Limits on Migration Limits on Tier 1 and Tier 2 for 2011/12 and supporting policies Migration Advisory Committee November 2010 Migration Advisory Committee 1st Floor Green Park House 29 Wellesley Road Croydon CR0 2AJ www.ukba.homeoffice.gov.uk/mac e-mail: [email protected] Limits on Migration: Limits on Tier 1 and Tier 2 for 2011/12 and supporting policies Migration Advisory Committee November 2010 Contents Chairman’s foreword 1 Migration Advisory Committee and secretariat 5 Summary 7 List of tables and figures 19 Chapter 1: Introduction 23 1.1 The Migration Advisory Committee 23 1.2 What we were asked to do 23 1.3 Our interpretation of the question 24 1.4 Scope of this work 25 1.5 Our approach 25 1.6 Structure of this report 26 1.7 Thank you 27 Chapter 2: Policy context 29 2.1 Introduction 29 2.2 Routes of migration to the UK 29 2.3 Dependants and the right to family life 31 2.4 Asylum 32 2.5 Tier 1 33 2.6 Tier 2 41 2.7 Other routes of migration 46 2.8 Policy and consultation on limits 48 2.9 MAC consultation on levels of limits 50 2.10 International comparisons 51 2.11 Implications 54 Limits on Migration Chapter 3: Data context 55 3.1 Introduction 55 3.2 The UK economy 55 3.3 The UK labour market 57 3.4 Overview of migration data sources 63 3.5 Net migration and population growth 63 3.6 Tier 1 and Tier 2 context 75 3.7 Migrants and the labour market 88 3.8 International comparisons 100 3.9 Implications 100 Chapter 4: What we did 103 4.1 Introduction 103 4.2 How we consulted 103 4.3 Consultation evidence received 105 4.4 Analytical work programme 113 Chapter 5: Analytical framework 115 5.1 Introduction 115 5.2 Frameworks for analysing limits on migration 115 5.3 Our framework 117 5.4 Implications 120 Chapter 6: Objective 122 6.1 Introduction 122 6.2 Defining the objective for net migration 122 6.3 Accounting for flows outside the scope of a limit 124 6.4 Estimating the implications for Tiers 1 and 2 129 6.5 Implications 132 Chapter 7: Economic impacts 134 7.1 Introduction 134 7.2 Economic growth and GDP per capita 135 7.3 Inflation 155 7.4 Labour market 157 7.5 Net fiscal impacts 163 7.6 Conclusions 167 Chapter 8: Public service and social impacts 169 8.1 Introduction 169 8.2 Provision of health services 169 8.3 Consumption of health services 175 8.4 Provision of social services 181 8.5 Consumption of social services 184 8.6 Provision of education services 185 8.7 Consumption of education services 189 8.8 Housing 196 8.9 Crime and justice 203 8.10 Congestion 208 8.11 Social cohesion and integration 211 8.12 Conclusions 218 Chapter 9: Limits and policy options 221 9.1 Introduction 221 9.2 Coverage of limits on Tiers 1 and 2 223 9.3 Trajectory 232 9.4 Numerical levels of limits on Tiers 1 and 2 237 9.5 Balance between Tiers 1 and 2 239 9.6 Levels of limits on Tiers 1 and 2 in 2011/12 241 9.7 Policy options for Tier 1 245 9.8 Policy options for Tier 2: Options for all routes 254 9.9 Policy options for Tier 2: Intra-company transfer route 257 9.10 Policy options for Tier 2: Combining the Resident Labour Market Test and shortage 263 occupation routes 9.11 Policy options for Tier 2: Resident Labour Market Test route 263 9.12 Policy options for Tier 2: Shortage occupation route 265 9.13 Policy on settlement 267 9.14 Impact analysis 268 Chapter 10: Conclusion 274 10.1 Context 274 10.2 Summary of economic, public service and social impacts 274 10.3 Summary of required limits and policy options 276 10.4 Next steps and future work 278 Limits on Migration Annexes Annex A: Consultation 280 A.1 List of organisations that submitted evidence and did not request anonymity 280 A.2 Indicative list of organisations / individuals met with 284 Annex B: Estimating policy impacts on net migration 289 B.1 Introduction 289 B.2 Estimating the impact of visa reductions (out-of-country) on non-EU inflows 289 B.3 Estimating the impact of visa reductions on outflows and net migration 295 B.4 Estimating impacts of in-country policies 305 B.5 Uncertainty and volatility in net migration flows 305 Annex C: Summary of required limits calculations 313 C.1 Introduction 313 C.2 Summary table of options A and B and an alternative option 314 Abbreviations 315 References 317 Chairman’s Foreword In June this year Three main channels of migration exist: the Home Secretary work, study, and family. And there are three commissioned the citizenship groups: British, European Economic Migration Advisory Area (EEA) and non-EEA. This can be Committee (MAC) to expressed as a three by three matrix with nine advise on the level at cells. In this report, the MAC is only dealing which “limits on Tier with one of the nine cells, namely the non-EEA 1 and Tier 2 of the work route. In 2009 work-related non-EEA Points Based System migration, excluding dependants, accounted (PBS) be set for their for 1-in-5 of the non-EEA inflow and just one first year of operation tenth of the total inflows. And Tiers 1 and 2 of in 2011/12 in order to contribute to achieving the PBS comprised only half of the non-EEA the Government’s aim of reducing net migration work inflow. So, even if Tiers 1 and 2 were shut to an annual level of tens of thousands by the down, it is unlikely that net migration would fall end of this Parliament”. In doing so, we were to tens of thousands. This goal can only be asked to take account of economic, public achieved by also cutting net migration under service and social impacts. the study and family routes. The Long Term International Migration (LTIM) It has been necessary to make a number of statistics, which record changes to country of judgements and assumptions in providing our residence of more than one year, show that in advice, including: the assumed initial level of 2009 net migration had risen by 33,000 from net migration in 2010; the precise nature of the 2008 to 196,000. It is this measure which ‘tens Government’s net migration objective for the of thousands’ refers to. However, the Annual end of this Parliament; the trajectory in terms Population Survey (APS) tells a significantly of how quickly migration flows move towards different story about net migration. The LTIM that objective; the extent to which EEA migrants and APS data measure different things, will replace limited non-EEA migrants; the but there is merit in examining all available likely relationship between the LTIM data and information. This will apply in particular when visa numbers; the number of dependants per the results of the 2011 UK Population Census main visa holder; and, crucially, the share of are available: after the last census, in 2001, reductions in net non-EU migration to be borne it was found that the LTIM data were under- by the work routes, rather than by the student counting out migration. and family routes. Until 1998 net annual migration (LTIM) was Two possible sets of limits on Tiers 1 and 2 are never above 80,000. Since 1998 it has never presented, which can be viewed as defining been below 140,000, and it has exceeded a potential range. These limits comprise the the 200,000 mark in three of those years. first tranche of the reduction in the non-EU Therefore, the Government’s wish to limit net work inflow required to reach the tens of migration is wholly understandable. thousands net migration figure by the end of 1 Limits on Migration this Parliament. In both of the two scenarios for limited periods but choose to settle here and we have assumed that the study and family make the UK their home. And whilst there is no routes bear their pro-rata share of the required quantitative evidence that foreign-born migrants reduction, but have made different assumptions are directly displacing resident workers, it is about the fraction of the pro-rata share of non- possible that the open-ended provision of EEA work-related routes borne by Tiers 1 migrant labour is creating an environment that and 2. means businesses and those responsible for education and training do not focus sufficient It would be remiss not to point out that there effort on increasing the skills and potential of is widespread concern among employers the resident population. regarding the impact that limits on migration could have. Many major companies – including It is plausible that any small adverse impact those responsible for substantial UK investment of a limit on GDP and the public finances will and jobs – argue for the intra-company transfer be partially offset via: recruiting from the UK element of Tier 2 to be excluded. Public sector unemployed or inactive; recruiting from the employers argue for flexible limits which EU; and in the longer-term by up-skilling UK could be interpreted as requesting that any workers and changing production methods limit should not apply to them. Bodies such (capital deepening). But, in the meantime, as the Trades Union Congress (TUC) and it is vital that the allocation mechanism to UK Commission for Employment and Skills implement any proposed limits on Tiers 1 (UKCES) also oppose such limits.