The UK’s approach to immigration and skills is under the spotlight once again. With net migration hitting 728,000 in the year to June 2024 — more than double pre-pandemic estimates — the Government promised to do more to control numbers. The Government announced immediate changes to the skilled work visa route and promised more to come. An upcoming White Paper is expected to set out changes to the immigration system, particularly strengthening the links between the immigration, skills and visa systems to “support the UK’s domestic workforce, end reliance on overseas labour and boost economic growth”.

Immigration policy is often shaped by short-term pressures, leading to reactive measures aimed at managing numbers rather than guided by a longer-term strategy. The Government has a number of objectives that immigration policy should (in theory) also support: they want to reduce net migration, get employers to invest more in skills, and achieve an employment rate of 80 percent (which would require approximately 2 million more people in work). Can the upcoming White Paper, and changes to migration policy, also help to support these wider objectives?

This is not an easy task! Attempts to improve the connection between the immigration system and skills system is nothing new: in 2018 the Government set out The UK’s future skills-based immigration system.

Making changes to work visa settings is often a tightrope for Governments to navigate, as they try to find the right balance between meeting the skills and labour needs of businesses, preserving opportunities for local workers, and managing net immigration numbers overall.

What are employers currently expected to do?

Right now, UK employers hiring migrants on Skilled Worker or Specialist Worker visas may have to pay the Immigration Skills Charge (ISC), a variable fee depending on the business size and visa duration. There are certain occupations where the employer is exempt from paying the ISC (these are primarily for highly skilled occupations in science, research and higher education). Introduced in 2017, the ISC was intended to increase the costs for businesses recruiting overseas talent and nudge employers toward training local workers instead. The ISC does little to bridge the migration and skills systems, and is a passive mechanism – apart from hitting employers’ pockets, it does not set any active obligation on employers to do more training, or take other action to address skills shortages. One issue is employers want skilled workers now but training takes time, so paying the charge may be easier for them in the short-term.

What do other countries do?

Other countries have tried different approaches to this challenge.

Australia’s system is a useful case study. It takes a three-fold approach, including:

• The Skilling Australians Fund levy (similar to the UK’s) that funds technical and vocational education. Similar to the Immigration Skills Charge, the levy was introduced to ensure businesses hiring skilled migrants also contribute to skills development for Australians.
• A labour market test, where employers must show they’ve tried to hire locally before seeking to recruit overseas workers. The UK previously used this approach too.
• Industry labour agreements for sectors with long-term shortages. The agreements offer streamlined access to migrant labour, but only where there’s clear evidence of a shortage in the sector and commitments to reduce reliance on overseas workers over time. There needs to be some caution in considered a similar approach to ensure that any agreements are based on evidence, rather than lobbying, and that industries covered by the agreements are still working towards reducing their reliance on migration labour, rather than seeing it as an open-ended exemption.

The Australian system provides a mix of carrot – easy access to migrant workers in sectors with recognised shortages – with sticks – requirements on employers to support training for locals, and for sectors to show that they are reducing their reliance on overseas workers.

New Zealand has also experimented with an industry-specific approach, introducing Sector Agreements, which provided easier access to overseas workers for certain roles, but required sectors to develop workforce transition plans — requiring sectors to show progress on training, recruitment of local workers, and investment in labour-saving technology. One of the Sector Agreements was for the Construction and Infrastructure sector which was selected because of the national interest of key infrastructure projects, and ongoing work to increase the housing stock in New Zealand was seen as to have a broader national benefits.

The Kiwi example was short-lived, providing a cautionary tale about introducing this type of approach without a longer-term plan for the immigration system.

While these approaches illustrate how other Government’s have tried to increasing sector-level responsibility for investment in skills, we don’t know what the impact has been or whether employer training has risen in the target sectors.

What should the White Paper deliver?

The White Paper is a chance to reset how immigration policy interacts with the UK’s workforce and skills system. Here are four things we think it needs to get right:

1. Assess the impact across industries and regions. Changes in 2024 were made with little plan to work with employers to address the impact for different industries, businesses and different parts of the country. A more joined-up and evidence-based approach is needed, while also steering clear of any tendency towards central planning.
2. Consider other ways to recognise higher investment in training. If an employer can demonstrate high, or increased, investment in apprenticeships or training and recruiting out-of-work people, that should be recognised — perhaps through exemptions or reductions to the Immigration Skills Charge.
3. The Government should offer sectors deals whereby they agree collective action to increase training and employing out-of-work people, such as increased sector skills levies, in return for greater control over how skills funding is invested and a slower tapering of visas in that sector.
4. The Government should lead by example, setting out clear workforce plans for how it will increase investment in training and recruitment in public sector industries and occupations. If the Government is serious about “reducing dependency on migration, and providing more opportunities for locals”, then departments need to set out their plan to upskill people here in the UK to address skills shortages.

The immigration White Paper should be used to support the Government’s wider skills and employment objectives

The White Paper is a chance to create a more balanced system — one that recognises the value of migration, but also takes meaningful steps to upskill the domestic workforce. Done right, it can help employers navigate skills shortages in a sustainable way, and ensure the UK is equipped for long-term economic growth.

But to succeed, it needs to go beyond a knee-jerk response to immigration numbers and consider broader skills and employment objectives, which requires a willingness to tackle tough trade-offs head-on.