Brexit and the Labour Market (Economic Affairs Committee Report)

Lord Kennedy of Southwark Excerpts

Thursday 8th February 2018 Lords Chamber

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I congratulate the noble Lord, Lord Forsyth, and the Economic Affairs Committee and thank them for this timely report on Brexit and the Labour Market. I am also pleased to see that we have had a response to the report from the Government, which is helpful for our deliberations today.

The report was published just over six months ago but the issues it contains are very much alive, and, as with much of the debate around Brexit, it does not feel as though the Government have come to many conclusions on the way forward. Whatever your view of Brexit, whether you were leave or remain, no one voted to make themselves or our nation poorer, but the attitude of the Government often makes it seem as if we are determined to make things as difficult as we possibly can for ourselves as a country.

The report focuses on three main areas. It looks at the reliability of data on migration and makes recommendations to improve the data, then sets out the consequences for businesses of a reduction in EU labour and recommends measures to help businesses adapt, and, finally, looks at the future of the net migration target. All these issues, which have been discussed in your Lordships’ House many times before, are still very much alive today.

The report identifies that there is not one simple measure of migration, that the picture of migration is built up from a number of sources and there is a considerable margin of error, and that we currently have no wholly reliable migration statistics, with UK migration measured through a series of surveys undertaken by the Office for National Statistics as well as data published by both the Home Office and the Department for Work and Pensions. My noble friend Lord Livermore made reference to the poor quality of the data relied on by the Government.

The Government partly recognise this problem in the response to the report from Brandon Lewis MP, when he referenced the fact that the ONS has recognised that more can be done to improve migration data. However, I do not think there was a complete acceptance of the weaknesses of the data collected presently. That is disappointing, because if you are inputting or analysing data to inform your policy decisions and assess them, and if what you are using can be described as “flawed”, that is not a good place to be and does not give you the rich source of data that the Immigration Minister referred to in his letter.

It would be useful if the noble Baroness, Lady Williams of Trafford, could update the House, following on from the letter from Brandon Lewis in November last year, on what further action has been taken and on what the Government will do to improve the migration data collected, which is used to inform government policy and decision-making. In particular, can the Minister comment on the new exit data and on what more is being done across government to deliver this agenda? The noble Lord, Lord Sharkey, also made reference to the inadequacy of the data that the Government are relying on to inform their policy decisions.

I very much agree with paragraph 19 of the committee’s report. It expresses an opinion which is shared by others in the House and elsewhere: that the International Passenger Survey cannot bear the burden placed on it and cannot be relied upon to provide accurate estimates of net migration. The report goes on to call for the Government to prioritise plans for comprehensive data sharing across departments. That seems a very wise move, as it will give us a much better understanding of the movements of immigrants within the UK economy.

Paragraph 27 of the report identifies three specific sources of data which, among others, should be analysed. These are the matching of PAYE and national insurance number registrations, the matching of self-assessment records for self-employed migrants and sole traders issued with national insurance numbers, and using data on benefit claimants and tax credits to ascertain whether those with unused national insurance numbers remain in the UK claiming benefits. I believe that those are rich sources of data which could really help to inform this debate and government policy, and I hope that the noble Baroness can respond to this recommendation in her closing speech.

In Chapter 3, the focus moves on to adapting the UK labour market and addresses how a reduction in immigration from Europe will affect British businesses. It was interesting to note that the number of immigrants from either the EU or outside the EU was approximately 10% of the UK workforce. The number of EU nationals working in particular sectors and in London highlight the regional differences in the overall figures. The case study of Pret A Manger, which the noble Lord, Lord Forsyth, referred to, was very interesting. Having been a customer on many occasions, I was always clear that a large number of EU nationals worked there, but I had no idea that only one in 50 of the people who apply for a job there is described as British. I found that amazing.

I agree with the committee that it is important to get an early agreement on the rights of EU nationals in the UK. The Government sometimes make progress on this, but the problems that the Government are clearly having in coping with the complexity of Brexit, the lack of a coherent position with conflicting views from Minster to Minister, the off-the-record briefings and the weakness of the Prime Minster mean that just when you think that we have made progress, the policy positions are undermined with a usually unhelpful intervention.

The report correctly identifies that the sectors estimated to be most reliant on EU nationals as part of the workforce tend to be those classed as requiring lower-skilled workers, with 24% of individuals working in jobs categorised as such. Tables 5 and 6 in the report highlight this fact in particular. I agree with the committee’s recommendation in paragraph 52 that the Government must address the needs of business and that any new immigration policy developed and implemented after we leave the European Union should not be based on this arbitrary distinction between higher and lower-skilled workers or whether a job requires a university degree. The noble Lord, Lord Shipley, made reference to this. The construction industry and the agriculture and hospitality sectors need to have policies in place from the Government that protect them and avoid the cliff-edge scenario that the hospitality industry, for example, fears. Similar problems will be faced by the social care sector and the health service if the Government do not get this right—and quickly.

The report also highlights the problems that some industries face in recruiting British workers, who do not see working in agriculture or parts of the hospitality industry as desirable. It points to the fact that replacing migrant workers with domestic workers will prove very difficult. The case study looking at seasonal workers in the agriculture industry was most informative in this respect, and I was not at all surprised at the findings. It is worrying when organisations in the industry cast doubt on the ability to grow, pack or harvest crops grown in Britain without this workforce. A solution needs to be found as higher prices, labour shortages and a reduction in our productivity are not good for anyone and not good for the UK. It will make us all poorer and it cannot be allowed to happen.

Clearly, having a skilled workforce is important. In the past we have been poor at delivering the technical skills that are required to produce a workforce ready to meet the challenges that the future will bring. The noble Lord, Lord Green of Deddington, suggested that the availability of EU nationals might have discouraged firms in some industries from investing in training. He also made reference to the committee’s 2008 report, suggesting that this could also be a possible consequence of immigration. However, I would contend that we have not been good at ensuring sufficient training for some considerable time. We have the examples of other countries. Germany, for example, has very similar challenges but has been much better than the UK at long-term planning to deliver a diverse and skilled workforce. The noble Lord, Lord Horam, made an important point about our collective failure to upskill our workforce.

My noble friend Lord Darling commented on the necessity for the Government to consult with business about its needs to ensure that we have the right skillsets post Brexit. I have visited Rolls-Royce in Derby and in Dahlewitz outside Berlin. There is great co-operation between the two factories, with workers and products moving back and forth between the two, but that will be at risk if we get Brexit wrong.

I also noted that the noble Lord, Lord Green, suggested that we should aim to be self-sufficient in most sectors. There is nothing wrong with that as an aim but it is much more difficult to make that objective a reality when you have to grapple with years of government policy, industrial strategy, the attitude of industry, the attitude of business and the skills of an underused workforce. However, it would be a tragedy if we ended up with the situation highlighted in the report of not growing certain crops in any great quantity but, instead, buying them from other countries in the European Union as companies adapt to the changing position.

The noble Lord, Lord Green of Deddington, made a number of points. As I said before, I can see no evidence of swathes of British workers wanting to work in certain industries—for example, picking cabbages in Lincolnshire, potatoes in Suffolk or strawberries in Kent. The same can be said of the social care sector, which, I contend, will need a significant injection of funds to significantly boost the pay of workers and attract more people. A huge number of vacancies are unfilled, with no stampede of workers wanting to work in this industry. Generally, this sector runs at a vacancy rate of 30%. I very much agreed with the noble Lord, Lord Balfe, when he spoke about the vulnerable position of these workers. He was absolutely right. It is clear to me that the noble Lord reads the Labour manifesto much more closely than I have ever done—which would not be hard. I assure noble Lords that it is not my usual holiday or bedtime reading.

I am very clear that the best place for Britain, for the British economy and for British workers is to remain in the European Union. When we leave the EU, we should seek to have the closest possible alignment with the institution and remain a member of the single market and the customs union. That would help us to protect standards across a whole range of issues. Anything else runs the risk of making us all poorer. There is no benefit for workers or any other group of people in the UK in having low skills, poor regulation and poor standards.

I agree with the section of the report on automation. It highlights the challenge that this will bring and the risk that migrant workers will be replaced not by domestic workers but by automation and mechanisation. This challenge will move from sector to sector quicker than we think. Industries with a high reliance on low-skilled labour will be affected as technology and processes improve, and that will challenge us all.

The implementation period for a new immigration policy, as detailed in paragraph 95, will have to be addressed by the Government. Moves to retrain and upskill the British workforce will take time and cannot happen overnight. It would be good if the noble Baroness could address that point when she responds to the debate, along with the issue raised in paragraph 96—the challenge of other policy objectives, such as the building of 300,000 new homes a year. I have raised that many times at the Dispatch Box. If you do not have the workforce—the bricklayers, carpenters and plumbers—to build these much-needed homes, how will that target be achieved? Again, can the noble Baroness address that? It was raised by a number of noble Lords, including the noble Lords, Lord Turnbull and Lord Shipley.

The issue of students being included in the net migration figures has been raised many times in debates and Questions and it is raised again in this report. I know that the noble Baroness will say that there is no limit on the number of students who can come here to study from abroad, but the reality and how the situation is reported are often very different. Other noble Lords have called for the student figures to be taken out of the immigration figures. The Government’s intransigence in this regard has caused real problems and has made this a less attractive place for students to come and study. As the noble Lord, Lord Forsyth, said, the target needs to be flexible to address the challenges that we face—a point made also by the noble Lords, Lord Sharkey and Lord Turnbull.

In conclusion, I thank the noble Lord, Lord Forsyth, and the committee for their report. It is an excellent document which has proved valuable in our ongoing debate.