, but health and care employers have no option, and they have no need for this. As the BMA letter says:

“Checks and balances are already in place to ensure posts are first offered to UK and EU nationals through the resident labour market test”.


Although we are going to introduce apprentice nurses later this year, doctors undergo long and rigorous training, and it is impossible to upskill UK citizens overnight.