Cable and the cap


For once, I agree with Vince Cable. The Government’s cap on non-EU immigration is bad for British business.

Preventing businesses from accessing the skills they need weakens their incentive to operate in the UK. As Vince points out, firms have already relocated to more friendly environments: over at the BBC he tells of two investment banks that have shifted operations to Hong Kong, having been allowed to recruit only 30-40 people from overseas rather than their usual hundreds.

The cap is a greater threat to industry at the more skilled end of the jobs market. One would expect the British strawberry picking industry to survive without foreign labour because the skills required to pick strawberries are relatively homogenous consisting, primarily, in owning a pair of hands. However, this is not true of, say, the British football industry. Were the Premier League denied the opportunity to showcase the unique skills of Ronaldinho and Tévez, one would not expect it to survive for all that long.

An outright cap, then, seems a silly option indeed. It fails to draw a distinction between more and less skilled workers. This enables the ludicrous possibility that the quota could be filled with substitutable labour and thus bar access to the more unique skills that firms struggle to obtain domestically.

A more sensible immigration policy recognises that some skills can be obtained domestically and others can’t. Given that immigration confronts us with trade-offs (domestic unemployment, strains on infrastructure and the like), it is best that British labour is used wherever it can perform the job well (strawberry picking) and immigration permitted wherever domestic supply of the relevant skills is short (the Premier League is one example, but there are many others). Immigration can be incredibly beneficial. Skills based systems (such as Australia’s) account for this fact, channelling foreign labour into the industries where it is most needed. Regrettably, the blanket cap on non-EU immigration does not.