Brexit employment update: New report on revised immigration regime

The Migration Advisory Committee (MAC) has this month published it’s much anticipated final report.

In July 2017, the Government commissioned the Migration Advisory Committee (MAC) to report on the current and likely future patterns of migration from the EEA to the UK and to consider the likely economic and social impacts of the UK’s exit from the European Union. The MAC put out a call for evidence on these issues (read our submission on behalf of clients) and published an interim report in March 2018.

The MAC has now published it’s much anticipated final report, setting out its recommendations to Government on what the work-related immigration regime should look like post-Brexit and how the UK can best adapt to the likely end of free movement.

The detail

Much of this weighty and detailed report is dedicated to considering the impact of EEA migration on a wide range of areas including house prices, public finances and public services. However, the most important content for employers is in Chapter 1 (Labour Market Impacts) and Chapter 7 (Conclusions and Policy Recommendations).

Overall, Chapter1 of the report concludes that there is no evidence that EEA migration has reduced employment opportunities, training opportunities or wages for UK-born workers, although the impact may vary across different social groups. It finds evidence that EEA immigration has, on average, had a positive impact on productivity. The MAC concludes that there is not enough robust evidence to conclude what, if any impact, immigration from the EEA has had on the UK-born self-employed.

A general theme emerges from the evidence that the impact of high-skilled migration is more beneficial across the board than low-skilled migration (although the report acknowledges that many UK employers are concerned about reduced access to low-skilled labour if and when freedom of movement comes to an end).

Immigration post-Brexit: 10 Key proposals

Out of this extensive analysis of the impact of EEA migration on the UK labour market, the MAC draws a series of conclusions about how the immigration system “could be designed to better benefit the resident population” of UK born workers. The report’s key recommendations to Government are:

  1. Focus on attracting higher-skilled workers
    The report suggests that a policy on work migration that provides “greater access for higher-skilled migration while restricting access for lower-skilled workers to enter the UK” would be consistent with the report’s findings that higher-skilled migrants contribute most to the public finances and impact positively on productivity and innovation. This approach also aligns with the Government’s industrial strategy published last year.

  2. No preferential treatment for EEA workers
    The MAC sees no “compelling reasons to offer a different set of rules to EEA and non-EEA citizens” stressing that a migrant’s economic impact “depends on factors such as their skills, employment, age and use of public services, and not fundamentally on their nationality”. However, this may be subject to negotiation with the EU.

  3. Expand Tier 2 to cover ‘medium-skilled’ jobs
    Currently, the main scheme for high-skilled workers to enter the UK is Tier 2 (General). Currently, applicants must have an offer of a graduate job above a certain skill level and minimum salary threshold. The MAC concludes that, if free movement ends, the skills threshold will need to be reconsidered. It suggests extending Tier 2 to all jobs at Regulated Qualifications Framework (RQF) Level 3 and above, which would bring an additional 142 non-graduate level medium-skilled qualifications within scope. The MAC will consider in a separate, future report whether the ‘shortage occupation list’ should also be expanded.

  4. No reduction in Tier 2 salary thresholds
    However, even if the range of eligible roles is expanded, no reduction is proposed in the minimum salary threshold for Tier 2 (currently £30,000 or £20,800 for new entrants). The MAC acknowledges that “this salary threshold would be difficult, but not impossible, to meet for medium skilled jobs” but argues that maintaining the salary threshold will “place greater upward pressure on earnings” and ensure that migrants make a clear positive contribution to public finances.

  5. Abolish the Tier 2 Immigration Cap
    Strikingly, the report calls for the annual cap on the number of high-skilled migrants permitted to enter the UK (currently 20,700 per year) to be scrapped, on the grounds that it operates against migrants who might be beneficial to the UK and makes the system unpredictable. The report observes that while the “cap may be viewed as an important part of a political strategy” it comes at an “economic and social cost”.

  6. Reduce the ‘bureaucratic burden’ of the immigration system.
    The report stresses that, if the existing Tier 2 scheme is to be extended to EEA citizens, criticism of the administrative burdens imposed by the scheme “should be taken seriously” by the Government. For example, the MAC suggests that the Government should seek feedback from users on how the system operates in practice and consider reviewing the current sponsor licensing system to make it easier to navigate for small and medium-sized businesses.

  7. Retain the Immigration Skills Charge
    The report recommends that the Immigration Skills Charge (currently an upfront cost of £1,000 per year for medium and large sponsors) should be retained and extended to EEA citizens.

  8. Abolish the Resident Labour Market Test
    The Resident Labour Market Test requires employers to demonstrate that they were not able to find a suitable candidate from the UK-born workforce before recruiting a migrant worker. The MAC suggest scrapping the test on the grounds that “a robust approach to salary thresholds and the Immigration Skills Charge” should be sufficient to prevent employers from using migrant workers to under-cut the UK-born workforce. This could make the sponsorship process quicker and less administratively difficult.

  9. No separate immigration scheme for ‘low-skilled’ workers
    The MAC does not recommend an explicit work migration route for low-skilled workers (with the possible exception of a seasonal agricultural workers scheme). Instead, the MAC recommends expanding the Tier 5 Youth Mobility Scheme to fill lower-skilled posts.

  10. No variation for UK regions or the public sector
    The MAC has rejected calls for minimum salary thresholds to be varied for UK regions (where average pay may be lower than London and the South East) and for the public sector (where it is argued that pay may not reflect the value of word done when compared to the private sector). However, the MAC maintains that current salary thresholds are based on average national pay levels and that it would be preferable for public sector pay to increase rather than for salary thresholds to be reduced.

What does this mean for me?

It is important to note that the MAC’s recommendations tackle “broad principles more than detailed rules”. If the Government puts some or all of these recommendations into practice, there is much more work to be done to amend and refine the details of any new immigration scheme.

The MAC also stresses that the UK’s post-Brexit immigration system could be decided by the UK on its own, or could be part of the negotiations with the EU. It is possible that negotiations may overtake some of the policy proposals set out by the MAC. For example, while the report recommends that EU citizens should not receive special treatment under a new immigration regime (and this has reportedly been agreed ‘in principle’ by the cabinet) it is possible that the Government might still choose to “trade-off some preferential access for EU citizens to the UK in return for benefits in other areas of the negotiations such as trade”.

It also remains to be seen whether other recommendations, such as the abolition of the Tier 2 cap, will be politically palatable to the Government at this sensitive time.

When we consulted our clients about the MAC call for evidence, concern about the future was highest where EEA workers are currently engaged in low or moderately skilled roles. Many employers are likely to be disappointed that no designated entry scheme for low skilled workers is proposed. It is questionable whether alternative measures such as the expansion of the Youth Mobility Scheme will be sufficient to address the anticipated manpower shortages in sectors such as hospitality and leisure, or manufacturing. An extension of Tier 2 to medium skilled roles may help to some extent but, without any reduction in salary thresholds, costs may be prohibitive for many employers.

Certainly, any steps the Government might take to streamline or simplify the immigration regime would be welcome across the board. We know that many of you are worried that both cost and complexity will increase post-Brexit.

The final report of the MAC is available to read in full online.

Elaine McIlroy (elaine.mcilroy@weightmans.com) is a Partner in the Employment, Pensions and Immigration Team and is based in Glasgow. If you have any questions or concerns about the potential impact of Brexit on your organisation, please do not hesitate to contact Elaine or speak to your usual Weightmans advisor.

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