Migration Statistics

Debate between Bernard Jenkin and Mark Reckless

Thursday 26th June 2014 Westminster Hall

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

Thank you, Mr Walker, for the opportunity to present to the House the Select Committee on Public Administration’s report of the 2013-14 Session on migration statistics. It has proved one of the most controversial that we have produced during this Parliament.

Migration statistics are of supreme importance to public policy and the debate about immigration in this country. National and local government depend on those estimates in planning public services. For reasons of security, we need to know not only how many people are arriving in and leaving the UK, but who they are. Migration statistics help us understand what is happening in British society and the British economy.

Accurate and reliable migration statistics are also important for public trust. How can the public trust politicians’ promises on immigration if we do not have reliable numbers on which to base our policies? One reason why the debate on immigration has become so toxic is that people no longer believe they are being told the truth; they do not even believe that Governments understand what is happening to their own country.

We conducted our inquiry last year and came to a conclusion that everybody in the know about immigration has understood for years, but been loth to say too clearly for fear of the consequences: the immigration statistics produced by the Office for National Statistics and the Home Office are but blunt instruments for measuring, managing and understanding migration to and from the UK, and they are not fit for purpose.

The current sources of migration statistics were established when migration levels were much lower than they are today. Those sources are not adequate for understanding the scale and complexity of modern migration flows, despite attempts in recent years to improve their accuracy and usefulness. Most people are astonished when they learn how the inadequate estimates that we do have are compiled. When a person checks in or out of the country, their passport is scanned, but they are not counted in or out of the country, even if they are a foreign national. The headline immigration, emigration and net migration numbers are annual estimates based on interviews of about 800,000 people stopped at random at ports and airports each year—a tiny fraction of the overall flow of passengers and people in and out of the UK. The method is called the international passenger survey.

The number of non-UK citizens identified from the sample as migrants entering or leaving the UK each year is fewer than 5,000. Most of the numbers that we hear in the immigration debate are based on that tiny sample of people, many of whom might be reticent, to say the least, about giving full and frank answers about where they have come from, who they are, why they are here and where they are going. To be clear, that group includes people entering and emigrating from the UK, so the sample number of immigrants in the survey may be as small as 3,000.

Unsurprisingly, migration estimates based on the international passenger survey are subject to a large margin of error, known to statisticians as the confidence interval: that is, the degree of confidence that it is possible to have about a particular margin of error. As we all know, the Government have stated that they intend to bring net migration—the difference between annual immigration into and emigration out of the UK—down from hundreds of thousands to tens of thousands. That is not a 90% cut; in fact, it amounts to about 50%.

On the ONS calculations for net migration as measured by the unadjusted IPS estimate, the 95% confidence interval is plus or minus 35,000, meaning that we can only be 95% certain that the true figure lies within 35,000 of the estimate either way. In other words, the error range is 70,000.

[Mark Reckless (Rochester and Strood) (Con)]

Does my hon. Friend agree that the error margin he gave is one of random variation in a bell curve distribution? Another potential source of variation could be systematic bias in the survey. For instance, if immigrants are not likely to complete the survey or if they say that they are not planning to stay for a long time when they actually are, that would make the margins vary even more.

[Mr Jenkin]

My hon. Friend is absolutely right. As I said, the survey relies on full and frank answers from those being interviewed even to include them. If people say that they are just visiting a relative for a week, they are not counted as migrants. To that extent, the 70,000 range for potential error within the 95% confidence interval is of significant size for the estimate.

If annual immigration is 120,000 or 150,000, there is only a 5% or one in 20 chance that the official figures are on target. The figures could say that the Government are missing their net immigration target by tens of thousands when in fact they are meeting it, or they could show that the UK is meeting its target when in fact it is missing it by tens of thousands. We do not have enough confidence to know. It is clearly a completely inadequate measure of net migration, but we must be careful before dismissing it, because it is all we have.

That degree of confidence applies only to the headline numbers. The ONS estimate simply does not provide sufficient detail to judge properly the social and economic consequences of different types and origins of migration, and the effects of immigration policy on, for example, students or people from particular countries. Nor does it provide any useful idea about international migration in and out of local areas. Efforts to achieve a blunt net migration target are therefore bound to have unintended consequences, such as skills shortages and effects on universities.

The shortcomings of relying on the IPS were highlighted when the 2011 census showed that the population of England and Wales was 465,000 higher than expected, given the recorded number of births and deaths and the estimated level of net migration during the decade since the previous census. The ONS identified several possible causes for the difference but considered that the

“largest single cause is most likely to be underestimation of long-term immigration from central and eastern Europe in the middle part of the decade”,

which of course was not picked up by the international passenger survey. The ONS concluded that the underestimation came partly from taking samples of people from the wrong airports. That is, the IPS sample under-represented airports such as Cardiff and ports such as Newcastle, where more immigrants are coming in than was previously understood.

As a result, this April, the ONS published a revised set of net migration estimates for the United Kingdom for the period 2001 to 2011. Total net migration during that period is now estimated to have been 346,000 higher than previously thought; the original estimate of 2.18 million has been revised to 2.53 million, plus or minus 35,000.

Professional Standards in the Banking Industry

Debate between Bernard Jenkin and Mark Reckless

Thursday 5th July 2012 Commons Chamber

[Mark Reckless (Rochester and Strood) (Con)]

In 1993, I joined Warburg’s as UK economist. One of the first things I recall is visiting the chairman of the bank, Sir David Scholey, in his office with my entry cohort. He said to us that what the bank had that mattered most was its reputation, that capital would always flow to good ideas and that if we did not have great amounts of capital, that was not a problem because we had our client relationships. He said that we must always remember to put our clients’ interests first, never our own.

My first boss was George Magnus, the chief economist at Warburg’s, who is still active. I remember him saying to me that we should never talk our book, and that we were there to be objective. He said that we should never be particularly proud if we got something right or concerned if we got something wrong, but that we should be proud of the integrity of our way of thinking. When I was given a bonus, I expressed gratitude. The culture had not yet become that we should look upset in the hope of more next time.

Only when I went to do an MBA at Columbia university in New York did I realise that the fact that I had become a rated analyst was of personal value to me and that I could perhaps have gone to another bank and got more money. When I came back from America, the position here had changed. We had the regulatory system of the FSA, and I was more involved in advising retail banks.

One case that I worked on for a substantial time was that of a retail bank merging with an insurance firm. It was clear to me that to treat customers fairly in merging the compliance function, as I was tasked to do, we had to focus on how that insurer might sell products to the bank’s customers. There was nothing wrong with that per se—that, along with stripping out cost, was the rationale for the merger—but it clearly brought risks, and we needed a function that would stop inappropriate sales to customers for whom they were not correct. Yet the main issues in dealing with the FSA were a turf war between the bank and the insurance regulator and a vast amount of time spent on box-ticking compliance. The question is not just whether the system is over-regulated or under-regulated, it is about the quality of the regulation.

I then became a lawyer—I am both a qualified barrister and a solicitor—when I worked on bank recapitalisations and FSA litigation. I served as a judicial assistant to the vice-president of the Court of Appeal. The motion asks for a judge-led inquiry. I have enormous respect for our senior judiciary, but they have almost entirely been judges and lawyers—they have not worked in financial services industries and are not, as hon. Members are, representative of wider society.

On LIBOR, two separate things happened with Barclays. First, there was market abuse—we will see what happens in respect of other banks. Because the two mid-quartiles of LIBOR were measured, it was thought there could be no gain by giving a low or high response, but there was collusion by so many players that there was market abuse, and the FSA was asleep on the job.

I would encourage hon. Members to think about the second Barclays aspect in terms of the perspective of the time. The British Bankers Association says that LIBOR

“is not necessarily based on actual transactions”.

Banks are asked a question:

“At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size”?

We should note that the question refers to “offers” rather than “an offer”, but the BBA goes on to say:

“Therefore, submissions are based upon the lowest perceived rate at which a bank could”

borrow. It also says that “reasonable market size” is not defined and that

“it would have to be constantly monitored and in the current conditions would have to be changed very frequently.”

Whitehall was therefore using Barclays reports for a purpose for which they were not designed. It was looking not at LIBOR, but at one particular bank’s reports, which were quite possibly compiled by a junior person, in an incredibly difficult market position. Therefore, if Barclays reported a higher rate than other banks, it might be that it had different perceptions of “reasonable market size”, or it might not ask the offered rates because the market had frozen. Which banks were asked and how are those considerations to be reported? The banks are not being asked: “What are your bid and offer rates?” They are being asked: “What do you perceive one of your competitors might offer you were you to ask?” In the context of the financial crisis, that is potentially different from the market abuse I have described.

We should also consider the UK in the international context. We have a huge banking industry in this country. If a regulator says that much of it is socially useless, people might reply, “Yes, but the employment and prosperity of many people in the country depend on it.” How do we clear it up so we can offer a market and export our financial services to the world sustainably and in a way that will keep our reputation? Hon. Members can rail and bash the bankers for the bust we are suffering—that is quite fair and proper—but we must accept that the bankers also gave us our boom. Our borrowing and extra spending was based on candyfloss, and on a boom that the bankers created. They are as responsible for what we enjoyed in the boom as they are for the bust.

[Mr Jenkin]

Is my hon. Friend saying that wrong regulation rather than under-regulation robs the system of discipline, and that we want a more capitalist, self-disciplined system rather than more bad regulation?

[Mark Reckless]

Elements of such regulation have been backed, but we must look at the quality of regulation. We can have a market system in which people are clear what the regulation is, or a system in which the Government run regulation and bail everyone out, making the taxpayer responsible. We were betwixt those two separate models. Some parts of the market but not others were regulated, and people put stress and reliance on LIBOR that it was never designed for, which led to much of the problem.

We cannot take what the regulators say as Gospel. Many say that Barclays accepted that the Bank of England and Paul Tucker had not told it to lower the rate. Barclays was let off tens of millions in fines because the regulators agreed that, but the regulators have a vested interest—people might ask why they were asleep on the job in the earlier phase, and what LIBOR was doing in 2008-09. Hon. Members should consider what reliance Ministers or officials at that time put on LIBOR—we should ask what LIBOR said about Barclays, why the Government were trying to push Barclays into a bail-out it was trying to resist, and why there was such reliance on that rate.

[Mr Jenkin]

My hon. Friend is making a very interesting speech. Is he saying that because it was widely known that the Government were prepared to rescue the banks, the self-discipline that liability for bankruptcy provides in a banking system was abandoned and the whole market was distorted?

[Mark Reckless]

For the calculation of LIBOR, I wonder whether it had been abandoned for RBS and Lloyds HBOS—as it became—while Barclays continued operating in a market context. The BBA now says that banks have to quote on the basis of an unsecured, unregulated, non-Government-supported rate, but I do not know whether that was the definition it gave at the time. That would have been a concern.

In conclusion, Members of Parliament, representing their constituents, have the necessary range of experience to have a reckoning, as a society and a nation, with what has happened with our banks, to assess the costs, as well as the benefits that we enjoyed, and to consider how to move on and put the matter behind us. I know, from my experience on the Home Affairs Committee, that we can have a non-partisan Committee that can reach across. We have people with the necessary experience and independence of mind. We can get together a group of people to come up with a report that downplays partisanship, to find out what went wrong and to learn the lessons for the future.

European Union (Amendment) Act 2008

Debate between Bernard Jenkin and Mark Reckless

Wednesday 16th March 2011 Commons Chamber

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I intend to speak very briefly. First, let me thank my right hon. Friend the Minister for clarifying the procedural issues. I wrote in a note to colleagues that I understood that this would be the last occasion on which we could scrutinise the process before ratification. I now understand that that is not correct, although certainly the decision will be set in stone, and we shall not have an opportunity to change it unless we vote down the Act of Parliament that will be implemented. However, I should like one further clarification.

I understood that whatever amendment was made to the text of the treaties would require an Act of Parliament, regardless of whether the European Union Bill was passed, because that is the way in which we have always implemented treaty changes. To that extent, the EU Bill means no change. It would be a shame if we lost the opportunity to discuss matters before they go to the Council, but I accept the point made by my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) that it is up to the European Scrutiny Committee to bring them before the House.

In the few minutes for which I intend to speak, I shall concentrate on what was said by my hon. Friend the Member for Stone (Mr Cash) and by the right hon. Member for Rotherham (Mr MacShane). The Government should be worried when there is agreement between those two Members. On this occasion, they agree that momentous events are afoot. My hon. Friend seemed to be saying, in so many words, that while we had always opposed the formation of a federal Europe which would inevitably be dominated by Europe’s major economic superpower—Germany—we were now facilitating the creation of a federal Europe, at least within the eurozone.

The text that we are approving states:

“Member States whose currency is the euro may establish a stability mechanism to be activated”,

and so forth, but there is no explicit exclusion of countries that are not participating in the euro in terms of its effects. What exactly is a mechanism? We have in mind some kind of bail-out fund, but the annex to the Council conclusions that were produced in December contains a draft decision that refers in more detail to what this instrument might actually concern. It states:

“The ESM will complement the new framework of reinforced economic governance, aiming at an effective and rigorous economic surveillance, which will focus on prevention and will substantially reduce the probability of a crisis arising in the future.”

All that sounds extremely beneficial and positive, but, as we know, the problem is that although specific sanctions do not apply to non-euro state, there is no exclusion of economic governance over all member states. Everything that the EU does implies that one day all its members will be members of the euro. That is clearly the direction in which it wants things to travel.

[Mark Reckless]

Is my hon. Friend aware that the issue is clarified by the decision made on 11 March on the pact for the euro? Annex I contains four guidelines. Guideline (b) refers to “Participating Member States” and guideline (d) to “Euro area Member States”. Guideline (c) states that we must consult our partners

“on each major economic reform having potential spill-over effects”,

and that that applies to “Member States”, but it makes no reference to the euro or to participating. It does involve us.

[Mr Jenkin]

I am grateful to my hon. Friend for pointing that out. It underlines the fact that we are at a crucial crossroads in the development of the European Union and our relationship with our European partners.

A few months ago I attended a private discussion, and those present included some very senior recently retired Government figures. One of them said—Chatham House rule, I am afraid—“You must be very pleased, Bernard, that the new Government are going to consider all this, because obviously there will be a consolidation of the eurozone area, and Britain will have to establish a different relationship with the European Union because we will remain outside it.” I said, “Well, I’d love to think the incoming Government have thought about all these things, but it seems that their minds are closed. I don’t think they want to think about this at all.” The result is that events are sweeping us along. We are not setting the agenda. The agenda is being set for us, and we are not even looking ahead at the consequences of what we are agreeing to.

That could have profound consequences for the future of our relationship with the EU. Indeed, I would say that it brings forward the inevitability of the United Kingdom finishing up having to make a dramatic in-or-out decision. If the Government have a lever in their hands but are still unwilling to exercise leverage to start drawing the distinction between those who want to consolidate the euro area and those who want to remain outside it, we do not have a European policy worth the name. We will therefore be driven into deciding on this binary question of whether we stay in or get out—and I hear that the Labour party may be beginning to flirt with the idea of holding the referendum that it denied the British people when it was in office.

We should consider the vote achieved by the UK Independence party at the recent by-election, as there has been a constant upward trend in every by-election since 1997. If we do not recognise that a part of the despair with politics that we experience in our daily contact with our constituents is a result of our powerlessness, and of our denial of the real choices and issues facing this country, we will drive those who feel such despair into the hands of more extreme parties than the mainstream ones where we all wish to be.

I leave the following thought with my right hon. Friend the Minister. As this Parliament progresses, this debate will not subside or go away. Instead, it will become more intense, particularly as the economic realities of the euro are based on denial. It is rather like the denial that there was for a period in respect of the European exchange rate mechanism before it broke up. However, because it is so much harder to break up the euro, the denial will go on for longer and the pain inflicted will be much more intense. There will be riots in the streets of European capitals before this situation is resolved, because I do not think it is possible for countries to make the kind of adjustment that the euro is currently imposing on them without the flexibility of separate currencies, which is why it is an accepted fact among many economists that at least some of the southern European states will leave the euro before this crisis is out.

Several Hon. Members: rose—Order