David Cameron seemed to suffer a bout of temporary amnesia last week. He used a trade delegation to India to announce Britain is open for business to Indian students wanting to come and study here, despite having introduced an immigration cap that effectively relies on falling numbers of non-EU students.
Just the week before, his message to Eastleigh voters was that the Conservatives will be clamping down on the economic migrants taking advantage of Britain’s “soft touch”, deploying a strategy to try and shore up core Conservative votes.
These mixed messages are emblematic of a wider dilemma Cameron faces: to retoxify or detoxify? One can see the political logic of the core-vote strategy: immigration comes number two only to the economy as an issue for Conservative voters. Cameron must have in the back of his mind polling in which more than a fifth of Conservative voters say they would consider voting Ukip in a general election. This seems to be solidifying into worrying levels of real support in Eastleigh: one Populus poll last week put Ukip at 21%, although there are serious questions about the extent to which a strategy designed to fight Ukip on one front is compatible with a strategy for winning over the marginal voters needed for a 2015 majority.
But the biggest takeaway from last week’s mixed messages is the extent to which they show immigration policy is decided on the basis of political strategy rather than what’s good for the British economy. Neither party can claim to be innocent of this charge. Unfortunately, though, when it comes to immigration, the triumph of politics over pragmatism tends to be most assured when the economy is faltering, because it is precisely when people are feeling economically vulnerable that the immigration becomes most toxic.
It is dangerous for the international business community to perceive the UK government pursuing a political strategy that damages the UK’s growth prospects. Yet the strong words of John Cridland, the director-general of the Confederation of British Industry, ahead of Cameron’s Indian trip, reflect the views of the majority in the business community: the government’s stance on immigration and the EU is doing tangible damage to UK plc.
The overall economic benefits of immigration are contested, although there is good evidence to believe that immigration does have a net positive effect on the exchequer. The political issue for the previous Labour government was that the positive financial benefits of immigration were not felt equally by all: people in lower-skill, lower-paid work experienced wages being held down as a result of the free flow of labour in the EU. This was something Labour never acknowledged while it was in government, to the detriment of its support among these groups.
Where there is no ambiguity, however, is the impact that high-skill immigrants and international students have on growth. The former make a strongly positive net economic contribution and enable key industries to fill the skill shortages that if left unchecked can cripple growth. Higher education is one of the UK’s most successful export success stories, a multibillion pound industry.
Yet the government’s target to reduce immigration to tens of thousands by 2015 has to rely on targeting these very groups. A big chunk of immigration into the UK comes as a result of free movement of labour in the EU, a founding principle of the EU that it is highly unlikely any prime minister will be able to do much about, save pressing the nuclear option of withdrawal. That means the only real slack in the system is to crack down on highly skilled migrants and students from outside the EU. Hence, these are the forms of immigration that have been targeted by the government. International student numbers have fallen by a fifth in the last year.
This not only has real and immediate impacts on industries such as higher education and advanced manufacturing. It has also created significant uncertainty in the business community about the lengths to which the government may be prepared to go to meet its target. Add to this the way in which the debate over Britain’s future relationship with the EU has been stoked for political reasons and Britain’s status as a good bet for investment is being eroded. This is something it will take much more than warm words on international trade delegations to fix.
There are also signs that the negative messaging about how tough it is to come to work in Britain is having a wider impact on Brand GB, with knock-on implications for our tourist industry. Britain is only the 22nd most popular destination for Chinese visitors; other EU countries such as Germany, with their cheaper visas, are more popular.
It is now looking likely that the government will miss its ill-conceived target. What slack does exist is quickly being exhausted, yet net migration still stands at around the 180,000 mark. The fall in international students will only make a temporary contribution to the target because students only stay for the length of their course. Eventually, it will reduce emigration as well as immigration, because students are counted when leaving as well as when coming in, so its long-term net impact will be little more than nil.
In addition, Bulgarians and Romanians will have newly acquired rights to live and work in the UK from 2014 onwards. Ministers have conceded there is little they can do about this, although the government-backed “Don’t come to Britain: it’s cold” marketing campaign only serves to highlight the panic there is about missing the target.
The short-term Ukip squeeze is heightening Cameron’s instinct to go for politics over policy on immigration. But in the longer term, a more pragmatic approach would pay off both politically and economically. The government missing its own target would be a gift to the Ukip 2015 campaign. It risks further exacerbating negative public attitudes towards immigration. So even the core-vote strategy is not without its risks and has the potential to backfire with the very voters whose support it is designed to consolidate.
There are some moderate steps that could be taken in the interim to diffuse pressures, without a complete abandonment of the target on which the government’s reputation is staked. International students could be excluded from the migration target, a move that has the backing of the business community, universities and the chairs of the Commons home affairs, business and public accounts select committees alike. Such a move would go much further to reassure potential students from countries such as India and China than merely claiming there are no limits to students coming here, which flies in the face of the facts. Company transfers could similarly be excluded from the target.
British voters, the business community and potential students from abroad are all more intelligent than last week’s inelegant volte-face gave them credit for. Economically and politically, the government stands to gain from a more sensible, long-term approach.