Politics and the law of unintended consequences

Politics and the law of unintended consequences are perennial bedfellows. It’s not surprising given the tendency of politicians to stick their heads in the sand to avoid hearing unpleasant truths. So it is with the UK’s immigration policy of the past two decades, which many believe inadvertently led us to Brexit. This has cut across both parties in power. While the Conservatives may pretend to be anti-immigration, in the same way that they have pretended to be anti-EU, the migration numbers show that they are just as keen on large numbers of workers entering the UK as their predecessors.

There are of course sound economic reasons for this. Migrant workers solve labour shortages in key areas and provide an expanded tax base to service the increasing costs of an ageing population. As ready-made workers they also constitute a bargain compared to home-grown talent. While it costs £73,000 on average to educate a British child, a foreign worker costs zero. If the migration estimate for the last decade of 2.7 million people is correct, that is an effective dividend of £200 billion. For UK business it’s a simple calculation. In the skilled area they save money on training people and they further benefit from suppression of wage growth due to increased supply of labour.

However, there are problems that come with that level ofimmigration. The fact that they don’t impact on people in government, orbusiness leaders, seemingly made them irrelevant to these people until theadvent of Brexit. They have not had to compete for housing or jobs with the newarrivals, they do not live side by side with them, they don’t share the sameoverworked GPs or struggle to find seats on public transport. Importantly, theyalso haven’t seen their wages stagnate as housing costs have risen.

The last 15 years have seen both business and governmentdeny that there is a problem at all.  Theinitial tactic was to deny that the migration numbers were correct, indeed ithas only been since the referendum that we have seen the numbers acknowledged.The second tactic was to close down debate by accusing anyone who questionedmigration of racism. Finally, and most stupidly, when both of these tactics hadrun their course, the Government chose to shift blame onto the EU and freedomof movement. This was despite non-EU net migration outstripping net EUmigration every year since FOM came into being.

In truth successive governments chose not to implementcontrols on migration at every stage. They chose not to opt out of FOM until2012 and not to limit non EU migration in any meaningful way up to the present.It didn’t occur to them that by not providing the infrastructure needed tosupport this influx they would bring about a backlash. By blaming the EU theyhelped to bring about a situation that is about as far from what they wanted aspossible, the prospect of Brexit. In addition, by not listening to opposition,they have ensured that a majority of people now wish to see a reduction in thenumbers of migrants entering the country. This will put them on a sticky wicketshould we leave the EU and end FOM, who will they blame then?.

By lying about the downsides of migration, effectivelydenying that the laws of supply and demand existed, they have eroded any trustthat they may have had on the issue. Now, selling a continuation of currentmigration policy by stressing the positives will be that much tougher.  However, there may be a glimpse of light atthe end of the tunnel. In September, a government paper finally acknowledgedthat migration does have an impact on both housing and wages at the lower endof the jobs market. Legislation was also passed last year, that acknowledged aneed to tackle overcrowding in rental properties where it is by no meansuncommon to find three bed semi’s housing 10 people or more in the poorer areasof our towns. Often new entrants to the country have little choice but toaccept these poor conditions.

Now is the time for action, before it is too late. If thegovernment wants to bring large numbers of workers into Britain each year itneeds to provide the housing, transport and services both they and the existingcommunity need and deserve. They also need to protect low wage workers with asignificant rise in the minimum wage. If dual wage families need governmentassistance via the tax credit system, then you know that the minimum wage istoo low. It isn’t the job of the taxpayer to subsidise low wages, business doesvery well out of this country and they should be paying their workers a decentsalary.

Building social housing on a large scale is also a must, it should be viewed as the investment it undoubtedly is rather than something to be avoided due narrow ideology. The current policy of leaving housing to the private sector will not provide type of housing required in the areas that it is most needed let alone in the numbers that we need. Should this or the next government continue to ignore the problem they will again risk falling victim to the law of unintended consequences.