Emily Carver is Head of Media at the Institute of Economic Affairs.
Yesterday’s headlines focused on Sir Keir Starmer’s robust line on immigration. Speaking at the CBI conference, he said the days of “cheap labour” must end to wean the UK off its “immigration dependency”.
Those of us who don’t suffer from amnesia will remember that Starmer got elected to his position in part by extolling the benefits of freedom of movement.
This apparent change of heart is therefore likely to be no such thing, but rather a blatant attempt to win back Red Wall voters and blue-collar workers.
Nonetheless, while he did insist he would be “pragmatic” on labour shortages felt by firms, the shift in tone is quite a turn-up for the books – the Labour leadership now appears more hard-line on immigration than the Brexit-backing, Conservative Prime Minister.
The problem for the Government is that while Starmer talks tough on immigration (even garnering praise from Nigel Farage) its own approach is confused and contradictory.
On the one hand, you have Robert Jenrick, the Immigration Minister, telling Sky News that he rejects the CBI’s demands for migrants to fill labour market gaps, and emphasising the Government’s ambition to “reduce net migration”.
On the other, Rishi Sunak and Jeremy Hunt’s growth strategy seems predicated on continuing with high levels of immigration. Indeed, the OBR revealed it expects net migration to only fall marginally in the next few years, from 224,000 next year to about 205,000 from 2026 onwards.
The implication of this is that ministers, who the OBR consulted, have pretty much axed plans to lower numbers, the assumption being that more immigration is needed to help boost tax revenues and give the economy a bit of a nudge in the right direction.
At the same time, there is little sign of any meaningful progress when it comes to reducing the number of Channel crossings, and the polls show the public has lost trust in their ability to do so. Many will see this as a betrayal of their Brexit vote.
Now, there’s no doubt that filling labour market shortages quickly would deliver short-term benefits to the British economy; bosses in a number of sectors are complaining that they simply cannot fill positions. There is also the worry that if businesses are forced to up their wages to recruit more Brits, prices for consumers could rise further.
But an economy that depends on a constant flow of cheap labour from abroad neither squares with the Conservatives’ manifesto pledges nor is a sure route to long-term prosperity.
Since the New Labour years, net migration has run in the hundreds of thousands, and continued to stay at a similar level. At the same time, and exacerbated by the financial crisis, the economy has suffered from low productivity and stagnant wages.
Our basic infrastructure – from roads and school places, to healthcare and housing – have failed to keep up with the additional pressure, while politicians of all stripes show no real sign of making the supply-side reforms that would at least allow for greater energy security and lower housing costs.
It’s also becoming harder for the Government to congratulate itself on delivering the lowest unemployment on record when the truth is we have 5.3 million people of working age on out-of-work benefits, presumably not all of whom are physically unable to take up any work.
The data also shows that there are now 630,000 more economically inactive working-age adults – neither looking for a job or in work – than before the pandemic hit.
To the Government’s credit, Hunt did announce that steps will be taken to help people off benefits and into work, including spending £280 million on cracking down on benefit fraud and errors in the next two years and extending the use of work coaches to help those on Universal Credit increase their hours or earnings.
This is welcome, but the Autumn Statement is set to leave most working people worse-off. Steps to get people back into work need to be coupled with the supply-side reforms that will help lower the cost-of-living, not least when it comes to housing and childcare, which are sucking up more and more of our wages and making picking up extra hours less worthwhile.
Starmer is playing a good political game – and his comments will appeal to many across the country. If the Conservatives want to claw back support, they need to make it clear what their stance is.
Ramping up immigration has consequences, and it is certainly not the silver bullet solution for our economic woes.