Theresa May’s immigration skills charge was a good idea badly implemented – Labour can make it work
4 min read
Theresa May's skills charge was a good idea, executed terribly. Done well, it could be an important and transformative part of Labour's immigration policy.
It is rare for Labour MPs to praise the previous Conservative administration. However, the introduction of the immigration skills charge by the Theresa May government was an admirable attempt to link immigration and skills policy. While implementation of this policy has been a disaster, Labour can make it right.
Since 2017, businesses hiring foreign workers pay a ‘skills charge’, the receipts of which get “invested in training and upskilling the resident workforce, thus reducing reliance on migrant workers”, as per the explanatory memorandum. This was an important acknowledgement of the public’s concerns about rising levels of immigration but also an attempt to grapple with the more substantive issue of an economy increasingly fuelled by cheap foreign labour whilst too many young people leave school without opportunities in education or work.
Since the charge’s introduction, net migration has exploded: Boris Johnson oversaw an exponential rise in foreign workers arriving whilst worklessness amongst Brits increased at a similar rate. This was a devastating perfect storm: deliberate open borders without any focus on getting people off welfare and back into work.
The charge has raised over £2bn since 2017, yet, despite this, there is no evidence a single pound has ever been used for its intended purpose. There is no public information about how to access the government’s “investment in skills”, or where businesses can find out where the charge they pay goes. Last year, in response to a question I put, the Treasury confirmed that when Labour entered government, the money was not ring-fenced for skills or employment support. It disappeared into general government expenditure.
The Tories’ failure in this area has not gone unnoticed. A report by the Social Market Foundation in 2023 referred to the policy as “a poor outcome for business, but also for society as a whole”, and businesses should call for the levy to be scrapped if the government can’t spell out how it gets used.
For too long, government hasn’t been upfront with the public about the costs of high immigration
Labour now has the opportunity for a reset. An imminent white paper on migration policy will set out the government’s plans to reduce net migration to fulfil our manifesto commitment to rebalance the economy and reduce reliance on foreign labour. The government should reassess the charge – not to raise further revenue and place further burdens on business, but to ensure there is an explicit link between hiring immigrant workers and investment in skills and employment support in any area.
There is scope to go further. The charge should support the government’s wider missions, to give the British people a better sense the economy and immigration policy works for them and that this government is on their side.
At the October budget, the government confirmed funding for Levelling Up Fund projects – £1bn in 2025/26 to revitalise high streets, town centres and communities. This is a significant investment in the economies and physical landscapes of some of our most deprived communities. Maintaining this commitment, in spite of other fiscal pressures, is rightly a priority.
In the areas prioritised for Levelling Up funds, the percentage of foreign-born residents are considerably lower: 15 per cent in the Midlands, 12 per cent for the North West, 11 per cent in Yorkshire and the Humber. Around 47 per cent of all foreign-born residents in the UK live in the more affluent London and the South East, compared with 27 per cent of the overall population.
Quite simply, those in places needing Levelling Up Funds rarely see the economic benefits immigration can offer. As a result, there is a strong inverse relationship between the percentage of foreign-born residents and concern about border control and immigration.
How might these additional funds boost levelling up? A back of the envelope calculation suggests adding the £1.7bn since 2020 to the Levelling Up Fund could have supported around 250 further awards, boosting infrastructure, improving productivity and rebalancing our economy.
For too long, government hasn’t been upfront with the public about the costs of high immigration – nor delivered on promises to redistribute any gains from people coming to work in this country. The Immigration Skills Charge was a good idea from the Tories, but poorly executed. Labour should make it work.
Jake Richards is the Labour MP for Rother Valley
