14 July 2020

Alasdair Smith is an Emeritus Professor of Economics at the University of Sussex and is a member of the UK Trade Policy Observatory.

There were no surprises in yesterday’s government announcement of the post-Brexit ‘points-based’  immigration rules (except for those who thought that a provision for health and care might actually cover social care workers).

The government’s stated objectives are “flexibility and control over our borders”. However, an essential feature of the points-based scheme is that it is not actually operated at the border, but in the jobs market through the rules that non-UK employees must satisfy in order to take up a job offer in the UK. EU citizens will continue to have visa-free entry to the UK: the change for them is in their right to take up employment in the UK. (In all of this, Irish citizens are treated the same as UK citizens, and indeed EU citizens in Ireland can enter the UK without passport checks.)

Because “control over our borders” is not primarily exercised at the border, the UK has scope for local flexibility: the points-based system could in principle have different rules in different parts of the UK.

However, when the government published its Immigration and Social Security Co-ordination (EU Withdrawal) Bill on 19 February 2020 it stated: “we will not introduce regional salary thresholds or different arrangements for different parts of the UK.” It noted that the Migration Advisory Committee (MAC) had advised against regional variation in the salary thresholds in the points-based system. The MAC believed that the most likely form of regional variation would be an increased salary threshold in London, and this would be undesirable. Regional variation also threatens to increase the complexity of an already complex form of labour market regulation.

But I want here to make the case for a different kind of regional flexibility, allowing EU citizens an automatic right to take up a job in some parts of the UK, bypassing the points requirements. This would cut through the red tape, not increase it.

Leading candidates for such flexibility could be London, Scotland and Northern Ireland, subject of course to the change being approved by the Mayor of London and the London Assembly, the Scottish Parliament, and the Northern Ireland Assembly respectively.

Part of the case is economic. The large tourism and hospitality sectors in London and Scotland employ many EU citizens. Allowing these sectors to continue to employ EU citizens without having to meet the salary and skills tests of the points-based system will help them to live with Brexit (and to recover from COVID-19). Scotland has a higher proportion of older people than the rest of the UK, and looser immigration rules might help it deal with its demographic issues. Northern Ireland will have to face the economic costs of the new border in the Irish Sea. Companies (like the large retailers) who currently supply Northern Ireland from Great Britain might be induced by border frictions to switch to operating on an all-Ireland basis, and Belfast will be a less attractive Irish base than Dublin if Belfast regulates the employment of non-Irish EU citizens and Dublin does not.

Of course, immigration always has a political dimension. The UK government can fairly point out that the decision to leave the EU was an all-UK decision; and with even more force than it obtained a mandate in December 2019 to end freedom of movement with the EU. But London, Scotland and Northern Ireland did not vote to leave the EU, nor did they vote in 2019 for the current UK government. The UK government can use its parliamentary majority to impose uniform employment rules throughout the UK, but it doesn’t need to do so, and it would be wiser to allow the rules to reflect the different economic needs and expressed political preferences of different parts of the country.

Would allowing London employers greater freedom to employ EU citizens harm the interests of low-paid UK citizens in London? There’s little evidence that low-paid workers lose from greater freedom of movement, and in any case, it’s for the political representatives of Londoners to make the judgement of what’s best for London. And any effects on low-paid employees outside London from more relaxed employment rules in London would be minimal. The UK government is unimpressed by the EU’s emphasis on level-playing-field conditions, so it is odd for it to insist on uniform labour market regulation across all the UK.

Nor would it create any additional enforcement problem. EU citizens will have visa-free access to the whole UK; making it easier for them to take legal employment in London will surely reduce rather than increase the probability of them seeking illegal employment elsewhere.

Perhaps the biggest risk for the government is that those parts of the UK that retained freedom of movement with the EU would demonstrate the economic advantages which the rest of the UK has given up? But this just underlines my argument – there’s no good reason to stop different parts of the UK making their own judgements about the links between migration, employment and economic growth.

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