Brexit and the Labour Market (Economic Affairs Committee Report)

Lord Forsyth of Drumlean Excerpts

Thursday 8th February 2018 Lords Chamber

Moved by

[Lord Forsyth of Drumlean]

That this House takes note of the Report from the Economic Affairs Committee Brexit and the Labour Market (1st Report, HL Paper 11).

[Lord Forsyth of Drumlean (Con)]

My Lords, although the Motion stands in my name on the Order Paper, it was in fact my predecessor as chairman, the noble Lord, Lord Hollick, who shepherded the committee through much of this topic. Unfortunately, the noble Lord cannot be here to speak in the debate on this, his final inquiry as chairman. I say as chairman that we miss him on the committee but I understand that he has been drafted into the report on artificial intelligence, for which he is very well equipped.

Before I introduce the report and its key conclusions, it is perhaps necessary to set it in context. The committee commenced this inquiry in January 2017, less than seven months after the EU referendum, which seems so long ago. Much excellent work was being undertaken by committees of this House and the other place on the impact of the referendum, which we aimed to complement. As we noted in our call for evidence:

“The vote to leave the EU presents the UK with an opportunity to restructure immigration policy”.


At that time, though, business anxiety remained high and, as we said:

“Some sectors … have stated that continued access to migrant labour is crucial for the success of their businesses”.


The committee wished to examine the competing claims about EU migration and the labour market. Taking as a starting point that EU migration would be reduced, we set out to identify practical measures that government and businesses could take to mitigate the impact of this change.

The issue that emerged and threaded its way through much of our inquiry was problems with data underlying many assumptions about the UK’s reliance on migrant workers. One witness told us:

“Evidence-based policy-making needs data that is fit for purpose”.


It was a great surprise to me and others on the committee how unfit for purpose many of the immigration statistics were.

The headline immigration figure that we hear announced at regular intervals is that for annual net migration, and the most recently available numbers show that for the year to June 2017, net migration to the UK was 230,000. But where do these figures come from? The answer is Office for National Statistics workers interviewing 4,000 to 5,000 at 19 airports and some other points of entry. It will not come as a surprise that this survey-based approach has problems. Who is counted; who is not?

Professor Portes suggested that,

“when you come into the country as an immigrant”,

you might,

“have better things to do than stop and chat with an ONS official for 20 minutes”.

We know that those arriving on overnight flights are missed, as are those travelling across the Irish land border. Student departures are radically underestimated, and the definition of migrant means that only those changing residence for 12 months or more are captured, missing seasonal and short-term workers.

The committee examined other sources of immigration data to see whether they could assist in overcoming those deficiencies. The Labour Force Survey details workers’ nationality and country of birth, but cannot provide anything more than a broad-brush approach to the number of EU workers employed in each sector. Its methodology leaves out short-term and seasonal workers and those living in communal households.

National insurance numbers should provide an objective check: every overseas adult registering for a number is captured. But these, too, are limited: we know only how many are issued, not how many are in active use by workers.

The next obvious thought is: can we count people in and count them out? The Government have introduced exit checks and collect information on those entering and exiting the United Kingdom, but again, this is limited. The most recent report on exit checks is enlightening, but covers only non-EEA nationals and is limited to whether or not they obeyed their visa conditions.

We considered how this could be improved. The Government hold the necessary information about workers. National insurance numbers can be linked to passport data and tax and PAYE returns to show who is employed and where. The data should be married up to produce a coherent picture, but this will be a lengthy and painstaking process.

Another radical way mentioned in evidence to the committee is the introduction of a single method of national identification used by all. I am sorry that the noble Lord, Lord Campbell-Savours, is not in his place, and very much hope that the Senior Deputy Speaker will think it appropriate to look at this issue in a special Select Committee in the coming year.

These points are of interest not just to those poring over spreadsheets of economic data. They have a real impact on how future policy can be formulated. As we noted in our report, there is limited reliable data on how reliant businesses and industries are on EU immigration. Much of the evidence we heard is based on anecdote. I take one example that featured in our committee’s evidence sessions: the food and agriculture sector. How reliant is that sector on EU workers? How can it adapt to changes in labour laws? How many workers will be needed to ensure that Scottish raspberries are picked and that London workers can receive their morning coffee?

The most specific sector figures provided to us by the ONS suggest that 20,000 workers, or 5.7% of the workforce, in agriculture, forestry and fishing were EU nationals. The NFU supplied data suggesting that 115,000 EU nationals work in the agricultural sector alone—some 20% of the workforce. At the other end of the food chain, so to speak, Pret a Manger, the mainly London-based coffee and food shop, told us that one in 50 applications for jobs in its stores were British. Of its employees as a whole, 65% were from the EU.

The Government’s recently—and finally—released sectoral report for agriculture, relied on sources including the NFU and the British Veterinary Association for its analysis:

“The ONS estimate that 6 per cent of agricultural employees were from the EU in 2015. However, this likely ignores many seasonal workers (estimated at 67,000). Both a recent NFU report and the 2013 Migration Advisory Committee report suggest that the vast majority are EU migrants … In addition, around 95 per cent of Official Veterinarians in the meat hygiene sector are from the EU”.


This is just one example of a problem that affects many sectors. Noble Lords will see from the report that there is quite startling evidence from the construction sector and others.

The Government seem to have recognised this issue. They have asked the independent Migration Advisory Committee to provide advice and evidence on the current patterns of EU migration and the role of migration in the economy. This wide-ranging analysis is expected to cover the labour market, looking at specific sectors, skills, and regions, current and future trends and the impact of a reduction in migration. The MAC is expected to produce this work by September this year. The Government indicated that they will be conducting their own,

“extensive programme of engagement and evidence gathering”,

and will form a new immigration policy once that process is complete.

On the data side, the ONS is working to improve the data and has a programme in place to increasingly present information based on administrative data and to move to reliance on these sources by 2019. Again, all this is very welcome, but the UK is moving towards Brexit day, and there are some steps we recommend that can be taken now, while consultation is ongoing, to ensure an orderly transition to a new policy.

First, we must ensure a proper implementation period to give businesses time to plan and adjust. They must, the committee concluded, have proper notice—probably a number of years will be required—and this period may be different across sectors and regions. Secondly, we need to promote better use of the domestic workforce and encourage capital investment. As the committee is discovering in its current inquiry, technical training outside universities in the UK is confused, and something of a disgrace. Further, companies may need to increase the use of automation to fill gaps in labour, and perhaps financial and tax incentives should be encouraged.

I turn now to the final section of our report: how is the success of any policy to be measured? The Government have their own chosen measure: the commitment—interestingly, they avoided in evidence and in their written response the use of the word “target”—to reduce migration to sustainable levels. As the then Minister for Immigration told us, this means reducing it to the tens of thousands—in other words, below 100,000. This, once again, brings us to the data: this target—or commitment—falls squarely on the shaking shoulders of the International Passenger Survey. It is not fit to bear that weight. At the most basic level, as one witness pointed out, due to the large margin of error in the current net migration figures, the Government may never be able to say with certainty that they have hit the target. I quote the witness, who said,

“you might think you have got [net migration] down to 99,000, but actually you only had it at 140,000”.

If the commitment remains, the committee offered suggestions to improve it: count students separately and, above all, ensure that the target is flexible. The objective of having migration at sustainable levels is unlikely to be best achieved by the strict use of an annual numerical target for net migration. Instead, such a target runs the risk of causing considerable disruption by failing to allow the United Kingdom to respond flexibly to labour market needs and economic conditions. The objective of reducing migration to sustainable levels should be implemented flexibly and be able to take account of labour market needs, particularly during the implementation period.

I hope the Government will listen to the voices of experience on the committee and expedite steps to, first, improve the data; secondly, provide certainty so that businesses can adapt to change; thirdly, invest in domestic training and capital; and, fourthly, ensure that policy is not straitjacketed by an inflexible commitment that overrides all other considerations. I beg to move.

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[Baroness Smith of Newnham (LD)]

My Lords, like other noble Lords, I thank the noble Lords, Lord Forsyth and Lord Hollick, for the report. I had intended to say that on many of the issues we appear to have considerable agreement. Then the noble Lord, Lord Reid, spoke and brought in a range of issues on which we may not have quite so much agreement. The Liberal Democrats have not yet changed our minds on identity cards. We have not discussed that issue within the party for several weeks but I do not imagine that there will be any change in our position on that any time soon.

I was intrigued by the fact that when the Labour Party was in power the noble Lord, Lord Reid, had come up with an idea for controlling immigration and had been accused of seeking to adopt a Soviet-style system. I wonder whether the noble Lord, Lord Green, has ever been accused of adopting a Soviet-style approach given that his views may be somewhat similar.

The report contains some key lessons with which I think your Lordships all agree: namely, the fact that the data are not fit for purpose, it is very difficult to know who is actually in this country, we do not know who is working, or whether people are using their national insurance numbers or have claimed a number and perhaps gone back to their home country. That is an issue on which there is clearly some agreement. The Liberal Democrat Benches can certainly agree with two issues in the report: namely, taking students out of the statistics for the purposes of public policy, and getting rid of arbitrary targets.

In opening the debate, the noble Lord, Lord Forsyth, pointed out that the Brexit vote already seems a long time ago. I declare my interest as an employee of the University of Cambridge. Like other Members of your Lordships’ House, I have always found that Brexit has basically been a job creation scheme for academics, lawyers, perhaps for trade negotiators, and certainly for Members of your Lordships’ House and members of committees in your Lordships’ House and in the other place. They seem to have produced so many reports on Brexit since June 2016, that one begins to wonder where all the evidence and the expertise was to be found before the referendum, and whether some of that work could not have been done before June 2016 rather than now.

I also have a brief secondary declaration in that in the past I have been the beneficiary of the right of free movement of people. In the 1990s I had a scholarship to be in Germany and I went back and forth; I was quite homesick, so I visited the United Kingdom on many occasions. I flew in and out of the country, and nobody asked me what I was doing or whether I was a student or working. It appears that the border agency of the 1990s was no better or worse than the situation we have now. If the Government can come forward with ways to improve the data, that would be enormously welcome.

We have already heard that there is a change in the number of EU citizens resident in the United Kingdom. The net numbers are already falling. As the noble Lord, Lord Turnbull, pointed out, perhaps we should be careful what we wish for. The impact on the labour force is significant and the vote to leave the European Union has created uncertainty in the minds of EU citizens resident in the United Kingdom, some of whom have already taken the decision to leave, others of whom may decide to leave, and many of whom are saying, “We are still not sure that the United Kingdom really wants us”. The interim agreement made in December 2017 does not give the certainty that EU migrants need to ensure that they will remain in the United Kingdom. Therefore we are already seeing a loss of EU migrants. Is that really what we want? Not necessarily.

The report recommends that the Government provide,

“a suitable implementation period during which businesses retain access to the European labour market”.

That would clearly appear to give certainty to businesses, and it has been welcomed across the House. However, what does an implementation period mean? In particular, the noble Lord, Lord Forsyth, and other noble Lords suggested that the implementation period might be for “several years”. So far, we have heard about an implementation period which Theresa May suggested would last two years, and which the EU 27 suggest would be 21 months. If an implementation period as regards access to the European labour market needs to be for several years, can the Minister explain to us how the Government might come forward with a policy on that? Will that be part of the proposed immigration White Paper and the immigration Bill, which we are likely to see later this year, or do the Government object to the idea that an implementation period of multiple years for access to the labour market is desirable?

[Lord Forsyth of Drumlean]

I suspect that I may be responsible for the confusion here by having used the word “implementation”. I was talking about the implementation of an immigration policy which took account of the needs of specific businesses, which is quite different from the transitional implementation period that is currently under discussion.

[Baroness Smith of Newnham]

I thank the noble Lord for that clarification. That raises two questions. What do the Government propose to bring in? If the implementation period for a new immigration policy was about access to the European labour market, there is still the question of what the Government propose to do. If the committee’s proposals are taken on board, is there a suggestion of having an interim period in which there are more liberal policies for EEA nationals than for third-country nationals? That might be welcome, but are the Government thinking about that? Also, are the Government willing to think about a wider range of implementation periods and transitional periods then we have heard so far? The use of the words “implementation” or “transition” suggests that the Government have a process and an idea of where they are going. So far, there is not a great deal of clarity on where the United Kingdom will be beyond 29 March 2019. The noble Lord, Lord Lea, would like us still to be in the single market, in which case many of these questions do not arise. However, assuming that the Prime Minister does not take on board the Chancellor’s idea that the United Kingdom should remain linked as closely as possible to the single market, what sort of immigration policy do the Government propose? To what extent are they willing to open up to the idea of having a policy that is based on the needs of the labour market, not on arbitrary targets? With the possible exception of the noble Lord, Lord Green, we are united in saying that arbitrary targets are not necessary or desirable. Therefore, to what extent will the Home Office be flexible?

We on these Benches very much welcome the amendment moved by the noble Lord, Lord Forsyth, in Committee, which has therefore been brought forward in this report, on the situation of students and the idea that they should not be included in short-term immigration statistics for public policy. I know that the Minister will say, as her noble friend Lady Vere said on Monday in answer to comments on a Statement, that students have to be included in the numbers because that is what happens in the OECD. But for public policy purposes, other countries, including the United States, do not consider students in the migration statistics. The noble Lord, Lord Hannay, pointed that out again on Monday and got the stock answer from the noble Baroness, Lady Vere, and the same answer is in the Government’s response to the Economic Affairs Committee’s report. Can the Minister please think about giving us an answer today that goes beyond the stock answer and which recognises that students are important and benefit the UK economy? In addition, the standard answer we get is not correct. We keep being told that there is no cap on student numbers, but if there is a commitment to a figure of net migration, and all of a sudden we say, “We want another 100,000 students this year”, does that mean that there are 100,000 workers who cannot come?

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[Lord Forsyth of Drumlean]

My Lords, I am grateful to my noble friend Lady Williams for summing up what has been an excellent debate. It is a relief to have a debate on Brexit where we do not refight the referendum campaign but focus on the issues for the future. I am grateful to everyone who has participated and to the noble Lord, Lord Kennedy, for his constructive and supportive response to the committee’s report. I was struck by a phrase used by the noble Lord, Lord Liddle, when he referred to the clash between politics and economic reality. That has been our experience in considering this matter in the committee.

This is a pretty well unanimous report. My noble friend Lord Lamont forced the first Division in the history of the committee at the first meeting of which I was chairman but we ended up with a unanimous report. This debate has illustrated that the way forward is complex but not impossible. I hope my noble friend Lady Williams and other members of the Government will take on board the recommendations, which are absolutely central to our future economic prosperity.

Motion agreed.