Martin McTague and Richard Burge gave evidence.

We will now hear oral evidence from a representative of the Federation of Small Businesses, who is attending by audio link, and from a representative of the London Chamber of Commerce and Industry, who is with us in the room. I welcome our witnesses and thank them for appearing today. Before calling the first Member to ask the first question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme motion that the Committee agreed earlier. We have until 10.20 am. Before we get to the questions, perhaps the witnesses could introduce themselves.

On a point of order, Mr Stringer. May I first draw the Committee’s attention to my entry in the Register of Members’ Financial Interests in relation to financial support that I receive in my office for work on immigration policy?

Thank you. Richard Burge, please introduce yourself.

Richard Burge:

Thank you very much. My name is Richard Burge. I am the chief executive—fairly recent—of the London Chamber of Commerce and Industry.

Martin McTague:

I am Martin McTague. I am the chair of policy and advocacy for the FSB in the UK.

Q I will start with a slightly more open question to the two witnesses. How do you see small businesses adapting to the new system that we have proposed?

Richard Burge:

With difficulty. The obvious difficulty they have is that they are surrounded by chaos at the moment. Many small businesses have furloughed a large number of members of staff, or they are operating on their own. They have only so much bandwidth, so this will be hard work for them, particularly as they do not know what the rules will be. If they employ EU citizens, their concern is that they will now be introduced to the world of having to register themselves and get themselves licensed, which, like customs documentation, is a completely new world for them, and they have six months to do it.

Martin McTague:

Sorry, I could not hear that question very well. Could you repeat it? You are very echoey and quite distant.

Just before you do, Minister, it would be helpful if when asking questions, Members said who they were directing the question to.

Q Certainly, Mr Stringer. The question was an open one, directed at both witnesses, and it was basically about how they see small businesses adapting to the proposed new immigration system.

Martin McTague:

I just about got that; I think it was a question about small businesses’ experience of immigration. The reality is that 95% of small businesses have absolutely no experience of dealing with any kind of visa system, and the system has been largely designed for larger businesses with reasonably sophisticated HR resources. We have found that the biggest concentration of issues is to do with mid-skilled occupations; in other words, the debate tends to be very binary. It either refers to high-skilled and very sophisticated employment requirements or completely low-skilled ones, but there are a lot of mid-skilled positions that fall within the £20,000 to £30,000 bracket, and those are the ones that cause the most problems for small businesses in the UK.

Q I would like to ask two follow-up questions, one to each witness, if that is acceptable. My first question is to Mr McTague, given what he has just said about mid-skilled workers being a particular issue. Does he see the skill level of skilled workers’ being changed to RQF3—that is, A-levels—as helping to address that issue?

Martin McTague:

I assume that was to me, was it?

My question to Mr Burgh is about the fact that he talked about the process of sponsorship and becoming licensed. He may be aware that the Home Office is looking to streamline that system. Is there a particular change, or changes, he thinks we could make to the sponsorship licensing system that would help address some of the concerns he outlined?

Martin McTague:

[Inaudible] it is welcome. It is a change that we were keen to see, and there has been a welcome change in the Government’s approach.

Richard Burge:

To add to that, first of all, I have great admiration for the Home Office team working on this. I have worked for Matthew Rycroft before, in the Foreign Office, and he is one of the most talented managers in the public service. I think umbrella licensing is a good idea: it has good precedents, and it would create a huge relief for small businesses if they felt they could go to an organisation that had the ability to provide umbrella licensing. It would provide reassurance to the Home Office and a workable solution for small businesses, and we would be happy to be part of that process.

AsQ free movement comes to an end with this Bill and we transition to the minimum income requirement of £25,600, how have your members responded to that minimum income threshold?

Richard Burge:

In two ways. One is relief that the threshold was lowered; it is now a much more realistic threshold. I have to say, though, that it is going to be a lot more workable within London than it is for my colleagues who run chambers in other parts of the country. A threshold of £25,600 is quite high in different parts of the UK, given the wage levels there, so while I think it is workable in London—not ideal, but workable—I also think we concentrate on income too much as an indicator of value, rather than skills, and that in parts of the country, the threshold is still probably too high.

Q Martin, may I ask you the same question? I will repeat it: as we transition away from free movement and towards the minimum income threshold of £25,600, how have your members responded?

Martin McTague:

There has been a broad welcome for that change. I think there was a strong feeling that the previously suggested £30,000 threshold was going to be far too high, so £25,600 is a really good move in the right direction. We actually think it should be lower, because there are quite a few jobs, especially in the care sector, that pay less than £25,600. That is why we have called for a care sector visa, because we think the requirements of that sector will always be uniquely different from most of the rest of the economy. However, the move to £25,600 is definitely welcome.

Q An open question to both of you: if you could change one thing about the Bill to make it work for your members, what would it be?

Richard Burge:

It would be quite complex. It would be a move away from worrying about what people are paid to worrying about their skills. Skills are not necessarily measured by qualifications, so we welcome the reduction down to A-level standard. However, for instance, you could look at a small coffee shop, where you pay with your credit card. No accountant, bookkeeper or partner in an audit company is physically involved in your paying your money and it appearing in the annual accounts of that company, but you still need a barista to serve your coffee, so the question is: what matters now—is it skills and competence, or is it qualifications and what you happen to be paid? I would like to see that change.

Martin McTague:

The biggest thing for us is the bureaucracy of this system. We estimate that a typical business with fewer than 50 employees will probably have to spend about £3,000 per employee to get through this tier 2 process. That is made up of a whole series of different costs. The biggest obstacles to recruiting somebody through this system are simply the cost and the time required to do it. Many businesses that traditionally recruit on the open market and have never gone anywhere near this kind of tier 2 system will find it very off-putting, and may just constrain their ambitions and avoid doing it completely.

When the Bill was being formulated and opinion was being sought, the UK jobs market was entirely different from the one we shall see from the summer onwards, with many skills in very short supply—particularly for things like engineering, or even for people working in care homes or picking fruit. Do you not think that we shall see a situation in which a lot more British workers come into the jobs market, and that some of the concerns expressed in the past about the bureaucratic hurdles that might need to be coped with will actually not be such a great problem, because we will have a lot of very well-qualified and well-skilled British people? Is it right that the costs that we have just heard of from the Federation of Small Businesses will be a real incentive for companies to employ British people who are now, sadly, in many cases being thrown back on to the jobs market, in a situation in which we do not have, in effect, full employment? I think the FSB should be the first to answer that.Q

Martin McTague:

I can see that there will be more incentive to look for indigenous employees, but the reality is that a lot of the shake-out, or the potential shake-out, that we are hearing is likely to happen will be among the least-skilled people. Companies are going to enormous lengths to try to hang on to the rare skills that they have. If they have managed to recruit somebody from, say, the European Union, they are going to enormous lengths to try to get them to apply for settled status and to reassure them about the covid situation. I do not think that a new influx of unemployed people, many of whom will have poor skills, will solve a lot of the problems for these companies.

Richard Burge:

From a London point of view, I think the jury is out, literally. I do not think we really know what to expect as we come out of covid-19. The critical thing for London, and probably for all metropolitan areas, is the mobility of people, and the willingness of people to be physically mobile to go and find new work, possibly earning less than they were earning before. However, it is also about emotional mobility, too. Are people emotionally prepared to go and do new work, taking completely new tangents in their lives and probably earning less? That will be a real challenge. I think there will be greater opportunities, but not necessarily in a career path that people might have been expecting.

May I go first to the London Chamber of Commerce and then to the FSB? You have both spoken eloquently about the new challenges and red tape that the system will impose upon businesses. Looking at the other side of the coin, is there also not an extent to which this process puts some red tape and expense on potential employees from the European Union? It risks making coming to the UK to work less attractive. Q For example, I am from Germany and I have a job offer in London or I have a job offer in Dublin. Going to Dublin does not involve any charge or bureaucracy; going to London involves a visa, a health surcharge, and so on and so forth. Is there a danger that we are going to make this country much less attractive for skilled workers to come to?

Richard Burge:

I think it is inevitable that it is going to be more difficult for people from the European Union; that is the consequence of leaving the European Union and not having an immigration policy for people from there. It is no longer an internal market; it is now a normal external market.

I think what we need to do is to make the red tape manageable. I think part of that is umbrella licensing. Part of that will be border clearance that is rapid and smooth, so it needs to be digitised and there needs to be e-clearance, and that also means that it cannot get cluttered up with tourism. We hope that everyone from the European Union will be able to come without a visa and not get caught in that process. Part of this process is the mechanism, and I think that one of the big challenges for the Home Office is to ensure that, while there may be more bureaucracy, it tries to make that process as smooth and as digitised as possible, and that is going to be a big ask before 1 January.

Martin McTague:

I am really sorry; I can barely hear the conversation. Is there anybody closer to the microphone who could just repeat the essence of that question for me?

Q It was a question about whether or not there is a danger that introducing this system for EU nationals will make the United Kingdom much less attractive as a place for them to come and work, if they have fees and visas to apply for, whereas the equivalent job offer in Dublin, for example, would involve none of that.

Martin McTague:

I got the essence of your question. Most small businesses treated EU nationals just as part of the pool of labour; they would not even question where they originated, and it was just a very simple recruitment process. I think that the additional costs will act as a disincentive, but more importantly it is quite hard to persuade a lot of EU employees to stay in the country. They are leaving, and they are leaving with the kind of skills that are in really short supply.

Q My other question relates to the proposals that we were debating this time last year, when the same Bill was going through Parliament, and there was a proposal for a 12-month visa for workers at lower pay levels. That was fairly controversial at the time, but now it has been scrapped altogether, rather than being improved, which some of us would have liked to see. Is that a change that you welcome, or would you want the Government to think again on that? Again, I will go to the London Chamber first.

Richard Burge:

If I may start with that, certainly from a London Chamber point of view, and I think from the point of view of all my colleagues around the country, it was hugely disappointing to see that disappear completely from the Bill this time. It was a very sensible scheme. I think it demonstrated flexibility and a willingness to try to respond to helping people get through what will be a permanent change in the market. It is very sad to see it go. We would like to see the route for lower-paid workers—lower-skilled workers—being reintroduced in the same way as it was under the previous Prime Minister’s Government.

Martin McTague:

I think I picked that up. We were disappointed to see the disappearance of the 12-month scheme; we thought that was addressing an important part of the labour market, and it is regrettable that it disappeared. Hopefully something can be done to implement something similar.

I have a question regarding the change for non-EU migrants where it looks like the thresholds for wages are going to be coming down. The question is particularly for the London Chamber of Commerce and Industry. What impact do you think that that might have on the ability to get migrants with the right skills into the labour market in London and across the rest of the UKQ ?

Richard Burge:

It is helpful, because it is creating bigger diversity in terms of availability and access to labour. I think most small businesses, though, or any business will be keen to employ UK-based labour if they can. That is simpler and easier. In the end you do need to have access to global markets. We have to remember that we are a globally trading nation and, in the 21st century, trading tends to be in the skills of individuals and their brainpower and abilities. It is mostly about people rather than things, although we tend to focus on trade as being about things rather than people. The more we can do to keep our borders—within the Government’s requirements in terms of immigration for other purposes, social purposes—as open to people for work as they are for goods and services, the better.

Q How important are social protections, such as access to healthcare or pensions, to the recruitment and retention of employees from the EEA and around the world? Perhaps we can start with Mr Burge.

Richard Burge:

They are hugely important, particularly when you are talking about people whose skills are valued less in the marketplace of wages than those of others, so any complexity to that will be a disincentive to employment. I would ask that whatever we do in terms of social security payments and pension provision, we try to make that as simple as possible. They are potentially a huge attractant.

Q I have a follow-up or separate question for you, Mr Burge, about higher-skilled workers and particularly graduates. What can the Government do, or what have the Government been doing, that might continue to make the UK an attractive destination for overseas graduates and EEA graduates in particular?

Richard Burge:

The first community I would like to talk about is overseas graduates who graduate from British universities. What the current Government have done to release the block on people who graduate from British universities and come from overseas being able to work is a hugely positive step, enabling people who have been to university here to stay on and work for a year. That is hugely encouraging and hugely exciting, and I think most businesses will be enthusiastic about trying to pick up that market.

In terms of people coming from overseas universities and institutions, I think it is very important that we move ahead on equivalence of qualifications—the transferability of people’s qualifications—particularly in vocational skills. I think we have to streamline that. Obviously, we have to make sure, particularly when they are in life-governing professions like medicine, that those qualifications are rigorously examined, but the more we can move towards a universality of qualifications between like-minded countries, the better. That will help hugely as well, and I think we in the UK should be leading on it. We have the best universities in the world and therefore it is in our interests to make sure we have inter-transferability of those higher-level qualifications.

Q Thank you. Mr McTague, have you any comments on the approach to attracting higher-skilled overseas job applicants?

Martin McTague:

I think the key is trying to make sure that graduates or undergraduates are attracted to UK universities, because once they are in that pool of the immediately graduating, they become a much more attractive group for small businesses in particular. It seems that a lot of the barriers that have been put up and are going to restrict the entry of undergraduates are the biggest worry for a lot of small businesses, because they think that therefore they will not have that pool of very skilled labour to draw on.

Thank you.

Q My question is for Richard Burge in particular and concerns international companies in London that might well have existing employees based in Japan, Singapore or the United States who wish to come to London to work as part of their company’s operation. There are also companies that might be based in the European Union whose employees have habitually come to work in London but, under the new regime, will be in the same category as those first workers. My question to Mr Burge is, under the new regime, how will that system function? Will it be an equivalent situation, something that companies can work with easily, or will there be problems for international workers coming to the UK within a company that might even be based in London, but certainly an international one?

Richard Burge:

The answer is that I don’t really know. A lot of companies that are already established in places such as Japan will find it easier; for the ones that have operations elsewhere in Europe, this will be a new world. This also comes down to the Home Office being flexible and agile in terms of making sure that we assume positive intent on the part of companies—that they are not getting people into Britain secretly to do full-time work, but that they are in fact part of the transferable market within their company.

We need to address that. It will be complicated, but there are precedents in companies outside the EU, so I think we will use that as an example. It will be more difficult for smaller companies. Increasingly, we find that international companies in London are actually quite small; they are not huge operations. You can find yourself to be an international company in London by dint of the first order put on your website, whereas in the old days you would have spent 20 years developing a domestic market and then you would move internationally. Smaller companies might find themselves potentially hostage to this without realising it. So yes, complex.

I remind hon. Members of the scope of the Bill, which is EEA nationals, EU nationals and Swiss nationals, not the rest of the globe.

Q Thank you for that guidance, Mr Stringer. Of course, EU nationals will be in the same category as non-EU nationals were. Does the Bill provide the equivalence of the posted workers directive? Under EU regulation, under that directive, people can work in other EU member states. Will there be equivalence in this to cover that particular situation, where some workers—particularly people such as lorry drivers but other sectors too—may use that regulation to enable them to work?

Richard Burge:

I don’t know. We will look at that and provide you with some written advice on it.

I wanted to ask a follow-up to the question of the shadow Minister, my hon. Friend the Member for Halifax, about the income threshold. In some answers, we have heard about the effect that that might have on particular sectors, such as the care sector. Will you both say more about the regional impact of the provisions of the Bill? Do you have particular concerns for the regions? I understand that Richard Burge is speaking for the London Chamber of Commerce, but I am interested in what other chambers of commerce around the country might be thinking.

Martin McTague:

We have made it clear that we think—if I heard the question correctly—that the care sector is a special case and should have a separate visa arrangement, because it does not fit neatly into any of the categories that we might like to define under normal immigration rules. It is clear from the experience that we have had over the last few months that this sector is under massive pressure. Any major changes would be disastrous.

Richard Burge:

I would agree to the extent that I think that the care sector is a special case, but we need to make sure that the definition of the care sector—in terms of immigration—runs alongside what I hope is emerging in the Department of Health, which is a much closer definition of what care is, bringing it in. Certainly, the Health Secretary has been trying to say that care is as important as the NHS, so I think that it needs much more careful definition.

In terms of the regional perspective, we are a country of many parts. For instance, on the lower wage threshold, I am deeply worried that, particularly in essential services—care being among them, but also things such as porterage in hospitals—in many parts of the country this is not a sufficiently low level of wage to enable us to get people in who technically have lower skills but are in high demand. There needs to be a more nuanced approach to this in order to respond to the different economic circumstances in different parts of the country. My colleagues in other chambers think that I am quite fortunate being in London, where this wage level will get us through most of our problems but will not get them through theirs.

Q Do you feel that by 1 January there will be a regime in place that will be sufficiently efficient to ensure that members of the Federation of Small Businesses will be able to have confidence that the scheme is going to work well for them and the requirements of their business? I am mindful of the very difficult situation that we are in with covid-19, as has been said already, and the bandwidth that is available in government at the moment.

Martin McTague:

The short answer is that the time available is far too little for most small businesses to adjust to what is a completely alien system. It is relatively easy for the larger businesses with HR departments to make this adjustment. They may already be recruiting tier 2 employees, but for most small businesses it will be extremely difficult and costly. I think that all it will mean is that most of them will decide to scale back their operations and make sure that they adapt to a new world that has fewer skilled people.

Richard Burge:

My view is that most small businesses will be able to get through this, if they know the rules soon enough, if there is a process by which they can use umbrella licensing, and providing that new systems are put in place by the Home Office. I think that is the critical thing. As I said, I have huge respect for the Home Office under the leadership of Matthew Rycroft and his team, but they are dealing with things such as covid-19 issues on immigration, refugees arriving over the channel, the situation in Hong Kong, and the immigration surcharge. They have a huge job list to do—and this is the only one in which they have a choice about the timing. I hope that the Home Secretary will be looking internally at the Home Office and its capability to deliver things that will then enable business to respond in a timely manner. I am concerned about the pressure being put on them.

Q Since we have a little time left, to what extent does the shortage occupation list offer a partial solution to some of the challenges you face? We sometimes hear criticism that it is slightly unwieldy, slow and unresponsive. What is the experience of your members—from the London Chamber first?

Richard Burge:

It is slow and unwieldy and should be faster. One way of improving that is to involve businesses much more directly in analysing what a shortage occupation should be. We can rely on businesses who are asked to join, say, an industry body, to work alongside the Migration Advisory Committee on that work. We can rely on them to be forthright but not to plead special interest. It needs to involve business much more directly and that, it is hoped, will enable it to be much more responsive to the marketplace. The marketplace is going to change very dramatically over the next 12, 18 or 24 months, and we do not really know how it is going to change, so we have to be light of foot.

Q Mr McTague, what is the experience of your members with the shortage occupation list?

We seem to have a technical problem. While we are trying to sort that out, are there any questions to Mr Burge?

Q One final question, if I may, Mr Stringer. It is a broader question about the nature of this Bill, since, obviously, this morning we are going into the fine detail of a future immigration system. In fact, the Bill is pretty much silent on that and essentially hangs the powers to put that system in place on the Home Secretary. That would be the end of MPs’ involvement to all intents and purposes. Is that the appropriate way to go about making immigration policy?

Richard Burge:

It is up to you in this House to decide how you use legislation to maintain scrutiny of Government. We would ask that, whatever means are chosen—through primary legislation or regulation—it is done in a transparent way and involves us. Instead of us in business being told what is happening, we should be involved in those discussions and make them as transparent as possible. As far as I can see, employment and immigration are not a national security issue; it could be discussed much more openly and transparently. We can resolve differences through public dialogue rather than through private discussion.

May I just check that Mr McTague is there? Apparently, he is not. We will try to get him back.

Just while we are waiting to reconnect, I notice that the London Chamber of Commerce and Industry sometimes speaks on behalf of other chambers—in your answers you have said a number of times, “And my colleagues in other chambers.” What dialogue have you had with, for example, the Scottish chambers of commerce and others around the country to speak on their behalf?Q

Richard Burge:

Just quickly, there is a thing called the British Chamber of Commerce, which is a hub body.

Q The Scottish chambers of commerce are not part of that.

Richard Burge:

No, but individual chambers—the 53 member chambers across the UK—are members.

Q So only eight in Scotland.

Richard Burge:

That is right. There are 53 accredited chambers.

Q So just to check for the record, a large proportion of the chambers that you are speaking about are not the Scottish chambers.

Richard Burge:

No.

Do we have Mr McTague?

Martin McTague:

Yes, I am here. Sorry, the line dropped.

Q Thank you, Mr McTague. Sometimes the shortage occupation list is said to be an answer to some of the issues that you have flagged up this morning. At other times, we hear criticism that the shortage occupation list has been a slow and clunky process. What has been your members’ experience of the shortage occupation list?

Martin McTague:

The principle of the shortage occupation list is a difficult one for us, because it is a fast-moving situation and the shortage occupations can change from week to week and from month to month. It is better for them to be in a general category, but it is rather bureaucratic and clunky. It is a situation that we are prepared to stomach rather than appreciate.

Q How would you try to improve it?

Martin McTague:

Sorry, I could not quite hear that.

What improvements would you want to make to the procedure?

Martin McTague:

I would like to see a much more active engagement with business representative organisations so that, if there are changes, they can be quickly implemented and we are not waiting for a long, drawn-out bureaucratic process to work its way through the system. It is about keeping as much flexibility in the system as possible.

Q My final question to you, Mr McTague, is a broader question about the Bill. We have spoken a lot about the future immigration system that has been proposed by the Government, yet the Bill is pretty much silent on that. In fact, it is basically just handing a blank cheque to the Home Office to implement that. Do you think that is the best way to go about scrutinising and making immigration policy, or would you prefer to see the rules made in a different way?

Martin McTague:

I am really sorry, I can barely hear you. It is echoing and distant. Could someone closer to the mic help me?

Can you try one more time?

Q I will try again, Mr McTague. It is a broad question about how we make immigration policy. This Bill essentially gives the Home Secretary the power to put in place a system with limited scrutiny and oversight from Parliament. Do you think that is the appropriate way to go about things or would you prefer to see immigration policy made in a different way?

Martin McTague:

I think the fact that the Home Secretary is in a position to vary it and respond to changes in market conditions is better than if it was written on the face of the Bill and we had to go through some sort of legislative process to get changes made. In terms of flexibility, my vote is for the most flexible system we can adopt.

Q Is there no way you can have flexibility but with parliamentary oversight?

Martin McTague:

Sorry, can you say that again.

Flexibility does not mean that you cannot have parliamentary oversight, does it?

Martin McTague:

No, it is not that. I think the Home Secretary will be answerable to Parliament about the decisions that she or he has made. That would be a way in which Parliament could ensure there was proper scrutiny. There needs to be a system that can respond in real time to some of the really big changes in market conditions. They will be even more marked in the coming months.

Q Yet, ironically enough, you have spent most of your evidence saying that the Home Secretary was not responding to what business was saying at all.

Martin McTague:

I’m sorry, I am struggling to hear you.

I will stop digging there.

Martin McTague:

I apologise.

If there are no further questions, I thank Mr Burge and Mr McTague. These are not ideal conditions, but thank you for giving us valuable evidence this morning.

Martin McTague:

Thank you for bearing with me.

Sitting suspended.

On resuming—