Theresa May’s perverse migration stance will damage the UK’s economy

 
Jonathan Portes
BRITAIN-BREXIT-PROTEST
Paradoxically, Brexit may therefore exacerbate the gap between London and less economically dynamic parts of the country rather than narrow it (Source: Getty)

One of the unexpected impacts of the Brexit vote has been a marked change in public attitudes towards immigration – for the better.


Today, 45 per cent of Britons are positive about the impacts of immigration on the UK, while only 31 per cent are negative – roughly the reverse of the figures from three years ago.

This isn’t because people think that Brexit has – or will – “solve” immigration. Instead, it seems to result from a more balanced and evidence-based public debate, meaning that many respondents are more aware of the benefits.

But one person whose mind hasn’t been changed is Theresa May.

The “political declaration” – the non-binding statement attached to the Brexit deal which she will try yet again to get through parliament before 29 March – is mostly fudge and waffle on its map of the future relationship between the EU and the UK.


But it does contain one unambiguous commitment: “the United Kingdom has decided that the principle of free movement... will no longer apply”. Not only was this inserted at the personal insistence of the Prime Minister, but the government officially cites it as the first – of 40 – reasons to “back the Brexit deal”.

So what does this mean for the future of UK immigration policy?

The government’s white paper from December, entitled “The UK’s future skills-based immigration system”, sets out a new framework.

Free movement will end, and in future European citizens will have to apply for permission to live and work in the UK in the same way as non-EU citizens do at present.

For most of those moving here to work, this will mean applying for a Tier 2 (“skilled worker”) visa, which requires the applicant to satisfy criteria relating (depending on the job) to salary, occupation, and skill level.

The most important is the salary threshold, which the government proposes should be set at £30,000.

This would exclude future migration for work by low-paid EU nationals to the UK, although in practice many might still be eligible by other routes.

But high-paid and high-skilled EU migrants would also find the UK much less attractive. It would be more bureaucratic and costly for them to come here than under free movement, and they and their families would have fewer rights – certainly not the long-term security offered by free movement.

In contrast, skilled workers from outside the EU might find it easier, particularly if the Home Office follows through on its promises to make the system more user-friendly.

Which sectors will be most affected? Crucially, the changes would not just impact “low-skilled” workers and their employers; those with intermediate skills, particularly in manufacturing, would also be affected, as would the care sector.

The impact on education and health will depend both on how the new system operates for skilled workers and the broader attractiveness of the UK as a destination.

Moreover, there is an important regional dimension. Average salaries in London are well above the £30,000 threshold; in Wales and many parts of the north, they are well below. So it will be considerably easier for migrants working in medium-skilled jobs to come to London than elsewhere.

Paradoxically, Brexit may therefore exacerbate the gap between London and less economically dynamic parts of the country rather than narrow it.

In recent research for the Welsh Centre for Public Policy, on behalf of the Welsh government, I’ve estimated the overall impact of these changes on migration flows and hence the wider economy.

Overall, plausible – though highly uncertain – estimates are that this would reduce net work-related migration by approximately 50,000 a year and reduce GDP by approximately 1.5 to two per cent over 10 years. GDP per capita – average incomes – would also fall, although by considerably less, as the population would be smaller.

These results are hardly surprising – both economic theory and evidence suggest that a less open and more restrictive migration policy will have a negative impact on output and productivity.

The government argues that restricting migration of lower-paid workers will improve the prospects of UK natives, because it will increase the incentive for employers to invest in training or other measures to boost productivity. However, there’s not much evidence of that.

Research commissioned by the Migration Advisory Committee found no clear links between migration and training, and a positive one between migration and productivity, while there was little to suggest that reductions in migration would result in significant wage rises for low-paid workers.

So proposed changes after Brexit are likely to reduce immigration, but certainly not eliminate it. This will result in a small but significant drag on growth, and will make us somewhat poorer, on average.

But while the white paper sets out a clear framework, the devil is in the detail, and future policy decisions – as well as how the proposals are implemented in practice could significantly change this picture for the better. The change in the public mood provides an opportunity for a more liberal and positive approach.

Let’s hope the government takes it.

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