UK Election 2017 - doubling the skills levy would be bad news for the UK digital economy

Profile picture for user slauchlan By Stuart Lauchlan May 17, 2017
The Conservative Election Manifesto proposes doubling the levy on hiring skilled workers from overseas. Bad news for the UK tech scene.

One of the biggest questions around Brexit is that of freedom of movement of workers. This is aleady presented as a major bone of contention by senior European Commission officals and by poiitical leaders, including Germany Chancellor Angela Merkel, who warned this week:

If the British government ends the free movement of people, that will have its price in relations with Britain.

For the UK digital sector, the major concern is what form of visa immigration system would be put in place to ensure that skilled workers can be recruited to come and work in the UK. To date, there have been various proposals put forward, such as an Australian-style points-based mechanism, but essentially no-one knows what the final outcome will be.

In its Election Manifesto, the Labour Party bluntly stated that Brexit will mean the end of freedom of movement. The Tory Manifesto doesn’t go that far - in fact, it doesn’t actually use the term at all. What it does say is:

We will ensure digital businesses have access to the best talent from overseas to compete with anywhere in the world. This will be complemented by at least one new institute of technology in the UK, dedicated to world-leading digital skills and developed and run in partnership with the tech industry.

The latter part of that pledge alludes to the need to develop and nurture home-grown digital talent in the UK, an ambition that all parties can agree with. But that’s going to take time, so the question is, what does the tech sector do in the meantime if it can’t tap into importing skills from overseas.

Last month the Immigration Skills Charge was introduced, a £1000 per person levy on employers hiring migrants in skilled areas. When the Charge was proposed back in 2016, the government was candid about it being in large part a stick with which to beat companies that hired migrants:

It is designed to cut down on the number of businesses taking on migrant workers and incentivise training British staff to fill those jobs…The new charge has been supported by the independent Migration Advisory Committee, which was commissioned by the Prime Minister [David Cameron] to advise on routes used to undertake work in the UK, including the Tier 2 visa route, the migration route for those undertaking skilled work in the UK from outside the European Economic Area.

At the time, the proposed levy was criticised by the tech sector, but today the Conservative Manifesto has commited to doubling the charge, stating:

We will therefore ask the independent Migration Advisory Committee to make recommendations to the government about how the visa system can become better aligned with our modern industrial strategy. We envisage that the committee’s advice will allow us to set aside significant numbers of visas for workers in strategically-important sectors, such as digital technology, without adding to net migration as a whole.

However, skilled immigration should not be a way for government or business to avoid their obligations to improve the skills of the British workforce. So we will double the Immigration Skills Charge levied on companies employing migrant workers, to £2,000 a year by the end of the parliament, using the revenue generated to invest in higher level skills training for workers in the UK.

Bad news

Antony Walker, Deputy CEO of UK tech sector trade association techUK, said that the proposal was bad news for the nation’s technology scene:

With domestic shortages in critical tech roles ever more pronounced, this move is another barrier for scaling companies accessing the talent they need to grow. Global Britain must be powered by a new wave of dynamic, innovative companies – now is not the time to pull up the drawbridge further.

The vast majority of demand for Tier 2 skilled worker visas comes from the UK’s most digitally-intensive sectors. The UK’s start-ups and SMEs are crying out for more talent – from cyber security specialists, to big data analysts, to software developers – and are already facing uncertainty on securing talent from the EU. These are roles already recognised as a national shortage by the Government’s own independent Migration Advisory Committee. The UK needs to continue to welcome growth-generating talent from around the world. Unfortunately today’s announcement will be seen as additional barrier to high-skilled recruitment, and sends a worrying signal at a time of uncertainty.

techUK has previously called for the £250 million per year raised by the current Immigration Skills Charge introduced in April to be explicitly targeted at investing in high-value domestic digital skills initiatives. However, the Government must think carefully to strike the right balance here. A additional tax on talent risks undermining a vision for an open, innovative Global Britain.

As for growing that indigenous talent base, a post-election Conservative governemnt would commit to setting up new institutes of technology, backed by leading employers and linked to leading universities, in every major city in England:

They will provide courses at degree level and above, specialising in technical disciplines, such as STEM, whilst also providing higher-level apprenticeships and bespoke courses for employers…they will become anchor institutions for local, regional and national industry, providing sought-after skills to support the economy, and developing their own local identity to make sure they can meet the skills needs of local employers.

And the Tory Manifesto promises:

We will equip people with the digital skills they need now, and in the future, by introducing a right to lifelong learning in digital skills, just as we have done for literacy and numeracy.

My take

I’ve avoided commenting on any of the parties manifestos to date, leaving it to the good offices of techUK to provide tech sector commentary. But this proposal is short-term thinking that has the potential to do long-term harm. I absolutely support the principle of developing a UK digital skills base and applaud the idea of focusing on apprenticeships and more technology education. But you don’t grow a digital talent pool overnight. Basic pragmatism dictates that the UK needs skilled immigration in the tech sector in the near term. Putting additional levies on that isn’t sensible.