An assessment of the house of lords report on the economic impact of immigration to the United Kingdom.

Author:Wright, Chris F.


On 1 April 2008, the Select Committee on Economic Affairs of the UK House of Lords handed down the findings of its review, The Economic Impact of Immigration. Its brief was to assess whether or not the immigration policies of the Labour Government have produced a net economic benefit. The House of Lords report concludes that there is 'no evidence for the argument, made by the government, business and many others, that net immigration-immigration minus emigration-generates significant economic benefits for the existing UK population'. (1)

The report comes on the back of a decade of substantial reform in UK immigration policy, which has made immigration a volatile and paramount topic. As the report states: 'immigration has become one of the biggest public policy issues in the UK [with] net immigration ... reaching a scale unprecedented in our history'. (2) Indeed, since the mid-1990s, the UK has gone from having one of the most restrictive economic immigration selection regimes in western Europe to one of the most liberal. Perhaps owing to the current salience of immigration in the UK, the findings of the report were highly anticipated and its unequivocal, pointed conclusion generated front-page press coverage. The media response was characteristically contrary: a headline in The Independent, a left-leaning daily newspaper, alleged the report to be 'malicious, misguided and badly misinformed', (3) while the more conservative Daily Express claimed the report showed that 'a once great nation is being ruined by its own government'. (4)

This article will provide an assessment of the House of Lords report into the economic impact of UK immigration. It is structured as follows. An overview of developments in UK immigration policy over the past decade will be provided by way of context. Detail of the contents of the report and the official response by the government will then be given. The remaining sections will evaluate the significance of the report's conclusions, seek to comprehend whether the report represents a new phase in the debate around the subject, and assess whether it could foreshadow a reorientation of government policy.


Until recently, the UK had one of the most restrictive policies on economic immigration--that is, immigration primarily for employment or business related purposes--in western Europe. Problems with 'race relations' in the 1960s had led to the UK's economic routes of immigration being curbed long before the oil crisis of 1973, which was the predominant catalyst for western European states closing down their guest worker programs. (5) Selection policies for economic immigrants remained tight for the next three decades.

Writing in the mid-1990s, Freeman observed that the UK immigration debate was 'obsessively' focused on 'controlling numbers and dealing with racial tensions ... immigration policy seems to be the work of a responsible political elite that veers from time to time toward populist manipulation of racial issues. It is a thin line between responding to a fearful public and exploiting their anxieties'. (6) This tendency extended to policy around economic immigration. A stated policy objective of the Major Conservative Government from 1990 to 1997 was to minimise inflows to the 'irreducible minimum', (7) with very little scope for foreign nationals to immigrate through economic or labour avenues. As Somerville puts it: 'of all liberal democracies', the UK had by the mid-1990s 'succeeded in restricting immigration where others had failed'. (8)

Against this background, the changes in UK immigration policy since the election of Labour under Tony Blair in 1997-from a policy of 'zero immigration' (9) to one that has sought to attract high, moderate and lower skilled migrant workers in large numbers--have been remarkable. The first sign of a policy shift came in the late 1990s when labour shortages, fuelled by consistent economic growth, prompted a steady increase in the number of work permits granted to foreigners. (10) By the early 2000s, continued economic buoyancy led the government to re-evaluate its entire immigration policy apparatus, with a series of liberal initiatives soon introduced to attract more foreign labour.

In 2000, work permit regulations--such as work experience requirements, the limit on the tenure of permits and some labour market testing provisions--were loosened in order to make permits more responsive to labour market demand. (11) Two years later, a series of initiatives were introduced to attract both high and lower-skilled workers. The Highly Skilled Migrant Programme, established to attract young workers with postgraduate qualifications, work experience and high earning capacities, also provided a route to permanent settlement. At the other end of the labour market spectrum, a new Sector-Based Scheme addressed shortages in hospitality and food manufacturing, and the quota for the long-established Seasonal Agricultural Workers Scheme was raised by 150 per cent. (12) Reforms lifting working restrictions for foreign students and working holidaymakers were also introduced in 2004. (13)

Perhaps the most significant initiative came in May 2004, when the European Union (EU) expanded its membership to eight central and eastern European states (commonly known as the 'A8' states), along with Cyprus and Malta. The existing 15 member states of the EU were allowed to limit the right of workers from the new member states to work until 2011, when any remaining restrictions would be removed. Unlike most other western European members of the EU, the UK opted to remove restrictions immediately. (14) As a result, some 580,000 central and eastern Europeans came (or in the case of those illegally residing, registered) to work in the UK over the ensuing two years. (15) This represented 'almost certainly the largest single wave of immigration that the British Isles have ever experienced'. (16) Unlike policies implemented prior to 2004, which largely (though not exclusively) sought to attract immigrants to higher skilled occupations, many of the A8 immigrants to the UK found employment in lower skilled work. (17) When the EU further expanded in January 2007 to include Bulgaria and Romania (the 'A2' states), existing member states were again given a seven-year window to phase out any restrictions on A2 workers. The UK adopted a different position to the one it took in 2004 and limited the right of nationals from these states to work to a few specific sectors. (18)

The decision to restrict A2 nationals from working in the UK was largely reflective of the political sensitivities that had arisen around economic immigration. (19) Since Labour was first elected to office, public discontent with the government's handling of immigration has steadily increased. As seen in Figure 1, the number of Britons rating immigration and race relations as the most important issue facing the nation today went from three per cent in 1997 to 46 per cent in 2007. The rise in the early years of the Blair Government coincided with heightened salience around asylum, rather than economic immigration. A near tripling of asylum applications between 1997 and 2002 prompted then Prime Minister Blair to pledge in 2003 to halve the number of asylum seekers within a year, a promise that was ultimately fulfilled. (20) Further spikes in public concern accompanied the 2004 decision in relation to A8 workers. This decision can partly be explained by the government's gross underestimation of the magnitude of immigration from the new EU member states.


In 2003, a report commissioned by the UK Home Office forecast the size of net immigration from the new EU member states (the A8 plus Cyprus and Malta) to be between 5,000 and 13,000 immigrants per year. These figures were accompanied by two important caveats: the authors acknowledged that the projection was underpinned by unreliable data and they assumed that other western European states would fully open their labour markets to A8 nationals at the same time. (21) However, as the UK was the only major economy not to initially impose restrictions on the rights of A8 nationals to work, the influx of immigration was substantially larger than anticipated.

When the government deliberated over the next expansion of the EU two and a half years later, the consensus from ministers and organised business that had greeted the decision on A8 expansion had evaporated. The stance of the Confederation of British Industry (CBI), the largest employer group in the UK, reflected that of the broader business...

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