Brexit & Immigration

Immigration, concern about immigration, control over immigration, seems for many to be one of the very biggest issues in the EU Referendum. As a second generation immigrant, I have something of a personal interest in the way that immigration is dealt with, although that doesn’t mean that I or indeed immigrants of any generation in the UK must automatically support “uncontrolled” immigration or have no “concerns” about immigration. Historically indeed it has tended to be the last wave of immigrants to any country who have been most concerned about the impact of future waves of immigration (there’s an interesting room in the Ellis Island museum of immigration in New York exploring this phenomenon).

As Sartre put it, hell is other people, so it is not surprising that anything involving increasing the number of other people around will inspire concern for most people. Most people are somewhat resistant to change even if that change is intended to be or turns out to be for the better. At a time when we’ve been told for many years that “there is not enough” of many of the things we need and value, it is quite reasonable for people to take the view that “if there is already not enough to go round, how can it be any good to spread what there is more thinly across more people?”. So ignoring either of those reasonable sentiments to steer the debate away from immigration entirely, or to claim that there is no good reason to discuss it at all, will immediately lead to the conclusion that people are not being taken seriously. These are concerns which can and do legitimately arise even in respect of migration within this country by people from this country: the joke in the 90s posters for the Manchester nightclub “South” (“Students, why don’t you F*** off down South this weekend?”) or the embarrassment felt by some at the reaction to their regional accents when they first move to London illustrate this.

However, while agreeing that it is not per se racist to have concern over immigration, I do sometimes feel that focusing on it allows for a relatively polite screen against uglier underlying sentiments.  In this blog I’ll try to explore what I think are the broad arguments about immigration and also whether in fact a vote to leave the EU will address those arguments. At a high level, the answer to the latter is that of course it could, but as in my previous blog, I take the view that the better approach in deciding on how to vote in the referendum involves at least sketching out a plausible and appealing vision for how it would be dealt with in fact. What I won’t do is drill deeply into numbers and statistics. This is because it is too easy to get bogged down in claim and counterclaim about precise numbers and models for predicting movements of people and because I think that most people’s reactions to immigration are not based on data but on personal experience and perception. Which is not wrong when we have to remember that this is a debate about real people and their lives rather than lifeless numbers. That doesn’t mean I’m going to ignore numbers entirely, just that I hope that the discussion won’t stand or fall on where a decimal point can be placed in a table. The main discussion is focused on migration other than for the purposes of asylum, which while related, ought to be distinct and so I’ll deal with that in a separate section.

What are the concerns about immigration, or some of them?

My impression is that there are four main aspects to immigration which motivate people to think that this is a significant issue in the context of the UK’s membership of the EU. I’m not putting them down in any consciously intended order of merit or significance or otherwise. Each of them will interrelate with the others to some extent.

  1. The impact on public services and quality of life.
  2. The impact on employment and wages.
  3. The fact that as a nation it should be up to us and nobody else who may come to the UK to live and work.
  4. The impact on local and national culture of people who may not share it or might even be in many ways opposed to it.

The first two aspects can broadly be described as economic ones. How important they are in referendum voting decisions will depend more on how they are perceived by individuals than on the aggregated economic data. If someone has noticed a worsening of access to the health service when they themselves have tried to get an appointment with a GP, have found themselves ever further away from being able to get the home they want or a place for their child in a local school while seeing immigrants appear to get ahead of them in those things it will be unpersuasive to throw data about waiting lists shortening etc at them. Similarly, if in fact someone has seen their ability to get a job or to get a pay rise reduced, they won’t be convinced by any number of statistics about employment rates and wage inflation.

The third one is a sovereignty argument – if this is of paramount importance, even if in fact there has been no adverse impact from immigration as it has been or even if it can be clearly demonstrated to have been positive, it won’t matter, because the principle remains the same. It is difficult to argue against as a point of principle if you place sovereignty above all else. Many of the most committed supporters of Leave start and finish here, but I think most of those who will decide on practical grounds would see it as the icing on the cake if Brexit delivered more visible change on whichever of the other three aspects they found most personally impactful, rather than the whole cake itself.

The fourth is a more nebulous one to define but still very real as a perception. There have been many discussions about what Britishness, Englishness, Scotsness, Welshness, Northern Irishness actually mean without any clear and uncontroversial conclusion. That is sometimes, mistakenly used to conclude that there is no such thing or worse, that those are mere petty nationalisms principally for “little Englanders”. I think it is more that the fourth aspect of the debate is a general feeling of discomfort about rapid change across the spectrum of life combined with a belief that even if we can’t quite put our finger on what it specifically comprises of, our local environment as it was some time up until the recent past was pretty good in terms of how we got on and related to our neighbours and communities. It doesn’t need nostalgia to the extreme of the Daily Express’s world view (although this is perhaps its epitome). It is for me a negative nationalism to an extent because it is at best merely sceptical about the possibility that change and incomers could assimilate into society let alone be positive. I don’t think it is specific to the issue of EU immigration but immigration more generally. It is a position which if strongly held would not be persuaded at all even by there being big economic benefits to immigration on any basis, in or outside the EU. One manifestation of it was seen in the erstwhile BNP and its open opposition to foreigners, but it is more prevalent in a quieter “very nice, but we’re happy as we are, thank you”, spoken to by Nigel Farage and UKIP.

So where does this leave the EU Referendum debate?

In my next couple of blogs I’ll look into these four aspects. My impression is that all four of these sets of arguments have two angles, a technical one and an emotional one. The Remain campaign started trying to focus on the technical one by bombarding us with data and opinions of the global great and good. The Leave campaign has been very successful in understanding the power of the emotional one. Remain’s response has often been to play on the strong emotion of fear that runs in these emotional angles – fear of change, fear of impotence, fear of failure. But that is a negative line and so not an attractive one. However, Leave hasn’t been very successful in rebutting “Project Fear” with a coherent and  unifying “Project Hope”. Had it been able to do so, I think we would already be very clearly heading for Brexit.

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Steel Yourself

Over the past week steelworks in the UK have ceased production one after the other. First SSI in Redcar, then Caparo and Tata Steel. The basic reason for this is that the global price of steel has fallen significantly from $500 a tonne when SSI spent £1bn on taking the Redcar plant it acquired from Tata out of mothballs five years ago to $300 a tonne now. Even without looking at the economics in any detail that sort of a price crash in such a short period of time would cause any business serious difficulties and even more so in an industry for commoditised products with typically low margins like steel.

Many commentators have said, “surely something can be done”. Britain has a long and proud industrial tradition in the manufacture of steel. Middlesbrough even briefly had a league football club called Middlesbrough Ironopolis and at one point produced more steel than the rest of the world combined. It seems wrong that apparently at the stroke of a liquidator’s pen so much history and so many jobs could vanish. While it seems that Tata Steel will be mothballing its remaining plant (as it did with Redcar in 2008*), the furnaces have been switched off at Redcar. This means that they cannot subsequently be restarted so this really is the end for much British production. But, the sad reality is that there is probably nothing which can be done quickly enough to save production, jobs and heritage, even if the money could be found to support the steel industry until global prices rose sufficiently to make it viable again (and that itself is unlikely to happen while there is substantial overcapacity elsewhere in the world).

However, even if there were the means for the government to afford to rescue British steelmakers, there’s a bigger obstacle in the form of the EU State Aid rules. In brief, these prohibit the provision of state support where that could distort competition. In a market economy that means that bailing out bankrupt businesses is almost always prohibited. There are provisions for notifications of proposed aid to be made to the European Commission to seek approval and these have, for example been used when RBS and Lloyds/HBOS were rescued during the crash of 2008. The approvals granted then were subject to significant conditions involving divestments of profitable parts of the business and spinning off divisions which had too large a share of the market. These were then updated later in the process of nursing those banks back towards health to include prohibitions on paying out dividends.

Well, why not provide aid to the steel companies and have some conditions like this? Unfortunately, steel has been considered a special case, along with coal, since the European Coal and Steel Community (ECSC) Treaty of 1952 which predated the Treaty of Rome establishing what is now the EU (the existence of this treaty and the community it established is the reason you sometimes still hear references to the European Communities rather than European Community, ECSC, the European Atomic Energy Community and the EEC were merged in 1965 and the UK joined the merged Community in 1972). The ECSC Treaty arose in the aftermath of World War II and specifically sought to create a single market across its signatory states for coal and steel. The reason for this is that coal and steel were at the time the raw materials for the building of national military strength. By looking at capacity requirements on a transnational basis the thinking was that it would not be possible for any country to ramp up production in preparation for building a load of tanks, planes and warships as had occurred prior to both World Wars. Article 4(c) abolished and prohibited “subsidies or state assistance… in any form whatsoever” and the Treaty more broadly set out the basis for competitive markets in coal and steel to operate in the absence of such subsidy.

The ECSC Treaty expired after 50 years in 2002 and the case law and guidance which had built up over the previous 50 years on what was covered by the prohibition of subsidies was summarised in the Commission’s Notice under EU law of 19 March 2002. This was titled “Rescue and restructuring aid and closure aid for the steel sector” and covered two different scenarios. First, the rules to apply in respect of aid for rescuing or restructuring steel firms in financial difficulties and second, the rules in respect of assisting steel workers who lost their jobs when steel works closed.

Article 1 of the Notice concludes:

“In these circumstances [referring to prior decisions], the Commission considers that rescue aid and restructuring aid for firms in difficulty in the steel sector …are not compatible with the common market.”

Under the EU State Aid laws, it is up to the Commission to decide, where a proposed aid package is notified to it (such as with RBS), whether that aid package is “compatible with the common market” and therefore can be approved. This Notice makes it clear that the Commission does not have any power to determine whether aid to bail out a steel company is compatible with the common market by deeming that it never would be. Although the Notice expired in 2009, this is very unlikely to make any difference at all to the position because the previous history of the industry and its regulation by the Commission is so clearly against the provision of such aid in any circumstances. The Commission would technically have discretion to consider a notification, but it is difficult to see how it could conclude that aid of a form which had been prohibited for 57 years could now be seen as compatible with the common market. This can be simply illustrated by putting yourself in the position of say a German steel maker which had managed to remain solvent despite the drop in steel prices. That business would rightly feel aggrieved that the reward for having run itself so as to be able to bear a 40% drop in steel prices was to find its British competitors being given a handout to let them carry on trying to win business from them. 

So, why not do as Nigel Farage suggested and simply ignore the EU rules? After all, apparently we Brits are far too overzealous and scrupulous about complying with them, whereas those perfidious Europeans simply ignore them if they aren’t in their national interests. The problem here is that the sanction for illegal state aid is that the amount provided has to be repaid immediately and in full. As the businesses in question here are bankrupt, if the aid is considered to be a loan which is repayable when the ECJ gets round to making an order, the value of those loans would have to be calculated on the basis of the sort of interest rates which a significantly distressed borrower might have had to pay (ie a very high interest rate!). It is not too fanciful to imagine that SSI, Tata and Caparo would not wish to borrow at those sorts of rate and so would not accept an offer of aid, which is probably why one thing which has not been reported is any of those companies complaining they couldn’t get any financing from the government. It is also worth noting that when in 1993 the Italian government wanted to write off €4bn of debts for the Italian steelmaker, Ilva, as part of the preparations for privatisation this was blocked by the Commission. This is also noteworthy because investment by a state in a nationalised industry with the intention of maximising the return on privatisation is something which is generally allowed as long as that investment is proportionate to that aim.

An alternative might be to nationalise and then pump whatever was needed in. At least this would in theory take away the risk to the business of repayment, right? No, unfortunately not, the Commission isn’t that stupid! It would be as if after the government bailed out RBS it was told it was not allowed to guarantee its massive debts. Instant collapse of RBS. Or here, instant collapse of “National Steel”. At the moment, the Commission is in fact investigating a complaint about the aid Italy has given to Ilva this year (Ilva having been renationalised in January to protect it from the consequences of breaches of environmental law) so nationalisation is no magic bullet either,

In summary, while remaining in the EU, the state bailing out the steel companies is not an option. It probably wouldn’t be an option even if we were outside the EU as enabling them to export steel at market price while it cost 40% more to produce would be a pretty clear violation of the anti-dumping rules, but that is another set of laws entirely (as is the question whether the global market price has been artificially depressed by the Chinese or Russians subsidising exports – which might in theory provide a defence were either of them to bring an anti-dumping case against a hypothetical non-EU UK). The best we could do would in those circumstances would be to require the use of domestically produced steel by British users of steel for products which were not to be exported.

Sadly, those who think more could be done are I think indulging in wishful thinking.

* After Redcar was mothballed in 2008 I advised various public sector funding bodies and possible users of the site on what uses for the facilities could be supported by the state without falling foul of the State Aid rules. From memory, these were largely confined to using the testing and laboratory facilities to develop new product prototypes and research rather than any form of commercial production. I did enjoy a few Parmos while taking the bracing sea air though. 

An Immigration Lie

The immigration lie of the moment is the lie that any of the major parties would do anything significant about it. It is true that the parties in favour of continued EU membership are limited in the extent to which they can promise to reduce EU immigration even if they wish to – the concept of free movement of people within the EU is one which is not realistically going to be capable of renegotiation (although there does seem to be some scope to distinguish the freedom to move from the right to claim welfare benefits). The real lie is the one being peddled by the most significant anti-EU party, UKIP.

It is true that were the UK to leave the EU, it would be able to restrict immigration from EU countries just as it is currently free to do so in respect of non-EU immigration. The lie here is more subtle. I will credit UKIP’s leadership with being sincere in not wanting it to be a racist or xenophobic party. However, its rhetoric about regaining control over immigration raises the hopes of those who would not just want to control future immigration, but also to “do something” about immigration up to the point at which this future control was obtained. Some people who are concerned about immigration are genuinely focusing on preventing future immigration but many, perhaps most, of those who consider it an issue do so because they have serious problems about the immigration which has already occurred.

UKIP’s election broadcast for the European Parliament elections included a contribution from builder (and UKIP council candidate), Andre Lampitt, who has since, embarrassingly, been found to harbour some unavoidably racist and unpleasant views. However, even had this not been true (and something for which Nigel Farage candidly admitted, the party deserved a kicking), what he said in the broadcast is telling in itself. He bemoans the Eastern European and other immigrant tradesmen who had already come and made it difficult for him to earn a living. People who sympathise with that view aren’t just saying “we don’t want any more”, they are saying that they don’t like what we already have.

UKIP, in pushing this is lying. Either it is lying to the people who are sympathetic to what Lampitt said in the broadcast because they have no intention of doing anything about those who will have lawfully come to Britain prior to them taking control of immigration. Or it is lying to those it is trying to persuade that it is a non-racist party who have no interest in attempting to “encourage” the repatriation of lawful immigrants. This latter line is the way in which it can distance itself from the BNP’s approach to immigration. But, it, and its supporters need to work out where they really stand on the issue. If they don’t want to “do something” about the immigration which has already occurred they need to stop using that immigration as part of the message for why something needs to be done about future immigration. That case can be made independently, but not credibly by a populist party reliant on the support of those who would happily see immigrants from the 2004 Accession States sent packing and who would pressure UKIP to do so were they to achieve power with their support. Or, they could be honest and say that yes, Farage was disturbed by the lack of English voices on his commuter train and was going to do something to remove the foreigners already in our midst.

Somehow, I can’t see either honest course of action being taken. UKIP won’t want to lose a lot of its popular support by clarifying that those who are already here can stay and there’s nothing wrong with them being here. It won’t want to lose a lot of its support by saying they agree with the BNP that many legal immigrants should “go home”. Just as Farage’s defence of employing his German wife hasn’t been translated into a policy of supporting the right of foreign spouses to enter the country and work here. He’s said she’s the only one who could be his PA, but would he have considered it acceptable for the UK to bar his wife from entering the country were she not to have had those unique skills? UKIP might not be racist, but it has no problem with courting the support of racists.