Despite the huge challenges they face, refugees are the most entrepreneurial migrants in Australia – and are nearly twice as likely to start a business as Australian taxpayers in general.
Read my piece in the Guardian to coincide with the publication of my new study for the Centre for Policy Development and OPEN on refugee entrepreneurship in Australia.
Greece’s former finance minister is being pilloried for doing what needed to be done. My piece for the Guardian
Apart from cut our tax burden, boost innovation, improve our quality of life etc etc. My piece for the Guardian’s Comment is Free
This is not a very happy new year. Rail fares, energy prices and fuel duty are all being jacked up. And today VAT goes up from 17.5% to 20%.
Optimists claim that the economy is strong enough to shrug off the VAT rise. People barely noticed when VAT was cut from 17.5% to 15%, so why should a rise to 20% make much difference? In any case, the rise is necessary, George Osborne asserts, to help fill the gaping hole in the public finances.
It’s true that few people will balk at paying two or three pence more for a packet of chocolate digestives. But, over a year, it all adds up. During the election campaign the Liberal Democrats claimed that the “Tory VAT bombshell” would cost the average family £389 a year, a figure that Labour is now throwing back at the coalition government.
Worse, VAT hammers the poor hardest, because they spend almost all their meagre incomes, whereas the rich save a big chunk of theirs. The Institute for Fiscal Studies reckons that the VAT rise will lop 1% off the after-tax incomes of the richest 10% – and 2.25% off those of the neediest 10%. That is hardly progressive.
The VAT rise will not just hurt people’s pockets: it will adversely affect jobs and growth too. Lower consumer spending means fewer jobs for people making things and selling them. In April, national insurance will go up by 1%, equivalent to an extra penny on income tax – all this at a time when public-sector pay is frozen, private-sector wages are stagnant, benefits are being slashed and many people are struggling with huge debts, often secured against their depreciating homes. Add big public-spending cuts and the fiscal squeeze will take roughly 2% out of the economy this year.
Unless private investment takes off, the economy will stagnate, unemployment will rise and the deficit will fail to shrink much. The government would be cutting to stand still – lots of pain for hardly any gain.
Of course, the government’s gamble may pay off. As the public sector and consumers retrench, business investment and exports may boom. The government points to countries – such as Canada in the 1990s – that tightened their belts and continued to grow. But circumstances in Britain now are different. Whereas Canada and others offset their fiscal squeeze with monetary loosening, the UK cannot cut interest rates below 0%. Worse, banks deny credit to small businesses that want to invest. And whereas previous belt-tighteners benefited from booming exports, Britain’s main export markets – Europe and the US – are weak.
In the longer term, we need to tap into the boom in emerging economies such as China, India and Brazil, but that will take time. The government isn’t helping by turning away foreign students, damaging one of the UK’s most promising export sectors.
The government claims that the alternative to today’s VAT rise is bigger spending cuts. But that isn’t true. Yes, the coalition government needed to set out a credible framework for stabilising the national debt, but its decision to tighten the screws so far and so fast was a political choice. It wouldn’t surprise me if Osborne was planning pre-election tax cuts for 2014.
Instead of raising VAT and national insurance this year, the government could introduce taxes on carbon and financial transactions next year. And it should levy a tax on land values. Since all the land in Britain is worth some £5 trillion, an annual levy of 1% could raise £50bn a year – without depressing economic activity, because land is in fixed supply: central London can’t be spirited away to a tax haven.
As well as preventing property bubbles (and busts), a land tax would be fair. A mere 160,000 people (mostly hereditary landowners) own more than two-thirds of Britain – and the value of that land increases not through their own striving, but through that of others. Surely it would be better to tax this windfall gain than the hard work and enterprise of those who generate it? And since infrastructure improvements, such as a high-speed rail network, boost surrounding land values, a land tax could also help to finance investment in future growth. There is an alternative to austerity – if only the government would listen.
This article first appeared on the Guardian‘s Comment is Free.
To anyone concerned that immigration is out of control, a promise to capthe number of people entering Britain seems very appealing. That’s why the Conservatives made the pledge during the election campaign. Such is the anti-immigrant fervour among the Tory grassroots that David Cameron didn’t dare ditch the proposal when drafting the coalition deal with the Liberal Democrats.
But now that the government is actually beginning to implement the policy, the holes in it are becoming all too clear. It will damage the economy without addressing any of the political concerns about immigration.
Theresa May, the new home secretary, has imposed an initial cap of 24,100 on the number of non-EU migrants who can come work in Britain between now and April 2011. She has also announced a consultation with businesses and other interested parties before introducing a more permanent limit. The overarching aim is to reduce net immigration to Britain from “hundreds of thousands” – the actual figure was 176,000 in the 12 months to June 2009, according to the Office for National Statistics – to “tens of thousands”.
The new cap is absurd. Since less-skilled workers had already been denied legal entry by Labour’s points-based scheme, it will only keep out highly skilled workers from outside the EU – people with exceptional talents and those with skills that are in short supply in Britain. Tightening the screws on migrants who are already small in number but make an outsized contribution to the economy will damage the fragile recovery while scarcely denting overall migrant numbers.
Once the arbitrary annual limit is reached, foreign workers will be turned away irrespective of their merit and how much they are needed. Big businesses will not be able to recruit the talent that they need to compete in global markets. A small business that has just won a big export order but cannot find the highly trained engineers it needs in Britain will not be able to hire them overseas. A local school that needs a new science teacher will have to do without. The football club you support won’t be able to bring in a top-class African or Brazilian striker. So much for the government’s claim that Britain is “open for business” – it is actually putting the shutters up.
Only the most extreme opponents of immigration object to highly paid foreign workers with valuable expertise who pay lots of tax and make little use of public services, while many of the government’s supporters in business depend on such migrants. So where is the political gain in clamping down? Most of the new arrivals that people expressed concern about during the election campaign have come from eastern Europe. Short of leaving the European Union, their numbers cannot be curbed by government policy – although because of the recession, far fewer are coming while many more are choosing to go home.
In opposition, the Conservatives had an incentive to fan the flames of public discontent about immigration. But now that they are in government, they would do better to adopt more constructive policies. Since freedom of movement within the EU is here to stay, they should point out its benefits – not just to the British economy but also to the millions of Britons who live, work and retire on the continent.
Since so many of the tensions about immigration revolve around housing, they should ease planning restrictions and swallow their hang-ups about building more social housing. And since public services are another flashpoint, they should make sure that local services respond more quickly to changing needs – and have the cash they need to do so. These are all points the Labour leadership candidates could be making too.
The coalition government should get serious about its immigration policy. By capping foreign talent, it is tilting at windmills.
To anyone concerned that immigration is out of control, a promise to capthe number of people entering Britain seems very appealing. That’s why the Conservatives made the pledge during the election campaign. Such is the anti-immigrant fervour among the Tory grassroots that David Cameron didn’t dare ditch the proposal when drafting the coalition deal with the Liberal Democrats.
But now that the government is actually beginning to implement the policy, the holes in it are becoming all too clear. It will damage the economy without addressing any of the political concerns about immigration.
Theresa May, the new home secretary, has imposed an initial cap of 24,100 on the number of non-EU migrants who can come work in Britain between now and April 2011. She has also announced a consultation with businesses and other interested parties before introducing a more permanent limit. The overarching aim is to reduce net immigration to Britain from “hundreds of thousands” – the actual figure was 176,000 in the 12 months to June 2009, according to the Office for National Statistics – to “tens of thousands”.
The new cap is absurd. Since less-skilled workers had already been denied legal entry by Labour’s points-based scheme, it will only keep out highly skilled workers from outside the EU – people with exceptional talents and those with skills that are in short supply in Britain. Tightening the screws on migrants who are already small in number but make an outsized contribution to the economy will damage the fragile recovery while scarcely denting overall migrant numbers.
Once the arbitrary annual limit is reached, foreign workers will be turned away irrespective of their merit and how much they are needed. Big businesses will not be able to recruit the talent that they need to compete in global markets. A small business that has just won a big export order but cannot find the highly trained engineers it needs in Britain will not be able to hire them overseas. A local school that needs a new science teacher will have to do without. The football club you support won’t be able to bring in a top-class African or Brazilian striker. So much for the government’s claim that Britain is “open for business” – it is actually putting the shutters up.
Only the most extreme opponents of immigration object to highly paid foreign workers with valuable expertise who pay lots of tax and make little use of public services, while many of the government’s supporters in business depend on such migrants. So where is the political gain in clamping down? Most of the new arrivals that people expressed concern about during the election campaign have come from eastern Europe. Short of leaving the European Union, their numbers cannot be curbed by government policy – although because of the recession, far fewer are coming while many more are choosing to go home.
In opposition, the Conservatives had an incentive to fan the flames of public discontent about immigration. But now that they are in government, they would do better to adopt more constructive policies. Since freedom of movement within the EU is here to stay, they should point out its benefits – not just to the British economy but also to the millions of Britons who live, work and retire on the continent.
Since so many of the tensions about immigration revolve around housing, they should ease planning restrictions and swallow their hang-ups about building more social housing. And since public services are another flashpoint, they should make sure that local services respond more quickly to changing needs – and have the cash they need to do so. These are all points the Labour leadership candidates could be making too.
The coalition government should get serious about its immigration policy. By capping foreign talent, it is tilting at windmills.
The Daily Mail claimed yesterday that “nearly every one of 1.67m jobs created since 1997 has gone to a foreigner“. Conservative immigration spokesman Damian Green claimed that there were almost 730,000 fewer British-born workers in the private sector than in 1997. Andrew Green, of the MigrationWatch pressure group, said: “The government’s economic case for mass immigration is finally blown out of the water.”
In fact, these selective statistics are highly misleading. The Mail failed to mention that the figure of 1.67 million new jobs refers to people of working age (16-64 for men, 16-59 for women). Why exclude older workers? Green focuses on private-sector jobs among people of working age. Why exclude public-sector jobs and older workers? Both confused “foreign-born people” with recent immigrants. Yet many people who were born abroad have been here for a long time.
As Habib Rahman of the Joint Council on the Welfare of Immigrantsrecently pointed out on Cif, what’s wrong with people who have lived in this country for decades, most of whom are British citizens, getting a job?
Broader Office of National Statistics (ONS) figures put those figures in context. Total employment in Britain has risen by just over 2.5 million since Labour took office in 1997, from 26.444 million to 28.986 million. Employment among people born in the UK has risen by nearly 800,000, from 24.468 million to 25.259 million. Employment among UK citizens has risen by 1.2 million from 25.478 million to 26.691 million.
The total employment rate (the proportion of people of working age in employment) is the same, 72.6%, as when Labour took office. The employment rate among people born in the UK and among UK citizens has also remained stable.
So, despite the worst recession since the 1930s, and with a large increase in migration over the past decade, 2.5 million more people in Britain are in work, 0.8 million more people born in the UK are in work, and 1.2 million more British citizens are in work (and remember that some long-term residents are not British citizens).
The bigger point is this: there is not a fixed number of jobs to go around in the economy, so simplistic assertions that foreigners (or foreign-born people) have “taken” jobs that would otherwise have gone to British people are incorrect. If there were fewer immigrants in this country, there would also be fewer jobs around, because immigrants also create jobs when they spend their wages, and in complementary lines of work. For instance, a Polish builder creates jobs for British people selling building supplies and British interior designers. Even Andrew Green of MigrationWatch has conceded that immigrants don’t take “our” jobs.
George Osborne does not look like a convincing chancellor-to-be. Polly Toynbee’s charge that the Conservatives’ economic policy keeps zigzagging is correct. It is also true that the Tories’ tax plans do not add up. But it is nonsense to claim that deciding not to implement Labour’s planned rise in national insurance contributions would be a “tax cut” that the country cannot afford. It simply means that a different – and with luck, better – way would have to be found to fill Britain’s gaping budget hole – £167bn this year, according to the Treasury’s latest forecasts.
At a time when unemployment is painfully high and workers’ incomes are being squeezed, it is astonishing that the government – a Labour government – thinks that the best way to raise extra revenue is to increase already high taxes on labour. What is progressive about hitting hard-working people with the bill for the financial crisis?
The national insurance hike is not only unfair; it will also damage future growth by making labour more expensive and penalising effort. It will drive a bigger wedge between the cost of employing people and how much they actually take home, cutting pay and costing jobs. And it will discourage many people from working harder – and some from working at all. That, in turn, will reduce the tax take and raise spending on unemployment and other social benefits.
Existing income tax and national insurance already increase labour costs by half, according to the OECD, while a single person on two-thirds of average wages faces an effective tax rate of over 40% on every additional pound they earn. Raising taxes still further on something the government wants to encourage – hard work– is perverse. Governments of all stripes should be cutting them as far as possible instead.
There are better ways to fill the budget gap, as I argue in my new book, Aftershock: Reshaping the World Economy, which is out on 6 May.
Tax harmful things, such as carbon emissions. A charge of £30 a tonne could raise around £16bn a year and reduce emissions. That would raise as much as a 3-percentage-point rise in the basic and higher rates of tax, a similar rise in employee and self-employment national insurance rates, or a 3.5-percentage-point rise in the standard rate of VAT, according to the green budget produced by the independent and highly respected Institute for Fiscal Studies. If the tax per tonne rose as emissions fell, a carbon tax would ensure a steady source of revenue.
The government could also accelerate desirable reforms, such as raising the official retirement age. It is normal for people to work longer now that they can be productive well past the age of 65 – and unaffordable for governments to burden young workers with paying to keep sprightly 66-year-olds on the golf course. The government could raise the retirement age by three months a year for the foreseeable future, while removing the incentives for early retirement and the obstacles to working longer. It would give a triple boost to government finances, reducing pension spending, increasing the tax take and boosting economic growth. Since many people have had their retirement savings devastated by the crisis, they should be open to working longer to replenish them.
A third option is to introduce a tax on land values, as I argue at greater length in an article in this month’s Prospect. That would help curb property speculation, which diverts funds from productive investment in booms and then causes terrible busts. Shifting the tax burden from labour to land would also boost growth, according to an OECD study. Why? Because whereas taxing income from work is wasteful – less is produced, and no tax is raised on the lost output – land supply is fixed. No matter how heavily you tax it, land cannot move, or be spirited away to a tax haven.
A tax on land values would also be progressive, since land in Britain is more unequally distributed than in Brazil – there, 1% of the population owns 49% of the land; here 0.3% owns 69%. Moreover, the value of land increases each year not through landowners’ striving, but that of others. As economic activity in London has soared through the ingenuity and toil of the masses of people who have flocked there, the value of the 300 acres of fields – now known as Mayfair and Belgravia – passed down to successive Dukes of Westminster over three centuries has sky-rocketed to an estimated £6.5bn. Wouldn’t it be better to tax that windfall gain rather than the work of those who really generated it?
Britain’s public finances are in a terrible mess. Putting them right will be painful. But it is also an opportunity to have a big debate about reforming the tax system to make it fairer and less damaging to growth. The three parties could start by looking seriously at the three options mentioned above.
For anyone of a progressive bent, the prospect of the Tories returning to power is profoundly depressing. However sick of Gordon Brown people might be, David Cameron is hardly an appealing alternative. So at one level it is cheering to see the Conservatives’ poll lead melt away with the winter snow. While a narrow Tory victory remains likely, according to political betting markets, it is not in the bag. But while keeping the Tories out would be heartening in the short term, Gordon Brown’s re-election would most likely be disastrous for Labour in the longer term.
Some election victories are a poisoned chalice. With hindsight, it was fortunate for Labour and catastrophic for the Conservatives that John Major won in 1992. Sterling’s ejection from the ERM shredded the Tories’ reputation for economic competence, and five years of in-fighting, blunders and scandal consigned the Conservatives to the political wilderness after 1997. It seemed for a while as if the party might never win office again. The Tories would surely have bounced back more quickly if they had lost in 1992. Conversely, a Labour victory in 1992 could have been fatal. Had the pound plunged within months of Labour taking office, the party’s chances of re-election would have been remote. The Labour government would have marked a brief progressive interregnum between long periods of Conservative dominance.
While we do not have the benefit of hindsight, 2010 feels a lot like 1992. Most people are fed up with the government but unconvinced by the opposition. The ruling party has become too comfortable with power and often seems bereft of purpose. The prime minister is at best uninspiring, more often dismal. Most importantly, the economic outlook is unpromising – and there is a growing chance that a run on the pound will wreak havoc with the recovery and the government’s plans. Even if catastrophe is avoided, running Britain in an age of austerity will be a thankless task, especially for politicians who believe in active government.
Tax hikes, spending cuts, curbing public-sector pay, cutting public-sector jobs – does Labour really have the stomach for it? Do Labour politicians want to spend the next five years undoing a lot of what they have achieved over the past 13? Do they honestly think voters will look kindly on them next time around if their sales pitch is that their cuts were “kinder” and more reluctant than the hypothetical cuts voters might have suffered under a Tory government? Even if the economy stages a phoenix-like recovery, will voters thank Labour for it? If Labour scrapes through in 2010, there is a good chance it would face a 1997-style electoral oblivion in 2015.
All the more so since five more years of Gordon Brown would test the patience of even the most diehard Labour supporters. Whatever his qualities might be, he is singularly ill-suited to being prime minister. His style rankles. His decision-making (or indecision) is erratic. He is tainted by all the mistakes of the past 13 years – not least cheering on the financial bubble that has now gone spectacularly bust. And since Labour has not had the guts to get rid of him over the past three miserable years, it seems highly unlikely that the party would find the courage to do so after he had won an electoral mandate. Besides, whoever the leader might be, voters would doubtless be gasping for change after four terms – 18 years – of Labour government.
To put it another way, if the choice for Labour is between either an unrewarding extra term in office followed by several terms on the margins or a narrow defeat, a period of renewal and a good chance of returning to government within five years, surely the latter is preferable? Surely only those whose political lifespan is nearing its end, those who depend on Gordon Brown for their advancement, and those who cling to the trappings of office would prefer the former?
The possibility of a hung parliament does not fundamentally alter this calculation. Since the Liberal Democrats have all but ruled out a coalition, a minority government (and most likely a second election) would prolong the uncertainty – increasing the risk of a sterling crisis – but would not change the underlying choice between Tory now or Tory later.
Of course, there are ifs, buts and maybes. One objection is that a Tory victory might result in such severe harm to Britain – for instance, a sequence of events that resulted in Britain leaving the EU – that it must be avoided at all costs. A more immediate danger is that if George Osborne sl
ashed spending, the economy would tank again. That is a big worry. But even a re-elected Labour government might be forced to bring forward budget cuts if markets panic. And in political terms, the likelihood of Tory economic mismanagement strengthens the argument that losing the election would benefit Labour longer term.
Another risk is that Labour might tear itself apart in opposition, rendering itself unelectable, allowing the Tories to win again by default in 2015 unless the Liberal Democrats could capitalise on the situation – a rerun of 1983. That said, Labour might also tear itself apart if it was re-elected, as John Major’s Tories did.
Others will argue that Labour could succeed where Margaret Thatcher failed and go on and on and on. A Labour victory might cause the Conservative party to implode (extremely unlikely) or result in electoral reform that entrenched a progressive majority. That possibility is certainly appealing, not least to Lib Dems and Greens. But with or without a change in the voting system, it seems highly unlikely that Labour would stagger on into an unprecedented fifth term after five more years of austerity under Gordon Brown, still less that the Lib Dems would want to prop them up in office.
The prospect of a Europhobic, economically confused, anti-immigrant, privilege-defending Tory government led by a lightweight PR man is soul-destroying. But as disheartening as it now seems, this is an election that Labour might be better off losing.
As the recession bites, unemployment soars, and protests against foreign workers proliferate, the publication of Office for National Statistics figures (pdf)
showing that the number of foreign-born people in work rose last year
would appear to confirm what opponents of immigration have been saying
all along: foreigners are taking "British" jobs. But the picture is far
more complex than that.
Note, for starters, that critics would
single out immigrants whatever the statistics showed. When immigrants
are in work, they are taking our jobs; when they are out of work, they
are a burden on the welfare state. Immigrants can't win: they are
damned if they do and damned if they don't.
Second, opponents
of immigration (and others, including myself) have previously pointed
out – correctly – that ONS migration figures were deeply flawed. In
particular, they did not accurately count the number of migrants from
central and eastern Europe, who as EU citizens can come and go freely.
If many of the Poles taking up jobs in Britain were not counted in the
boom times, they are unlikely to be counted if they have since lost
their jobs or left now we are in a bust. Foreign-born workers may thus
not be faring as well as the ONS figures suggest.
Third, the
category that the ONS has highlighted – foreign-born people – includes
British citizens born abroad and immigrants who arrived as children and
are only now entering employment after finishing school or university.
In fact, 40% of the UK's foreign-born workers are now British citizens.
On what grounds would the wildcat strikers and opponents of immigration
object to their employment?
The other category that the ONS
provides figures for – non-UK nationals – includes people who have been
in this country for decades but have never taken up British
citizenship. Again, what would be wrong if more of them were now
working? What we would really like to know is whether the number of
recent migrants in work is rising, but unfortunately those figures are
not available. We would also need more research into what is driving
the employment trends, which again we don't have.
Digging a
little deeper in the ONS statistics that we do have, one finds that the
175,000 rise in the number of non-UK nationals in work (which is
subject to a margin of error of plus or minus 111,000) comes from an
unexpected source. Employment among east Europeans has not risen, it
has increased (subject to big margins of error) among Indians (up
24,000), citizens of the 14 other countries that were EU members before
2004 (up 25,000), South Africans (up 27,000), and Pakistanis and
Bangladeshis (up 31,000). At the same time, figures released to
parliament last month show that the number of work permits granted to
Indians last year rose by 24,000 to 50,000, while those granted to
South Africans rose by 2,000 to 4,900 and those to Pakistanis by 1,700
to 3,300 (a mere 725 were granted to Bangladeshis). Together, this
suggests that nearly all of the rise in the number of South Africans
and Pakistanis in work last year is due to people who were already in
Britain finding jobs, not new arrivals. Since the employment rate among
Pakistanis, particularly Pakistani women, has historically been low, it
is surely a good thing that more of them are now working.
The bigger point, which bears repeating again, is that there is not a fixed number of jobs to go around,
so that making divisive statements about one group of people taking
jobs off another is not only invidious, it is also inaccurate. Everyone
who works creates jobs for others when they spend their wages as well
as in complementary lines of work. Women who work are not taking jobs
off men; black employees are not depriving white people of work; people
from outside London who work in the capital are not nabbing jobs off
those who were born there; and foreigners are not grabbing British
jobs. The debate we should really be having is how to create more jobs.
Investing more in our rickety infrastructure would be a good place to
start.
The economy is shrinking, unemployment is soaring, insecurity is rife – no wonder people are angry. As wildcat strikes against foreign workers spread across Britain, people who fear for their own jobs may feel sympathetic. But however understandable the strikers' emotions may be, they have got it all wrong.
Foreign workers are not responsible for the mess we're in; the financial crisis is. Blame bankers (British and foreign), finger blase regulators and blinkered politicians, spread responsibility among everyone who piled on debt and gambled on house prices – but don't scapegoat Italian oil workers.
Nor would kicking out foreign workers create more jobs for British people. The notion that there is a fixed number of jobs to go around is a nonsense. Workers (foreign or otherwise) not only take jobs, they also create them. Gordon Brown should have known better than to legitimise the old National Front canard of "British jobs for British workers" in his 2007 conference speech. He should eat his words.
Fewer foreigners around would mean even less spending in the shops, and so cost British people their jobs. Chucking foreign employees out would cause further dislocation to businesses already struggling with shrivelled credit and collapsing demand. It would play havoc with public services, depriving patients of doctors and nurses, the elderly of carers, and children of teachers. It would plunge the economy into an even bigger hole – and we'd end up with fewer jobs for British people, not more.
Let's be clear: if British workers are being discriminated against in Lindsey or elsewhere, that is unacceptable. It would be a breach of both British and EU law. But there is no evidence of that. What the strikers appear to want is that foreign workers be discriminated against – and that too is unacceptable.
The free movement of labour is not only economically beneficial and morally right, it is a legal requirement of EU membership. If Britain were to discriminate against other European workers, what is to stop other EU countries discriminating against British ones? Some 2 million Brits are thought to work in another EU country – do we want to put their jobs at risk too?
During the boom years when the pound was overvalued, Britain attracted workers from around the EU. But with the UK economy now predicted to be hardest hit by the global recession, Brits may feel tempted to seek work on the continent. That's what happened when unemployment reached 3 million in the 1980s, as workers similar to the brickies who featured in Auf Wiedersehen, Pet sought work in Germany and elsewhere.
Pundits and politicians are forever intoning that we must not fall prey to protectionism. Barricading ourselves off from outsiders leads not to salvation, but to economic depression and political extremism. That's one reason why the EU, with its single market, impartial regulations and common political institutions, is so important. Reverting to a policy of each to his own, beggar-thy-neighbour, and devil take the hindmost, would cause the EU to unravel.
That would delight Europhobic Tories, Ukip, the BNP, MigrationWatch and a host of rancid fellow-travellers. But the trade union and wider Labour movement should have no truck with it. Solidarity does not stop at the water's edge. The EU is a champion of workers' rights. And if the flaws of financial globalisation are to be fixed – and climate change curbed – it will be in partnership with Europe, not against it.
Now of all times Derek Simpson, Jon Cruddas and others on the left should not be making common cause with what Peter Mandelson has rightly called "the politics of xenophobia".
Are immigrants taking our jobs?
It is an explosive issue, especially with Britain sinking into
recession and unemployment rising. So opponents of immigration will
doubtless seize on a new report
by the independent thinktank MigrationWatch UK, which claims that those
dastardly foreigners who have the cheek to look after your granny or
pick English strawberries are stealing jobs from British people. Yet
the claims of Sir Andrew Green‘s thinktank are flatly contradicted by figures from the Office for National Statistics (ONS).
MigrationWatch claims that nearly all the jobs created in the UK since 2001 have gone to immigrants. But figures from the labour force survey (xls),
show that employment among British-born people actually rose by 378,000
between the second quarter of 2001 and the second quarter of 2008, the
dates arbitrarily chosen by MigrationWatch. If one excludes the recent
fall in employment due to the financial crisis and instead compares the
last three months of 2000 with the last three months of 2007, the
number of UK-born people with jobs has risen by just over half a
million (520,000).
MigrationWatch also claims that employment
among UK-born people has fallen by 230,000 since the second quarter of
2004, when Britain opened its labour market to the Poles and other
eastern Europeans joining the EU. But this too is contradicted by ONS
figures. These show that the number of British-born people in jobs
actually rose by 43,000 between the second quarter of 2004 and the same
period of 2008. Excluding the impact of the financial crisis,
employment rose by 175,000 between the second quarter of 2004 and the
last three months of 2007.
MigrationWatch says that "there has
been no progress at all in getting British-born unemployed workers into
work" since 2001, and blames immigrants for this. But ONS figures
suggest otherwise. They show that the employment rate among
British-born people – the proportion of UK-born people of working age
in employment – rose sharply in Labour’s first term, from 73.5% in the
second quarter of 1997 to 76% in the third quarter of 2000. Since then
it has remained roughly steady: it was 75.6% in the second quarter of
2004 when Britain opened up to east European workers and 76% in the
last quarter of 2007. In other words, the employment rate stopped
improving well before eastern European migrants started arriving in
large numbers, and has not worsened since.
The bigger point is
this. As even MigrationWatch is forced to concede, there is not a fixed
number of jobs in the economy. Immigrants don’t just take jobs, they
also create them, as they spend their wages and fill roles in
complementary lines of work. If Britain threw out its Polish workers
there wouldn’t suddenly be more jobs for British people – just as
throwing women out of work wouldn’t provide more jobs for men.
Whichever
way you look at it, immigrants are not taking British people’s jobs. On
the contrary, they are helping to provide vital public services and
keep small businesses going. Not for the first time, MigrationWatch’s
xenophobic prejudice is causing it to twist the truth. Andrew Green
should be ashamed of himself.
Extraordinary times call for extraordinary measures. Alistair Darling’s statement was a pre-budget report
only in name; in reality, it was an emergency budget crafted by Gordon
Brown. It was big and bold, but it should have been bigger and bolder.
Worse, the main plank of the government’s plan to support the economy –
a cut in VAT to stimulate consumption – is misplaced.
On
the big picture, Gordon Brown is right and David Cameron is wrong: a
fiscal stimulus is urgently needed to prop up the economy as demand
slumps. Faced with the sharpest downturn since the 1930s, interest-rate
cuts are not enough. While a further increase in government borrowing
is risky, doing nothing – and risking an even longer and deeper
recession – would be reckless.
The forecasts for government
borrowing are huge – £78bn in this tax year, £118bn in the next – but
national debt will still peak at only 57% of GDP, comfortably below the
level deemed prudent by EU rules. It is not a tragedy if public debt
rises even higher in the short term. So the Conservatives’ critique is
wide of the mark. The real problem with the government’s stimulus
package is that it is too small and poorly targeted.
A stimulus
of £20bn between now and April 2010 is not trifling, but it amounts to
only 1% of GDP. It will do little to fill the gap left by the collapse
in private consumption and investment, not least since some of the
stimulus will be saved. In comparison, president-elect Obama’s team are
considering a fiscal boost of $500bn, or even $700bn, over two years –
which is equivalent to 1.75%-2.5% of GDP in each year. A bigger
stimulus would not only provide a bigger boost to the economy directly,
it could also help restore confidence, by signalling to consumers and
companies that the government is serious about supporting the economy.
The focus of the emergency budget is also misdirected. Encouraging debt-ridden consumers
to spend more is wrongheaded. For a start, it may not work: since
retailers’ hefty discounts are doing little to tempt shoppers to spend,
a cut in VAT of 2.5% is unlikely to either. But even if it does work,
encouraging consumers to go on yet another spending spree is unwise
when they need to start saving more. It would be far better had the
government done more to limit job losses, repossessions and
bankruptcies and invest in areas, such as infrastructure, that bring
long-term benefits to society.
For sure, the measures to help
small businesses are welcome. A combination of tax cuts and loan
guarantees will help. But a large share of the assistance consists of
merely deferring a planned rise in corporation tax. A temporary cut in
corporation tax for small businesses would have provided a lifeline for
them and their employees.
Likewise, the £1.3bn package to protect
jobs is too small. More jobs could be saved if the government
introduced a temporary cut in employers’ National Insurance
contributions. And while the £1.8bn housing package is better than
nothing, three months’ grace for those struggling with their mortgages
will bring little relief. The government should also provide funds for
housing associations or local authorities to buy up property that banks
wish to repossess, allowing homeowners to remain as tenants if they
wish.
Above all, the focus of the stimulus package should have
been a big increase in investment in infrastructure and other public
works, along the lines proposed by president-elect Obama. Instead, the
government merely brought forward £3bn in capital spending, a drop in
the ocean. It should be doing much more: bringing forward and
increasing spending on social housing, upping and accelerating
investment in Britain’s crumbling infrastructure, especially transport,
and offering bigger subsidies for energy-efficiency measures, such as
loft insulation.
Longer term, the government’s growth and
deficit forecasts look optimistic. It seems unlikely that the economy
will start growing again as early as the second half of next year. The
recovery is also likely to be slower than the government predicts,
since consumers will be struggling with the burden of their excessive
debts for many years. So looking forward, the tax rises in the next
parliament are likely to be bigger than the 0.5% increase in National
Insurance contributions and the introduction of a new 45% tax band on
incomes above £150,000 announced.
The measures announced in the
pre-budget report are unlikely to be the last word. As the crisis
continues to take violent and unpredictable new turns every other week,
with the US banking giant Citigroup
forced to seek a bail-out over the weekend, further action will no
doubt be needed soon. The government may need to inject further capital
into Britain’s banks – and outright nationalisation may even be
necessary. A further fiscal stimulus is also likely to be needed in
next year’s budget. It’s a pity Darling didn’t announce it yesterday.
Tony Blair once said that the government was best when it was boldest. Gordon Brown is – finally – heeding that advice. The government’s three-pronged plan
to shore up Britain’s banking system is bold and right. It is our best
hope of pacifying the financial panic, getting credit flowing through
the economy again and thus avoiding a 1930s-style depression.
The Bank of England’s half-point cut in interest rates is also welcome, particularly since it was coordinated
with other central banks. It signals that the US and Europe are finally
acting together to tackle the global financial crisis. But a larger cut
is needed soon: at 4.5%, UK interest rates are still far too high.
The
bigger challenge is to get banks lending again – to each other, to
companies and to individuals. They need enough cash to conduct their
day-to-day operations; secure access to medium-term funding; and extra
long-term capital to provide a cushion against bad debts and allow them
to lend to creditworthy borrowers.
The government’s plan
addresses all three of these needs. The Bank of England will supply
£200bn in short-term funding; the government will underwrite £250bn of
medium-term finance; and it will also inject £25bn in long-term capital
initially – and perhaps up to £50bn in total – in the form of
preference shares that pay a fixed return and protect taxpayers’
investment.
Headline writers may describe the government plan
as a £500bn bail-out, but that is completely misleading. The £200bn
consists of short-term secured loans; the £250bn is a form of
insurance, for which the government will be paid a fee; and the £50bn
is an investment that pays a return. This is not money for nothing.
And while it is certainly true that taxpayers’ money is at risk,
we will also share in the upside when the banks recover – as they are
much more likely to do thanks to the government’s intervention. Most
importantly, the risk of doing nothing – or of continuing to do too
little, too late – is far greater. If the banks went under, so would
businesses and jobs. By keeping the UK banking system afloat, the
government – acting on behalf of all of us – is giving the economy a
life raft.
Many of the details of the government’s plan are
still unclear. Ideally, the preference shares should pay a hefty
interest rate to properly compensate taxpayers and give banks an
incentive to seek private financing if and when they can. Taxpayers’
money should also come with strings attached, such as guarantees that
banks will use the extra capital to lend to small businesses and
individuals rather than pay extravagant dividends and unjustified
bonuses. And, of course, the plan must be implemented speedily and
efficiently.
We are by no means out of the woods yet. Global
financial markets are in turmoil; other governments need to follow
Britain’s bold lead soon. The UK economy has many other weaknesses:
consumers are overladen with debt, often secured against housing that
remains overpriced; unemployment is rising; food and energy prices
remain painfully high; and the global gloom is hardly auspicious for
exporters, despite the fillip of a weaker currency. What’s more, the
banking rescue package will swell the government’s already-large
deficit – although borrowing to invest in banks need not increase the
national debt in the long term. But while 2009 will no doubt be
unpleasant, the government’s actions should stave off economic
collapse. Amid all the gloom, that is certainly good news.
The time for half-measures is over. Britain is no longer in the grips of a credit crunch or even a financial crisis; it is suffering a full-on financial heart attack. Markets have seized up.
Banks will no longer lend to each other. Credit to companies and
individuals is drying up. Unless credit starts flowing again soon, a
nasty recession – conceivably even a depression – looms and with it,
massive job losses, bankruptcies, repossessions and a sharp fall in
living standards. The government needs to act – now.
But what to do? Ken Livingstone, Seumas Milne
and others argue that the government should turn its back on market
economics. Since capitalism seems to be collapsing under the weight of
its internal contradictions, the government should finish it off. More
measured voices such as the TUC’s Brendan Barbour
favour a ragbag of measures, such as a new industrial policy. But all
of them are missing the point. Righting the huge problems in financial
markets certainly requires decisive government intervention, but
lashing out at generally well-functioning product and labour markets is
perilously misplaced. The last thing a heart-attack victim needs is to
have a healthy leg amputated. The priority now is tackling the
financial crisis; everything else is a dangerous diversion.
But
while the government should not try to turn the clock back to the
1970s, it does need to change course. Its ad hoc approach will no
longer do. The nationalisations of Northern Rock and Bradford &
Bingley, and the government-orchestrated rescue of HBOS, were justified
at the time. But damage limitation is no longer enough – not least
since Lloyds’ rescue of HBOS seems to be dragging it down, too. Now
Royal Bank of Scotland seems under threat; Barclays may be next in
line. Waiting for the next bank to collapse and then picking up the pieces will not restore confidence or get credit flowing around the economy again.
Across Europe,
governments are rushing to following Ireland’s lead and guarantee
(nearly) all deposits in the banking system. Here, the Treasury has
just raised the guarantee on savers’ deposits to £50,000. But while it
may soon be forced to extend a broader guarantee, this will not tackle
the root causes of the crisis: a lack of capital in the financial
system and sheer panic.
A cut in interest rates would do some good.
Although inflation is well above the target rate of 2%, the Bank of
England should slash rates when it meets on Thursday. As the global
economy tanks, oil prices are sinking, so inflation is set to fall.
Collapsing demand means that the real threat now is deflation, not
inflation. But a big cut in interest rates will not be enough. If banks
are unwilling to lend, monetary policy alone is virtually useless – in
Keynes’ words, it is like "pushing on a string". Bolder measures are
needed.
The US has opted for a $700bn bailout. In theory, taking
bad debts off banks’ books should reassure markets that that they are
not about to go bust. Banks may be willing to lend to each other again,
their share prices may recover somewhat, and investors – not least
Asian governments and those of oil-rich states – may be willing to pump
some of their huge cash reserves into them. But the bailout route is
deeply flawed. It provides the most help to the banks that made the
biggest mistakes. It exposes taxpayers to huge potential losses. And it
does little to recapitalise the banking sector and thus encourage it to
start lending again.
There is a better way. As now seems likely to happen in some form, with the chancellor’s statement on Wednesday morning, the government should buy stakes in – and in some cases, take over – stricken banks, an approach that worked well in Sweden
in the early 1990s. With the government standing behind banks, the fear
that they are about to go bust would vanish. An injection of taxpayers’
money would strengthen banks’ balance sheets, allowing them to start
lending again. But it would not be money for nothing: the government
could acquire preference shares, which pay a hefty interest rate and
put taxpayers first in line to be repaid if a bank fails. These could
be combined with warrants (basically, options to buy shares at a future
date at a specified price), so as to give us all a share in the profits
when banks – and the economy – recover.
John Hussman, a US analyst and investor, has suggested
a novel variant of this idea. He proposes that the government provide
capital in the form of a "super-bond". This would be subordinate to
deposits, and so could be counted as capital. But if a bank went bust,
taxpayers would be repaid before shareholders and senior bondholders,
thus protecting the financial system, customers and taxpayers. The
super-bond could pay a relatively high interest rate to give banks an
incentive to shift to private financing when conditions improve, but
interest payments could be deferred until banks were profitable so as
not to drain their cash reserves now.
A government
recapitalisation of the banking sector – combined with much tougher
financial regulation to limit future excesses – would be good politics,
as well as sound economics. With Labour so far behind in the polls, its
only chance of recovery depends on rescuing the economy from the worst
crisis since the 1930s. Decisive action would marginalise the
Conservatives, who are unconvincing advocates for state intervention in
the financial system and are, in any case, powerless to act. And since
even David Cameron has been forced to concede that government injections of capital may be needed, the government has political cover to act.
Gordon Brown has shown that he can be bold when circumstances demand it. Now is such a time.
With a stagnant economy and Led Zeppelin performing, Britons could be forgiven for thinking they had travelled back to the 70s. This week saw yet more throwbacks, with the proposal of Labour MP Frank Field for non-EU migrants to be thrown out after four years – sorry, for "balanced migration", and the return of manpower planning. Oh dear.
Field should know better than to team up with the Tory MP Nicholas Soames and MigrationWatch to put forward a "one in/one out" temporary-worker scheme. The plan is unfair, unworkable and harmful to the economy. Throwing out people who have been working here for four years would deprive us of people who have demonstrated their contribution to society and adapted to British life; it would also deter many talented people from coming. And since only a select few would be allowed to settle, with priority given to the rich and well-paid, Russian oligarchs and American investment bankers could doubtless stay while Asian acupuncturists and African nurses would be turfed out. This is Powellism dressed up in statistics.
The Field-Soames plan is in tune with the Conservatives’ sketchy plans for an immigration quota. Fortunately, the government has rejected it. Unfortunately, its own policies are not much better. It is pressing ahead with a new points-based system, modelled on Australian lines, for vetting workers from outside the EU.
This system will allow a top tier of highly educated people to enter, while slamming the door on those with fewer skills. Among a middle tier, only those with a job offer in areas where a shortage is deemed to exist will be admitted. On Tuesday, a government-appointed committee of wise men and women delivered a provisional shortlist of shortage occupations, which the government is due to finalise in October. Doctors, secondary-school teachers and social workers are no longer welcome, nor are midwives, most nurses and, crucially, care workers.
Neil Kinnock once warned Britons not to be young, not to fall ill, and not to grow old; and the government will now be turning away people from Kenya or the Philippines who could help meet the desperate need for carers for the young, the old and the sick. With suitable British applicants vanishingly few and Polish workers increasingly going home as the plunging pound devalues their wages, pensioners will not just be struggling with fuel bills this winter, they will be shamefully short of care. The immigration minister, Liam Byrne, trumpets how "tough" the new system is, but it is toughest on the weakest and poorest.
While there are lots of things that Britain might want to import from Australia – such as its wine and cricketing success – its devilishly complicated system of micromanaging immigration is not one. Governments are no good at second-guessing the ever-changing labour needs of complex modern economies. Even if the government could somehow ascertain whether Britain needs more IT staff or welders right now – its advisory committee says not – it certainly can’t predict what the economy will need a year from now. Only a year ago estate agents were in hot demand; now bailiffs are.
The new points system is like an 11-plus for foreigners. It prejudges how people will contribute to society and denies opportunity to those who don’t make the grade. It would have turned away most of the people on the Windrush, the father of Olympic hero Kelly Holmes, and – had he been born abroad – a young Richard Branson. A Labour government should know better.
Labour MP Frank Field’s new proposal for "balanced migration" is many things, but it certainly isn’t balanced. A "one-in/one-out" immigration policy is unfair, unnecessary and unworkable – and would deal yet another blow to Britain’s faltering economy.
Field frets that Britain’s "open door" policy will lead to a large increase in the settled UK population, which he believes is not unsustainable. He proposes instead what amounts to a temporary-worker scheme, policed by employers. Foreigners could work here for up to four years, but would then be sent packing. Businesses that failed to produce evidence that their foreign workers had left the country would be denied future work visas. There would be a strict quota – perhaps 20,000, including dependants – on the number of non-EU workers able to gain permanent residency, selected on the basis of their skills as reflected in their salary.
Field’s proposal, cobbled together with Tory MP Nicholas Soames and the swivel-eyed xenophobes at MigrationWatch, is utterly misconceived. For a start, Britain does not have an "open-door" immigration policy: while people from within the EU can come and work here freely, those from outside the EU, which the Field-Soames proposal would target, cannot. The door is already slammed shut for all but the most highly skilled non-Europeans.
Second, as I have written previously, it is a fallacy that Britain’s population is destined to rise inexorably. The recent increase in immigration is largely temporary, and is already reversing itself: as the pound plummets and the economy teeters on the brink of recession, Britain is far less attractive to foreign workers. But, in any case, since when are other people such a bad thing? If having more people around is so terrible, why isn’t Frank Field suggesting that densely populated cities such as London, Birmingham and Glasgow prevent people from the rest of the country from settling there?
Even if one accepts that stabilising the population is desirable, Field’s proposal would not necessarily do so. Preventing most temporary non-EU workers from settling permanently would not limit entry from the EU, or keep out asylum-seekers, clandestine migrants, visa overstayers, and those entering on family reunification visas; nor, indeed, would it prevent Britons from having more babies and living longer. Indeed, if large numbers of Britons stopped emigrating, stabilising the population would require expelling existing migrants.
While the suggestion that employers should be able to hire the foreign employees they need has some merit, forcing most of those still here after four years to leave does not. After all, if their employers would rather they remained, these migrants are clearly contributing to the economy and society as a whole. Throwing them out would deprive Britain not only of the skills with which they arrived, but also of those they have acquired while living and working here. As an Arsenal fan, I don’t want Kolo Touré chucked out, and I’m sure Portsmouth fans would be loath to see Kanu go, too.
What’s more, making it much harder for skilled workers to stay on is Britain is hardly conducive to attracting them in the first place. Talented people increasingly have a choice about where to work; and with Australia, Canada and other countries wooing them assiduously, making them feel unwelcome here is tantamount to shooting our hobbling economy in the foot.
Common sense also suggests, and international experience in the US and elsewhere confirms, that businesses are hardly equipped to enforce immigration policy. At the same time, if workers would only allowed to stay in the country on their employers’ say so, they would be far more vulnerable to exploitation.
But perhaps the worst thing about the proposal is that the select few who would be allowed to settle in Britain would be the rich and the highly educated. Most likely, they would be American investment bankers and Russian billionaires rather than Asian acupuncturists or African nurses. That is hardly fair or progressive. Frank Field should think again.
Europe prides itself on being a continent of human rights, freedom and international solidarity. Yet it is fighting an increasingly dirty war against immigration, with casualties mounting every day. The biggest victims are the poor and the vulnerable, who are demonised as "illegal" or "bogus". But EU governments are also doing huge harm to the societies they purportedly want to protect.
Britain continues to hunt down unauthorised migrants and is planning to introduce ID cards for foreigners. In Italy, Gypsy camps have been burned down, and the Berlusconi government, far from protecting the targets of such racist attacks, is whipping up animosity against them and fingerprinting them. Spain is increasing its efforts to stop desperate Africans from reaching European soil, causing thousands to die each year as they take longer and more dangerous routes to avoid detection. Last month 15 people died of dehydration and exposure when their boat engine failed as they tried to reach Almería, on the Costa del Sol. The previous week 14 people drowned when their boat sank off nearby Motril.
Those lucky enough to escape death en route to Europe now face being locked up when they arrive. The EU’s new "return directive", which was recently approved by European interior ministers and MEPs, allows governments to imprison – sorry, detain – unauthorised migrants for up to 18 months. Why? For daring to cross a border in search of a better life.
As the EU begins to adopt a common approach to immigration, the British government is helping to draft Europe-wide measures that attract little coverage in the UK. Frontex, the EU’s border force, is helping southern European governments to patrol the Mediterranean and around the Canaries. And while the return directive was front-page news in Spain, it was a footnote in Britain.
There is plenty more to come. Nicolas Sarkozy, the son of a Hungarian migrant, has made cracking down on migration a priority for France’s EU presidency, which lasts until the end of this year. His proposed migration pact aims to make it easier for the EU to attract highly qualified migrants, establish common European refugee and asylum policies by 2010, beef up policing of the EU’s borders, and expel more illegal migrants. EU leaders are due to decide on the plans in October.
They should reject them. Europe’s clampdown on immigration is neither fair nor sensible. Undocumented migrants are not criminals, nor are they an invading army. They are human beings less fortunate than ourselves. Most come to do jobs that comfortable Europeans no longer want to do, but as Europe’s front doors are closed, they have to creep in through the back. Far from threatening Europe’s ageing societies, they are reinvigorating them. What’s more, the billions of pounds they send home dwarfs the sums that European governments give in aid.
The cruel irony is that, despite all the suffering they cause, Europe’s increasingly costly border controls fail to keep foreigners out. Instead, they foster people-smuggling and an ever-expanding shadow economy in which illegal migrants are vulnerable to exploitation, labour laws are broken and taxes go unpaid. They also encourage people who would rather work temporarily to remain permanently, because migrants fear that if they go home they will not be able to return to Europe. Surveys of Senegalese migrants in Italy show that most would prefer to spend part of their time working in Europe and part back home, just as the Poles who commute back and forth to Britain do. A sensible immigration policy would facilitate this.
Fear of foreigners is nothing new, yet rarely has panic about
immigration been so feverish. It tops voters’ list of concerns,
jangling raw nerves about jobs, public services, race and terrorism.
The new bogeyman is a Muslim asylum seeker. Yet, contrary to tabloid
hysteria, we are not being swamped with immigrants – nor are they a
threat. Fewer than 10% of people in Britain were born abroad. Asylum
applications were a mere 25,710 in 2005, while 15,685 failed asylum
seekers were deported; the refusal rate exceeds 80%. Britain, a soft
touch? Hardly.