So, is an open labour market a good thing or not? There is little point in looking to the government for guidance on this. A few weeks ago, ministers were praising themselves for having reduced migration – legal migration, that is, not the illegal kind, which continues to grow.
The government – or rather Rishi Sunak’s government, which introduced the rules now taking effect – has achieved this partly by making it difficult and expensive for employers to offer jobs to foreign workers. Salary thresholds have been increased. Costs and bureaucracy have been loaded onto the process. It can cost thousands of pounds to obtain a work visa. In April, a Skilled Worker Visa was increased in price by £75 to £1,235; a Global Business Mobility visa has been put up £114 to £1,865.
But now Rachel Reeves seems to have had a change of heart. She wants to reimburse employers for the costs of obtaining visas for skilled workers – to the tune of £5,000 per worker, up to a maximum of £25,000 per employer over a 12 month period. However, the concession will only apply to a limited number of ‘high-growth’ businesses – or rather, businesses which the government has decided have excellent prospects. Anyone else will have to continue to stump up as before.
In our era of hyperactive government, markets cannot be allowed simply to get on with it
If you are running an AI start-up – an industry which the government has decided that should be encouraged – then all well and good. If your business is dull and doesn’t excite ministers – say manufacturing rubber grommets somewhere in the Midlands – then you can stuff it. For you, there will be no handouts, just visa fees, taxes and soaring energy costs.
This seems to be Reeves’ strategy across the board: cause damage by jacking up taxes and then, realising what she has done, introduce subsidies to a favoured few in an attempt to partly offset the burden. She has also done it with VAT concessions for tourist attractions over the coming summer months – this, after fleecing the tourist industry with business rates increases and the threat of a tourist tax.
In all this we can see the creeping return of a government ‘picking winners’ – deciding which sectors and businesses are going to thrive and showering them with affection. Reeves’s National Wealth Fund – in which taxpayers’ cash is invested in promising high-growth businesses – is another facet of this.
This was a policy which failed in the 1970s and it will fail again. No one can reliably predict which businesses will thrive over the coming years and which will fall by the wayside. If it was possible, then making money on the stock market would be child’s play, but of course it isn’t. It may seem obvious to some that AI is the future, and well it might be, but the more novel and energetic the economic sector, the greater the risks become. The reality with AI, as in every new technology before it, is that the few huge successes will be outnumbered by the many start-ups which will crash and burn.
This week, we taxpayers learned that we have lost the entire £100 million that we ploughed into a broadband firm called Gigaclear. When Reeves leaves office, which I suspect might not be long now, I don’t recommend that she apply for a job in venture capital.
The job of government ought to be to create the right fiscal and regulatory environment to allow capital investments to fight it out amongst themselves – with low and stable taxes. As for migrant labour, why can’t we have a system which gently favours UK workers without hindering employers who need to import workers from abroad?
An obvious answer would be to levy a higher rate of employers’ National Insurance contributions only on overseas workers to cover the cost that migration imposes on the NHS and other public services but without making it prohibitively expensive to hire the workers that a company needs.
Better still, abolish National Insurance contributions (wind it all up into income tax) for all but overseas workers. That would do away with the ‘jobs tax’ for UK workers for good, imposing it only where there is a proper case for it. As for work visas, their price should be limited to the genuine administration costs; they shouldn’t be used as an underhand means of raising revenue or as a punitive measure.
But, no. In our era of hyperactive government, markets cannot be allowed simply to get on with it. Everything must either be officially encouraged or officially discouraged, sometimes at the same time. The result is the bewildering mess which Reeves has helped create.
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