Linking skills with visas? Just make sure the Immigration Skills Charge does what it says on the tin

In his speech last week, Sir Keir Starmer, the UK Prime Minister, announced plans to publish a White Paper which will link the ability to sponsor migrant workers to training “people here in our country”. He said:
 

We will publish a White Paper imminently – which sets out a plan to reduce immigration.  The Migration Advisory Committee is already conducting a review and where we find clear evidence of sectors that are over reliant on immigration we will reform the points-based system and make sure that applications for the relevant visa routes whether it’s the skilled worker route, or the shortage occupation list will now come with new expectations on training people here in our country. “

Over the last couple of years, Labour has clearly indicated its wish to create a link between the ability to sponsor foreign workers and upskilling the domestic workforce, which  culminated in the reference to “workforce training plans” in the 2024 Labour election manifesto. 

Sir Keir Starmer’s comments to the CBI at the end of 2022 that the immigration system would come with “new conditions” for business had gone hand in hand with reports in May 2023 of plans to “reform the Migration Advisory Committee to link it to the bodies setting out industrial and skills strategy - learning from the Australian approach to ensure that where skills shortages lead to a sector remaining on the Shortage Occupation List, that must be tackled with a plan to upskill workers in the UK.”  Those plans came to fruition in August 2024, starting with the Migration Advisory Committee looking at the IT and engineering sectors.

The Immigration Skills Charge-start with the low hanging fruit

Before we start to discuss whether linking skills and immigration policy will work (see our next blog on learning from the Australian experience) , there is a very obvious starting point where the link exists which would give the Government a quick win-the Immigration Skills Charge or “ISC”.

What is the ISC?

The ISC was introduced by the UK Government in April 2017 as a charge imposed on UK employers who sponsor migrant workers. Most sponsoring employers are charged £1,000 per worker per year of their visa, with a lower annual charge of £364 for small businesses, charities and Universities. So a large company will pay £5000 in ISC upfront at the point it sponsors a foreign worker for five years (plus around another £8000 in other fees).  Sponsoring employers are responsible for paying the ISC and cannot recoup this from their sponsored workers.

Why was the ISC introduced?

When it launched the ISC, the Government stated that it was being introduced to “to reduce demand for migrant labour and make sure British people have the right skills to fill jobs” as well as incentivising employers “to invest in training British staff”

This follows from the Migration Advisory Committee’s Tier 2 review in 2015 in which it looked at the economic rationale for an ISC. Its view was that “to the extent that employers face a viable trade-off between recruiting a skilled migrant or investing in UK skills, raising the cost of the former may, at the margin, encourage more employers to choose the latter. In this sense, the ISC can act as a tax intended to dissuade businesses from the use of migrant labour.”  In conclusion the MAC stated that “there is a rationale for an ISC to be applied … to incentivise employer investment in skills where this is a viable alternative and to raise funds to re-invest into skills provision.”

This was in 2015, however, and since then, not only have immigration fees increased exponentially, but the Immigration Heath Surcharge ( a migrant tax paid to the NHS) has more than quadrupled, both of which have significantly increased the cost of sponsoring foreign workers on top of the ISC.

How much does the ISC raise?

The latest Home Office accounts show that in 2023, the ISC raised £586 million and in 2023-24, this increased to £667 million, a 13% increase.

What happens to the £667 million raised through the ISC ?

In a little publicised letter sent to Yvette Cooper MP way back in January 2019, the then Minister of State for Apprenticeships and Skills, Anne Milton MP, confirmed “the income raised is not additional funding for skills”.  This suggests that the income raised from the ISC may simply be replacing or ‘backfilling’ existing funds which have either already been or will be reallocated elsewhere.

Use the Charge for Skills!

What is clear is that before it embarks on a long and complicated journey of linking  skills and visa policy, the Government must ringfence this £667 million specifically at developing UK skills and training.  In the same way that the Government can reassure the British electorate that the Immigration Health Surcharge (which raised £1.69 billion in the year 2023-24) goes straight to the NHS, it would make sense to be able to say that the ISC is going straight to supporting skills in the UK.   

You don’t need a White Paper to work that one out. 

further information

If you have any questions, please contact Nicholas Rollason in our Immigration team.

about the author

Nick Rollason is a partner and head of Business Immigration. He advises on all areas of UK immigration and nationality law and has particular expertise in providing strategic advice to businesses on their global immigration needs.