How will the MAC report affect London's businesses?

The strength of London’s economy is intrinsically connected to the diversity and vibrancy of its people. To preserve this, London First has been advocating for a fair and managed immigration system since the outcome of the referendum.

Over the last couple of years, the has Home Office tasked the Migration Advisory Committee with a series of research questions and consultations to make sure that the immigration system will work for businesses and fulfil their pledge for more control over migration. The most recent report took a closer look at the role for a points-based system, Australian or other-wise, and the right level for the salary threshold.

The MAC’s response – published on 28^th January – recommended that the Government should keep its current ​“UK-style” points-based system” with a couple tweaks to its Tier 1 Exceptional Talent and Tier 2 Skilled Workers route. The MAC advised keeping Tier 2 broadly as it currently functions – as an employer-sponsored system with a checklist of ​“points” applicants will have to fulfil – including the salary threshold/​requirement. If implemented, this would be welcomed by many businesses, as it would make it easier to prepare for these changes by the proposed implementation date of January 2021. Nevertheless, smaller businesses who don’t yet have a sponsorship license will face greater costs and time pressures to understand the new demands placed upon them to be able to keep hiring the workers they need.

The main recommendation for the Tier 2 Skilled workers route was a lowering of the general salary threshold from £30,000 to £25,600, to reflect the expanded remit of skills eligible (expanding to A‑level/​Apprenticeship degree level, rather than just university graduates). While London First had called for lowering the salary threshold to around £21,000, in line with the London Living Wage, it is a step in the right direction and will make it easier for many employers to keep accessing skilled construction workers, as well as media, design and administration professionals. 

The MAC rightly acknowledged that London, with its 38% share of foreign workers, compared to the 18% UK wide – will be harder hit by these changes. That’s why the recommendations to have no regional differentiation in the salary threshold are a positive step – otherwise it would have meant that the salary threshold would have been 25% higher for London, adversely affecting the capital’s businesses. 

However, to make the transition to the new system as effective as possible, the Government needs to factor in the timescales involved and that businesses will need some form of a transition period after the full system is revealed. Without a transition phase many employers will face a sudden cliff-edge in recruitment at the end of this year – especially in crucial sectors like social care. 

The MAC pointed out if government is concerned with the pressure on these sectors that it could temporarily aim for a lower salary threshold – this would obviously be welcome. But an even better solution to the cliff-edge was already proposed in the 2018 White Paper: a temporary short-term worker route until 2025, which would enable businesses to hire workers on fixed-term contracts (with a reciprocal cooling-off period), giving employers more time to upskill and adjust salaries. 

This route could be kept under review and adapted to ensure that our economy stays at #FullStrength while the country adapts to the new trading relationship with the EU. 

Businesses welcomed the proposal to expand the new entrant category and lower the salary threshold for them to around £17,900. The new entrant category would apply to students switching from Tier 4 to working, applying for a graduate scheme or for workers aged under 26 on the date of the application.

While there has been much talk of the points-based system – it’s best application would be to improve the Tier 1 – Exceptional Talent route, now rebranded as Global Talent route. The current skills requirements are too high and applicants should be judged on their potential rather than their established exceptional talent. Extra points could be given for STEM qualifications and creative skills. For employers, it is important that this route would also cover self-employed and freelancers – especially in the creative sector. 

While trying to comply with its research request, the MAC noted the distinct lack of quality data available from the Home Office as well as suitable formats from other departments to link data sets for more evidence-led policy making. London First has consistently made the point that better data leads to better immigration policy and we can only hope that more changes are underway in the departments to improve data retention and collection methods, and ensure they are comparable. 

It is unclear if the Government will incorporate the MAC’s recommendation in its forthcoming White Paper (expected in March), but it is vital that the plans support a fair and managed system. Failure to do so will risk the UK’s economic growth, and its ability to continue as a world-leader in many sectors.