Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.
The United Kingdom has been living a lie. The Treasury seems to think bringing in more and more cheap labour boosts growth and helps pay the bills. In practice it makes it more difficult to grow GDP per head, the way to greater prosperity and happiness.
Worse still, what is cheap labour to the employer is a dear commitment to the state. Everyone coming into a low paid job will receive benefit top-up, subsidised housing, and a wide range of free public services.
I have long opposed the low-wage model. It means employers can put off investing in labour saving and productivity boosting equipment and computers and training. It helps depress wages when we should want a high wage high productivity economy, where people are paid more because their work achieves more for the business.
It has been an important part of Conservative policy to say it must always be worthwhile working. Welcome welfare reforms dealt with some of the benefit traps that made it more sensible for some to try to stay on benefits than get a job. A rising minimum wage helped a bit to make work more worthwhile.
That policy, however, needs to be at a time of rising productivity otherwise it will reduce the number of jobs available as firms struggle to pay the extra wage bill.
The low-wage model has thrived through sector after sector demanding special treatment. Each claims a skills shortage and requires many more visas to be issued to foreign workers to come here. These are said to be temporary shortages, yet many of them have been going for year after year. When wasn’t there a shortage of farm workers or care workers?
The Government and industry did respond better to the shortage of drivers, which became acute as we adjusted to lockdown and struggled to provide enough drivers for all the extra activity needing delivering from on line retailers. Government helped by making more tests available. More training was supplied. Businesses in some cases put up the wages. The shortage was relieved.
Drivers needed better pay and conditions. If we could do it for drivers, why not for other staff in our economy? London Transport had found earlier that higher pay ended recruitment difficulties for train drivers.
Inviting in too many new employees can create the need for even more foreign workers. Every new arrival will need healthcare, so the NHS ends up hiring more overseas workers to take care of the overseas workers they have already recruited. Britain seems to think it fine to attract qualified health personnel away from lower-income countries.
When the EU faced a large surge in migrants in 2016, Brussels calculated that the early years capital and revenue costs to the state of allowing in a new migrant was €250,000. This was what it took, they thought, to construct a new home and provide healthcare, security, school places for children, and other public services for the early years.
They worked this out in order to say to the countries that were reluctant to take their share of migrants that they should pay this per-person sum for some of the migrants taken by other countries. It was not a popular idea, and was dropped. Nonetheless, the estimated cost was probably about right.
Last year to June 1.2 million new arrivals came to live in the UK. Some were migrant workers, some were students, some were family members joining people already residing here, and some were British citizens returning from abroad. Some 500,000 left to live elsewhere making a net addition of 700,000.
To accommodate them, we would have to build – in that year – three cities in that year the size of Southampton. They do not just need homes but also power cables, water pipes, school places, and shops. We did not do anything like that, of course. So more properties were subdivided, rents were driven up, more power was imported, and rushed extensions to schools had to be arranged.
The 500,000 leaving did not necessarily free the type of accommodation the incomers needed or could afford. Many of the new arrivals are younger people on low incomes needing affordable housing in cities or fast growing towns. Those leaving may well be better spread geographically and include better-off citizens going to live for some years in a place with more sunshine.
This further adds to the strain to build enough of the right homes and facilities where the newcomers wish to settle or have to settle to fill the job vacancies).
The Government has now said it will change policy to cut legal migration by 300,000 a year. This will still leave it above 2019 levels, when the Conservative manifesto said we would reduce it. It leaves it massively above the 50,000 net a year mark which the Thatcher Government saw as a ceiling; In some of the Thatcher years it was around zero or even negative.
Its proposals make sense. They should reduce the number of dependents students can bring in, cut the number of work visas granted (by more than their current plans), and encourage students who come to undertake a one, two, or three-year course to return to their own countries rather than seeking work to extend their stay.
The Treasury and Department of Work and Pensions are making good progress with plans to encourage more people to return to work, and to help people out of permanent unemployment by helping those with long term illnesses or mental health problems. It should be easier now there are more jobs that allow working from home, and more can be done to support people at home or in a workplace with suitable equipment, furniture, and understanding of their needs.
The only criticism I have of the current plans is they are taking too long to roll out. We need them now, as we need to expand the domestic workforce now. There are still plenty of jobs available.
Cutting the numbers of legal low-pay (and no-pay) migrants would reduce pressures on homes and public services. It would cut public spending. Those worried about British CO2 levels would get big wins from a smaller population. Getting more people already here into work and better paid jobs would be good news too. So, ministers: get on with it.