Rishi Sunak Warned Hiking Migrant Visa Cost Will Send Food Prices Higher
Government has been warned that plans to make visas more expensive for foreign workers will fuel food inflation by exacerbating an "unholy mess" of high costs already faced by businesses.
Rishi Sunak announced last week that visa fees for overseas workers taking on jobs in the UK would be increased to help fund pay rises for public sector workers. Speaking in a Downing Street press conference, the Prime Minister said fees "across the board" would rise "significantly".
But a number of industry sources have highlighted that it is usually the employer rather than the worker who covers the visa costs, meaning it will be more expensive for businesses to recruit workers from abroad, and the increases are likely to be passed on to consumers.
The Skilled Worker Visa, which allows Home Office-approved UK employers to hire foreign workers to take up certain jobs, is set to become 15 per cent more expensive under the government's newly-announced plan, rising from £625 to £718.75 per application. The Immigration Health Surcharge (IHS), meanwhile, will increase from £624 a year to £1,035, though health and care workers will be exempt from this specific hike in fees.
The decision to make the Skilled Work Visa more expensive, which the PM said would allow him to fund public sector pay rises without borrowing money or raising taxes, has in particular prompted warnings from frustrated food industry figures, who say it will make tackling inflation even harder.
Nick Allen, CEO of the British Processors' Association, said the British meat industry had been left "gobsmacked" by last week's announcement. “We are completely baffled by the government. This is going to impact inflation, how can it not?", he told PoliticsHome.
Allen stressed that in most cases it is the employers, not the overseas workers, which pay for visas fees, and that businesses in his sector – which is dealing with acute labour shortages – are already paying between £10,000 and £15,000 per person recruited from abroad.
He was echoed by Richard Griffiths, chief executive of the British Poultry Council, who said tackling inflation would be made "harder" by the move and described it as an "unholy mess".
“The depressing thing is that what we are talking about here is skilled workers,” he said.
“One of government’s stated aims is to help us bring in skilled people, and while they may argue that these fees are fair as everyone is treated the same, the cost is ridiculous and will only add to the overall cost of production and cost of living problems we have.
“We are just not able to absorb those costs easily with everything else that is going on.”
The meat sector stands to be directly impacted by the changes, with butchers and meat processors both on the list of jobs employers are allowed to fill using the Skilled Worker Visa.
A spokesperson for the Prime Minister insisted that borrowing money to fund public sector pay rises would have a greater inflationary effect than making visas more expensive.
“We knew that to match the recommendation of the independent body it was right not to borrow further or tax the public further," they said on Tuesday morning.
“Visas was one area where we felt the right approach was to increase fees. Of course, that means those affected will pay higher fees but we have tried to make sure the impact is mitigated.
"Clearly, what would be more inflationary would be to borrow the money required to fund this £2bn this year and £3b next. That would have greater, longer-term impact.”
Food inflation is proving to be particularly stubborn in the UK, and is one of the biggest strains on household finances. On Tuesday, market researchers Kantar estimated that grocery prices rose by nearly 15 per cent in the four weeks leading up to 9 July – which while a decrease on the previous four weeks is still "incredibly high", said Kantar's Fraser McKevitt.
Food industry figures blame soaring prices primarily on the pandemic, Russia's invasion of Ukraine, and Brexit's negative impact on trade and labour shortages.
Despite industry concerns, the government's decision to hike visa costs was welcomed by many MPs on the right of the Conservative party, who want the government to tighten immigration rules. Sunak has been under intense pressure from Tory backbenchers to reduce net migration to the UK after the Office for National Statistics said in May that it had reached a record high of 606,000.
But there are MPs elsewhere in the Tory party who argue that curbing economic migration will inflict economic damage, and that Sunak should take a pragmatic approach to helping staff-shortage industries like food, hospitality and construction fill gaps in the workforce.
"We should be trying to make the visa simpler and easier. If you make it harder you, exacerbate labour shortages and continue to drive inflation," said an ex-Cabinet minister.
On Monday, MPs in the former group reacted angrily when the Home Office confirmed that it would make it easier for employers in construction to recruit workers from abroad by adding five job categories to the Shortage Occupation List. The move means it will be easier and cheaper for businesses to hire bricklayers, carpenters and plasterers from overseas.
The news prompted MPs in the so-called New Conservative Group to write to Sunak on Monday night urging him to reverse the decision.
In a letter seen by PoliticsHome, Tory MPs including Miriam Cates, Danny Kruger and Jonathan Gullis said allowing employers to pay foreign workers 80 per cent of the average salary to fill gaps in their workforce, which is permitted by the Shortage Occupation List, "fuels employers’ addiction to cheap labour".
"Undercutting market rates deflates wages for British workers and further disincentivises British people from training for these jobs. The Shortage Occupation List may seem to offer a temporary fix but it exacerbates the existing problem at the same time," the letter said.
However, the Chartered Institute of Building, which represents the construction sector, said relaxing immigration rules was a necessary step because a sharp fall in EU workers following Brexit and the pandemic had left significant, "immediate" gaps in an aging workforce.
"While we acknowledge our industry needs to work harder to attract workers from here in the UK, there is an immediate skills shortage which must be addressed," said Eddie Tuttle, Policy, Research and External Affairs Director at the Chartered Institute of Building.
"Without a good supply of skilled workers from abroad, as well as homegrown talent, projects large and small including the likes of schools, hospitals, new homes and key infrastructure simply won’t happen.”
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