Over the past decade, EU migrants have become an important part of the economy and even more so in urban areas. Cities attract the majority of migrants and they have become increasingly reliant on them as workers, meaning that they are likely to be hit the hardest by the end of free movement for EU workers. And as the majority of the places that rely on EU workers are also among the most successful ones, this has clear implications for the national economy.
Getting to a new system
Deal or no deal, Government should commit to a minimum two-year transition or ‘implementation’ period
Despite the formal deadline for the UK to leave the EU now being just months away, there is great uncertainty on what the new immigration system will look like after Brexit. The Government is still to set out its proposals in its immigration white paper, which is due this Autumn.
The transition agreement, which will apply from March 2019 to December 2020, states that EU citizens arriving in the UK in the transition period will enjoy the same rights and guarantees as those who arrive — before Brexit — effectively a continuation of freedom of movement.
However, in the event of ‘no deal’, there would be no transition period. In this event, Government should ensure there is at least a two-year implementation phase where free movement continues to allow time to debate, construct and implement an immigration system that works for the whole economy.
Designing a new system
Government should explore all the options available in designing the new immigration system
Given the importance of migration to UK cities and access to the EU market30, and the EU’s stated negotiating position that the four freedoms (people, goods, services and capital) are indivisible, government should explore the options set out by the Home Affairs Select Committee in its report on policy options for future EU migration31 for reform that allows either close or full participation in the single market. These include using existing provisions (such as migrant registration), ‘emergency brake’ provisions and controls on access to the UK labour market.
Government should ensure that any new immigration system is responsive to the needs of the economy
When designing the new system, the government should move away from setting targets or caps on migration. There have been growing calls for the Government to drop the target to reduce net migration to tens of thousands and for the focus instead to be on the contribution that migrants make. Current caps on visas for non-EEA migrants restrict businesses and public sector organisations’ ability to recruit the workers they need. The current cap on Tier 2 visas32 – the main route through which non-EU workers can come to this country – does not reflect the needs of the economy as many of the existing high-skilled vacancies are filled by EU workers.
The new immigration system should also recognise the importance of high-skilled and low-skilled migrants – and that restricting businesses ability to recruit low-skilled workers will be damaging to the economy. Many predominantly low-and-medium-skilled industries, such as hospitality, retail and construction, heavily rely on EU workers but the majority of these migrants will not qualify for a Tier 2 visa,
Government should work with city leaders to ensure that the national system works for all parts of the UK
There have been calls for the introduction of a regional visa system, similar to the ones in Australia and Canada, to better reflect the needs of the different local labour markets, as well as different attitudes towards migration.
But it is not clear whether this would create better matches between policy and economic need in practice, in part because of the difficulties defining ‘need’ in an objective way at the subnational level. 33It is also likely to increase costs for businesses through additional administrative burdens.
In theory, a national system could serve the needs of cities as long as it is reflective of the contribution migrants make and minimises labour shortages caused by a fall in EU immigration. As an overwhelmingly urban issue, the Government should work with city leaders to ensure that the new immigration system works for businesses and local communities.
Government should release administrative data to improve understanding of the impact of migration
In spite of the growing importance of EU migrants in local economies, local data on migrants and their impact are limited. The Census provides the most comprehensive data but this is fairly outdated. This makes it hard to predict how migration changes will play out in different places.
Administrative datasets from HMRC and DWP could give a more accurate and timely picture of the role migrants play within city economies. This might also help places better understand levels of demand among the migrant population for public services and how any additional funding might be most effectively distributed.
Government should increase funding for local areas to manage the local impacts of migration
Notwithstanding the contribution that EU migrants make to the national economy, it is also true they contribute to demand for public services and local infrastructure. The Controlling Migration Fund34 is designed to help mitigate these pressures. Yet with a budget of £100 million equivalent to 0.02 per cent of local authorities’ total budgets, the fund has been criticised for being too small.35 In addition, some of the key services, such as health, remain largely outside local authority control.
In order to address these challenges, the size of this fund should be increased. In addition, the way these resources are allocated should be reviewed. At the moment local authorities need to apply for the funding. Instead, these resources should be automatically channelled into those places that face the greatest pressures. But this will require better and more timely intelligence on migration patterns.
A responsive skills system
Government should devolve more flexibility and resources to support training at the local level
Engaging more adults in education and training may help to address skills shortages over the longer term. The government needs to deliver on their promise to devolve the Adult Education Budget to the mayoral combined authorities to help ensure the skills system is more responsive to the needs of employers. Building on this, the Department for Education should work with metro mayors and city leaders to ensure that the wider skills system is demand-led.