It’s time for creative thinking on immigration for a greater Britain


Brexit means Brexit, the Prime Minister has repeatedly insisted, but what does Brexit itself actually mean? Any meaningful political consensus is still a long way off, as the growing Cabinet kerfuffle only too plainly demonstrates. 

On one thing, however, Mrs May is unequivocal. If Brexit stands for anything, it must be about imposing limits on immigration. Figures announced last week show that the Government has made virtually no progress in getting the numbers significantly down, let alone in delivering on its promise to reduce net migration to the tens of thousands each year. 

Even among those of us who felt that, on balance, it was better to remain, it has been obvious for a long time that the situation on free movement is chaotically out of control. Brexit was at least in part an instruction to act. Ramping up the pressure, Iain Duncan Smith has, in an interview with The Sunday Telegraph, called for the urgent introduction of a US-style points system to give British workers a better chance. 

Brexit is our chance to ensure British jobs go to Britons, says Iain Duncan Smith

Mrs May’s starting point in negotiations must therefore be to define her position on migration, then work backwards in the quest for an acceptable trading framework. It won’t be easy, and will probably result in Britain ending up with less than ideal access to the single market, but it is the only logical way to proceed if the Government is to avoid damaging splits.

Free movement of people is one of the internal market’s founding four freedoms, and in itself is both a noble and desirable ambition. Yet it was designed for another world, in which member states were of roughly equal levels of economic advancement, and with broadly similar entitlement systems. 

Only relatively high earners, it was believed, would make use of the principle; that it might lead to the mass movement of low-skilled labour was never fully anticipated, even after enlargement eastwards.

Companies have been the big beneficiaries of this process of integration in widely divergent European labour markets, with access to a virtually unlimited supply of cheap workers who in many cases don’t even need to be trained. 

Yet for those they have displaced, it is hard to point to any obvious upside. They seem to have lost out all round – on jobs, wages, training and public services. The problem has become particularly acute since the financial crisis. British success in creating jobs over the past eight years has come at the price of stagnating wages and public services stretched to breaking point by high levels of immigration.

Europe’s free movement crisis is only the mirror image of its even greater crisis in another of the four freedoms – free movement of capital. Both are examples of economic integration running ahead of democratically accountable political integration. Europe has attempted to sprint before it has learnt to walk, with disastrous consequences all round. 

By generating a depression across large swathes of the Continent, the single currency has greatly added to the migration problem, as populations chase work in less deprived countries. 

Migration has also added to the economic difficulties of the eurozone’s afflicted nations, which can ill afford to lose the young and skilled they ultimately need to sustain the tax base and service sovereign liabilities. The EU began as an exercise in tariff-free trade, but today it is people who are traded, not goods and services – the reverse of what it should be. So far, so self-evident. But what is the solution to the immigration problem for Britain, now that in weary frustration it has chosen to leave the EU altogether?

Traditionally, the free-market Right has spurned anything that smacks of government intervention, with justification in many instances. The old adage that there is no mess so bad that government intervention won’t make it worse is repeatedly proved true. Yet there are plainly some forms of intervention that make markets purer, help them work better, or prevent crises. Where such intervention is for the purpose of promoting self-reliance and market?based solutions, it would be foolish to object.

Immigration is ripe for the application of creative thinking of this sort. The points-based system used by Australia and the US Green Card may have some merit, but also contain some obvious downsides – not least that, in a dynamic economy, governments tend to make poor arbiters of what type of immigrant skills are needed and which aren’t. Unduly simplistic controls risk holding back the economy, rather than advancing it. In the US, where as much as 4 per cent of the population is thought to be made up of illegal immigrants, they are also not terribly effective.

In any case, if it is primarily unskilled migration we wish to deter, there are better solutions. One, proposed by US economist Gary Becker, is to auction or otherwise charge for work visas, thereby setting a price that would match supply and demand, raise money for the government and generally be a deterrent to all but relatively highly paid, skilled workers.

Another, quite similar, approach would be that already applied in Singapore – arguably the world’s most open economy – of charging companies a levy for employing foreign workers below a certain wage threshold, with the extra taxes so raised channelled into productivity-enhancing schemes, such as training for local workers.

Freedom to hire as companies see fit is thereby preserved, but at the same time the initiative helps raise local wages, decreases reliance on immigrant labour, and provides a powerful incentive to adopt less manpower-intensive practices. Better productivity ultimately means higher wages for all.

Since adopting the scheme, Singapore’s growth in immigrant labour has slowed from 60,000 in 2011 to just 16,000 the year before last, excluding domestic workers and construction.

Any such positive discrimination in favour of nationals would no doubt fall foul of the single market’s free-movement rules. Yet if the EU doesn’t change, there soon won’t be an internal market left to defend. The EU refused Mr Cameron, and thereby brought Brexit on itself. We can but hope that Europe’s leaders aren’t quite so stupid when it comes to Mrs May.

News Source TelegraphNews

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