Shortage occupation list 2020: call for evidence - our response

Introduction

Our Position

1. Scotland is a progressive, outward-looking nation. We recognise that migration strengthens our society and our nation benefits from the skills, the experience and the expertise of those individuals who have chosen to live, work and study in Scotland. Inward migration, including from across the European Union (EU), has made an overwhelmingly positive contribution to Scotland's economy and society. Migrants play a vital part in ensuring that we remain a diverse and outward-looking country that is open to the world. We welcome those who come to Scotland and make a positive contribution to our communities, our economy and our public services.

2. The UK Government is committed to ending freedom of movement. Yet inward migration has helped to turn Scotland from a nation of emigration with a declining population into a culturally diverse, outward-looking nation with a growing population. It has also brought benefits and opportunities for people born in Scotland. The Scottish Government is clear that maintaining free movement of persons would have been in the best interests of Scotland and of the UK as a whole.

3. The proposals to end free movement and to restrict immigration to a single route as set out in the Immigration and Social Security Bill and the UK Government policy statement^[1] on the future points-based immigration system would significantly disrupt patterns of mobility and settlement across Scotland. A proliferation of smaller groups of migrants from a wider range of countries, a predominance of shorter stays, and changes to gender, age and family profiles will have implications for integration.

4. More broadly, shrinking the number of those granted entry to live, work, and study in Scotland will only serve to reduce our working age population and our much needed population growth. The UK Government have announced their intention to reduce levels of migration overall through the new system. Restricted routes for EU migration alone will be particularly disruptive for rural and remote areas of Scotland where the age structure means that inward migration is the only means of countering depopulation. The economic conditions in rural and remote areas suggest that a salary threshold, even at the reduced level of £25,600, will make it very difficult to recruit workers through existing migration routes.

5. In February 2019, the independent Expert Advisory Group on Migration and Population (EAG) published a report on the impact of the UK Government's Immigration White Paper proposals in Scotland.^[2] They estimated that migration to Scotland over the next two decades would fall by between 30% and 50%, causing the working age population to decline by up to 5%; but that even with reduced migration to the UK as a whole, the working age population in the rest of the UK would continue to grow.

6. The EAG have since produced an update which considers the proposed lower salary threshold of £25,600.^[3] Taking into account the expansion of the skilled worker route (Tier 2) with the lowered salary threshold and the consideration of inclusion of some Regulated Qualifications Framework (RQF) 3 roles on the Shortage Occupation List (SOL); together with the contrasting steady decline of EEA migration since 2015; the EAG retained their estimates of a reduction in migration of 30-50%.

7. Additionally, the Group note, however, that a key issue is how the changes will affect the occupational, geographic and gender distribution of migration to Scotland. Their analysis of differences in income across Scotland showed that in 2019, 52.5% of employees in Scotland (both UK and non-UK nationals) earn less than £25,600. In contrast, 60.9% of jobs pay less than the original threshold of £30,000: only an additional 8.4% of jobs would therefore be available to migrants. Thus even a salary threshold at the new level of £25,600 would dramatically constrain Scottish employers' access to skills and the workers they need to thrive.

8. The overall reduction in EU immigration would be especially challenging for those sectors most reliant on lower-paid, non‑UK workers, including occupations in agriculture, textiles, social care, leisure and travel, sales, and elementary occupations. Many of these sectors would be unable to adjust by increasing investment in skills or capital.

9. Existing gaps in the current system have necessitated the creation of a range of seasonal or temporary programmes. While there is already evidence that these schemes are insufficient, they do at least provide marginal support to these sectors. However, the UK Government proposes to remove these schemes completely without a replacement.

10. The EAG also found a significant gender differential in the distribution of salaries, with a lower proportion of women earning over £25,600 in almost all sectors, implying that such a threshold would create a gender disparity in the supply of future migrants. 63.3% of jobs currently employing females would not be available to migrants. There was also a striking divergence in the distribution of salary levels across areas of Scotland.

11. Not only then, will reducing migration to Scotland harm our economy, it will also significantly constrain our ability to deal with our pressing demographic challenges and will undoubtedly disrupt the effective functioning of public services across our communities.

12. Implementing an excessively high salary threshold would restrict the ability of employers to attract the international talent they need in all sectors of the economy, including social care, construction, agriculture and new growth industries in creative, digital and fin-tech. Therefore while we welcome the MAC's recommendation to reduce the threshold to £25,600, without consideration of differentiated regional thresholds, this will still exclude key roles in Scotland.

13. In 2018, Theresa May's Government launched a White Paper on Immigration, following this with a consultation process with Devolved Administrations (DAs) and businesses. However the change of administration and proposals for a new 'Australian-style' points-based immigration system represents a significant change to these proposals, for which there has been no consultation process.

14. We urge the Home Office to ensure a full engagement process with businesses and particularly with the DAs. It is important to ensure that we have an immigration policy in place which enables our economy and our public services to recruit individuals with the skills that they need; which allows our communities to prosper and is fair and transparent to individuals and employers seeking to navigate the system.

About this paper

This paper sets out the Scottish Government's response to the call for evidence launched by the UK MAC 2020 review of the SOL.

In responding to this call for evidence, the Scottish Government and businesses across Scotland have found the MAC's deadline significantly challenging which has given very limited time for the appropriate analysis of shortages.

The timing of this consultation during an unprecedented period of change and uncertainty, with organisations focused on mitigating the challenges of Brexit, preparing for the implementation of a new immigration system and responding to the rapidly unfolding COVID-19 pandemic would be pushing organisations' capacity even without the time pressure of a 6 week consultation.

The robustness of the economy and the capacity of firms to engage with plans for a radically changed migration system by January 2021 are highly questionable assumptions at this time.

Given the importance of this issue we would encourage the UK Government to pause and reconsider the design and implementation of the new immigration system to ensure that businesses can be genuinely engaged in the development process and properly prepared for its introduction. This is inclusive of the evidence being sought for this review of the SOL to ensure appropriate consideration of all shortages and a truly evidence based approach.

There must be a significant risk that there isn't sufficient time for the UK Government to be able to properly test and implement the system by January 2021 nor time for businesses to prepare for what, for many, will be a very different approach to securing the skills they require.

In compiling this evidence we have been mindful that this consultation is taking place in a rapidly shifting and unpredictable context.

Despite these constraints and caveats, this paper provides evidence as set out below:

Section one outlines the general Scottish Government position in relation to the UK Government's proposals for the Future Border and Immigration System.

Section two focuses specifically on the SOL for Scotland (SSOL) and details proposals to make that List more flexible and responsive to the needs of the Scottish economy, whilst also providing a specific role for the Scottish Government in commissioning and determining what occupations are in shortage in Scotland.

Section three outlines general evidence on recruitment, salaries and skills in Scotland.

Section four provides sector-specific evidence across the Scottish economy, highlighting key sectors including tourism and hospitality, culture and creative industries, manufacturing and construction, and health and social care.

Section five discusses the current context of both Brexit and COVID-19 as well as shifting public attitudes to migration.

A points-based approach to migration

15. With the change in Prime Minister in 2019, the UK Government announced their revised plans for an 'Australian-style' points-based immigration system and confirmed the ending of freedom of movement from 1 January 2021. The Home Secretary then commissioned the MAC^[4] to consider how points could be awarded to prospective migrants and to review the salary threshold for the new system.

16. The UK Government did previously have a points-based visa route from 2008 to 2012. This was closed to new applicants in 2012 in response to what the UK Government perceived as 'abuse' of the route. This highlights a broader issue relating to the lack of engagement and consultation before the announcement of significant shifts in immigration policy.

17. Immigration policy should be based on evidence and full engagement with stakeholders to develop proposals and policies which meet the needs of all parts of the UK. Starting with a policy position and then gathering evidence to support that policy position, particularly within a constrained timetable, while limiting the opportunities for debate, risks flawed outcomes.

18. A points-based approach to selecting migrants can be an effective way to broaden the range of criteria for eligibility, allowing migrants to score points across multiple human capital characteristics. It is typically not tied to a migrant having a job offer, although that could be one of the criteria for which points are awarded. Migrants are able therefore to enter the labour market and seek work in the same way as migrant workers.

19. Such a system should therefore not require a salary threshold, and this approach would address many of the concerns arising from the White Paper proposals. Points could be awarded for earnings or for skills or experience in a particular sector. An approach focusing on skills or experience in key sectors could also help to address gaps in sectors of high social value but where the qualifications and salary levels would not meet the thresholds set by the current Tier 2 Visa route.

20. Our response^[5] to this commission on the salary threshold and a new 'Australian-style' points-based Immigration System in December 2019 expressed concern about the impact of a salary threshold at all, and in particular, that the proposed £30,000 threshold would be actively damaging for Scotland's economic, social and demographic prosperity. It would disadvantage women, young people and part-time workers, and our rural and remote communities.

21. The response further outlined how a true, human-capital points-based selection approach, designed carefully and in full collaboration with businesses and devolved administrations, could be appropriate in meeting the needs of the whole of the UK. We highlighted examples of points-based systems in, for example, Australia and Canada, where schemes have increased migration to rural and remote areas previously facing depopulation. A wide-range of criteria that did not focus solely on high earnings or advanced qualifications (as the UK Government has proposed), but which captured the social value or wider contribution a person or family could make to life in Scotland and the rest of the UK, could go some way to meet the distinct needs of Scotland.

22. Notably, however, this is not the approach the UK Government intends to take. The proposed new system, operational by 2021, does not have 'tradeable' characteristics in the sense that any migrant must meet the skills and salary threshold, as well as have a job offer from a sponsored employer (exceptions include roles on the SOL).

23. The Scottish Government has engaged proactively with each of the MAC's calls for evidence and provided detailed evidence of Scotland's distinct challenges: challenges which are a consequence of Scotland's historical legacy as a nation of emigration. Scotland is now a nation of net immigration but that legacy means that many of our communities still need to replace those lost generations.

24. Migration is crucial to growing Scotland's population and specifically the working age population. It is crucial to our economy and to economic growth. Changes to migration policy have a greater impact in Scotland than in the UK as a whole, as evidenced in the figures published in the UK Government White Paper, given the greater significance of migration to Scotland's population growth. The economic modelling that we set out in our 2017 evidence to the MAC and in our February discussion paper showed that real GDP in Scotland will be 4.5% lower by 2040 as a result of lower migration whereas the comparative figure for the UK is 3.7% lower.

25. The Australian system does include regional flexibilities within its points-based system. The Australian Government works with state and territory governments to offer a range of State Specific and Regional Migration initiatives which include varying criteria that recognise the specific needs of rural and regional areas and are designed inter alia to address regional skill shortages, and to ensure that the intake of skilled migrants into Australia is spread across the country. These initiatives are designed to encourage migrants to settle in regions of low population density or economic growth.

26. There is some commonality here with Scotland's situation in relation to the rest of the UK. We need people to settle in Scotland, to make their homes here, to bring their families and to contribute to our long term future prosperity. The demographic pressures in the rest of the UK are less pronounced, and many communities, particularly in England, have larger migrant populations than are typically found in Scotland, or have experienced more rapid growth in migrant populations than typically experienced in Scotland. That has led to different requirements for, and perspectives towards, migration across the UK.

27. The establishment of the Scottish Parliament reflected an acceptance of the need for a differentiated approach to policy making in Scotland across a range of key issues. It allows for tailored approaches to specific challenges. As the Migration Observatory notes in the 2017 report on regional migration policy, Australia and Canada have full federal structures with democratically elected legislatures and executives to manage such regional differentiation. It is therefore easier to envisage such an approach in areas that already have devolved powers over other policy areas, such as Scotland, Wales and Northern Ireland. The existence of the Scottish Government and the Scottish Parliament ensures that there are existing governance and accountability mechanisms to manage such policy differentiation.

28. The evidence provided by the Scottish Government to previous MAC consultations, the reports from the EAG and future population projections clearly illustrate Scotland's distinctive challenges in relation to demography and the age structure of the population, the fragility of rural communities and the role of migration in helping to mitigate these challenges. These differences therefore require a different policy response in Scotland than elsewhere in the UK. Policies and systems that might be appropriate for other parts of the UK are not appropriate for Scotland. Any move to an Australian points-based immigration system must therefore include a commitment to regional differentiation and a tailored approach to migration policy for Scotland.

29. The Scottish Government recognise that there is no single, unique solution to our population challenge. We have therefore established a Ministerial Population Task Force^[6] which brings together a wide range of Ministerial portfolios to deliver an integrated response to Scotland's demographic and population challenges and ensure population supports the needs of communities and sustainable economic growth.

30. Critically, inward migration is an element of this integrated response; a point that the MAC themselves accepted hence their recommendation for the establishment of a pilot scheme to attract and retain migrants in rural areas.

31. The UK Government accepted this recommendation in a written statement to the House of Commons on 23 July 2019.^[7] Scottish Ministers have written to UK Ministers welcoming this proposal and offering to work in partnership with the UK Government to develop a proposal for a pilot. We are still awaiting a response to that offer but wish to reiterate our commitment to working collaboratively to develop and deliver solutions that work for Scotland's communities.

32. It is clear that current UK policy on migration does not meet Scotland's needs. In February 2018, the Scottish Government published a discussion paper Scotland's Population Needs and Migration Policy^[8] setting out options for a future migration system tailored to Scotland's needs. This paper recommended that the UK Government should:

• Abolish the net migration target, or at least migration to Scotland should not be counted in it;
• Take a different approach to family migration, and improve the rights of people in Scotland to bring close family into the country with them;
• Review the immigration skills charge, which is an unhelpful burden on employers;
• Give Scottish Ministers a formal role in deciding on the SSOL; and
• Reintroduce the post study work visa as recommended by the Smith Commission.

33. In January 2020, the Scottish Government then published our follow up paper, Scotland: Helping Migration Prosper.^[9] This added further detail and evidence to our proposals for a Scottish visa within a devolved framework. Regrettably the UK Government dismissed this paper immediately without engaging with the Scottish Government on the substance of the proposals.

Increasing Scotland's Input Into UK Immigration Decision-Making

34. The Scottish Government's response to the MAC's previous call for evidence on the Shortage Occupation List (SOL)^[10] provided detailed evidence in relation to a number of sectors of the Scottish economy while also providing detail on how the SOL could operate in future and how a differentiated approach for Scotland could work.

35. Whilst this call for evidence is only focusing on the UK-wide SOL it is worth reinforcing that the SOL is the only element of the UK immigration system where there is an attempt to consider the different occupational needs of Scotland relative to the rest of the UK.

36. While the UK Government has repeated the suggestion that Scotland does not have different migration needs it is notable that not only is there significant evidence of Scotland's distinct needs, but the immigration system already acknowledges this fact, albeit ineffectually, through the SSOL. Our desire is to ensure that this element of the immigration system is more effective in reflecting the needs of the Scotland's employers. There is a strong argument to expand and improve the effectiveness and impact of the SSOL, by adding more jobs to the vacancies list in consultation with Scottish industry stakeholders, to take account of Scotland's skills shortages and dynamic economy.

37. Immigration is reserved to the UK Government under the Scotland Act 1998 and Scotland currently has no influence over UK decision-making on migration flows. Within the current UK immigration rules, the SOL is the only element of the points-based system (PBS) where there is any attempt to consider the different occupational needs of Scotland relative to the rest of the UK.

38. However, the SOL is not a devolved competence - the Scottish Government has no formal role in determining what occupations are considered in shortage in Scotland. Scottish Ministers cannot currently commission the MAC to consider changes to the Scottish SOL and the Scottish Government is only able to contribute to MAC calls for evidence as a stakeholder in the same way as any other individual or body can respond.

39. As outlined in our submission to the MAC on the contribution of EEA citizens to Scotland^[11] and our discussion paper Scotland's Place in Europe: People, Jobs & Investment,^[12] the UK Government's drastic migration reduction strategies have the potential to seriously harm Scotland's prosperity. The contribution of migration to Scotland's economy and demographic profile is crucial, and relatively more important than it is to other parts of the UK. Data published by the National Records of Scotland (NRS) shows that 7% of Scotland's population is made up of non-UK nationals,^[13] many of whom fulfil vital roles in sectors integral to Scotland's economy, including the NHS.

40. It is increasingly clear the UK Government's immigration policy does not address our economic, demographic and social needs and our 2018 discussion paper Scotland's population needs and migration policy^[14] outlines how differentiation within the current framework could mitigate some of the impact. A key recommendation in that paper was to give Scottish Ministers a formal role in deciding on the SSOL.

41. The idea of regional differentiation on migration within the UK framework is not novel. In the first years of the new Scottish Parliament immigration being a reserved power did not stop a cross-party consensus emerging that, because the migration needs of Scotland were distinct from those of the rest of the UK, the policy solutions for Scotland should be distinct as well. This difference led to the Scottish Executive of the time working to introduce Fresh Talent, a post-study work visa scheme that allowed international students to stay in Scotland after they had completed their studies in order to seek work and make a contribution to Scotland's economy. This differentiation of migration policy for Scotland was intended to both support economic growth and mitigate demographic pressure. Fresh Talent recognised that different parts of the UK had different needs and expectations of migration.

42. Whilst the current Scotland SOL has also attempted to allow for differentiation, it is insufficient in its current form to fully accommodate Scotland's distinct labour-market needs. To address this failing, a collaborative assessment and restructuring of the current mechanism and scope of the list is urgently required to be more accurate and responsive to Scotland's distinct needs.

43. In 2008 the MAC produced a report titled 'Skilled, Shortage, Sensible: The recommended SOLs for the UK and Scotland'.^[15] Chapter 11 of this report, titled The Scotland List, outlined the request for a Scottish specific SOL and referenced the UK Border Agency's (UKBA) consultation document on the points-based system (2005) which set out Scotland's specific need for managed migration.

44. The UKBA report cited a need for Scotland to address its predicted population decline and change its demographic profile for reasons of economic growth and social development. They highlighted Scotland's ageing population and shrinking working age population as detrimental for public services as well as long term economic development.

45. The MAC report highlighted that, due to the smaller population in Scotland and the resultant difficulties with sample sizes, top down approaches to investigating skills shortages would not be possible, as is undertaken for the UK SOL. They therefore highlighted that bottom up evidence, meeting with stakeholders in Scotland, was necessary. The Scottish Government believes that the period of one day to one week that is spent by the MAC in Scotland during a review period is not adequate to appropriately assess the shortages present across the entire nation. We would therefore propose that a defined role for Scottish Ministers and Scottish Government in the review process would enable a more comprehensive review of need and a stronger evidence base for the SOL and Scottish SOL.

46. Shortly after the outcome of the EU referendum, the Scottish Parliament's Committee for Culture, Tourism, Europe and External Affairs commissioned Dr Eve Hepburn to write a paper on the options for differentiating the UK's immigration system.^[16] Dr Hepburn's independent findings were published in April 2017 and determined that increasing Scotland's input into UK immigration decision-making would better ensure that the current Points-Based System (PBS) is taking Scottish labour market and demographic needs into account.

47. Specifically, the report recommended increasing Scotland's representation and influence in UK advisory and decision-making bodies. Evaluating case studies on Quebec, Prince Edward Island, South Australia and Vaud, Dr Hepburn determined three areas where Scotland could have a greater 'voice' in UK decision-making on immigration:

• Sub-state representation on the MAC, in order to advise on labour shortages and skills gaps in Scotland (and other regions);
• Revising and expanding the SOL for Scotland, in order to make it more flexible to take account of current and future labour shortages; and
• Increasing bilateral relations between the Home Office and Scottish Government, for instance through a Joint Ministerial Committee (JMC) on immigration and regular meetings of civil servants.

48. The Scotland-only SOL is designed to enable Scottish employers facing labour shortages to fill these jobs with skilled third-country nationals. However, this list is currently very short, containing just two additional occupation fields to the
UK-list (physical scientists and medical practitioners).

49. The London First report on a fair and managed immigration system fit for the post-Brexit economy^[17] has highlighted the issue of the List's responsiveness to shifting market requirements. It notes that lack of skills shortages can easily get out of step with real labour market need and are often based on evidence that is one or two years out of date and, inevitably, have a public sector administrative approach rather than an employer-led one. The report's key recommendations largely align with the Scottish Government's view that:

• The SOL should move away from separate occupations and align with key growth areas and sectors as, especially in new sector areas, occupation titles and needs shift quickly;
• It should align with the essential labour needs of the country, taking into account the distinct needs of all four nations, and include medium and
  lower-skilled roles with a more streamlined and responsive process for
  adding and removing roles from the list;
• Current criteria should be reviewed with appropriate exemptions from the salary threshold, such as roles paying under £20,155. Those at RQF3 and 4 should not be subject to the RLMT. Appropriate workers should be given
  fast-tracked access, recognising their crucial role in the economy; and
• There should be efficient feedback mechanisms for Scottish stakeholders and businesses to contribute evidence on labour market needs, taking into account Scotland's unique rurality challenges.

50. Assessing and improving the current mechanisms of the SSOL is particularly relevant given the UK Government's intention to commission the MAC to compile such a list for Northern Ireland and consider whether the composition of the SOL needs to be different for Wales. Ensuring regional lists are adequately responsive to the needs of each nation, with meaningful and jointly formalised structures for devolved administrations to guide and influence their outcome, will be imperative not only for the prosperity of each nation but for the UK economy as a whole.

51. In the longer term, there remains a question about whether SOLs are a helpful measure, or if there is a more systemic way to fix the problems they attempt to address. A substantive review is required to ensure all elements of the immigration system meet Scotland's needs. Our 2018 discussion paper outlines how concurrent and devolved structures of decision-making on immigration could work to better serve Scotland.

52. The White Paper outlined the intention for an enhanced role for the MAC. This expanded role includes the potential for an annual report including reviews of the SOL, SSOL and the newly proposed SOLs for Wales and NI. It also outlines the potential for an enhanced role for the chair and a change in the MAC's composition, status and role. We welcome the UK Government's stated commitment towards an evidence based immigration policy but that needs to be reflected in the composition; remit and role of the MAC.

53. We would therefore welcome meaningful engagement on the development of this enhanced role. We see this commitment as a valuable opportunity to broaden the expertise represented on the MAC. By enhancing the composition and remit of the MAC, the unique demographic and rural challenges that Scotland faces can be appropriately highlighted, assessed and mitigated. We are disappointed that despite the UK Government's commitment to evidence that they have not progressed the MAC's recommendation for rural pilots. This is an example of an area where the Scottish Government provided clear evidence to the MAC of a specific need and where the MAC accepted that evidence and made a clear recommendation for change to the UK Government.

Recommendations

54. The UK Government should review the administrative procedures around the SOL to give a formal role to the Scottish Government in commissioning and determining what occupations are in shortage in Scotland.

55. The SOL should be revised and expanded in order to make it more flexible to take account of current and future labour shortages by:

• moving away from separate occupations and aligning with key growth areas and sectors, as especially in new sector areas occupation titles and needs shift quickly;
• aligning with the essential labour needs of the country, taking into account the distinct needs of all four nations, and including medium and lower-skilled roles with a more streamlined and responsive process for adding and removing roles from the list;
• reviewing current criteria with appropriate exemptions applied; and
• developing efficient feedback mechanisms to allow Scottish industry to contribute evidence on labour market needs. This mechanism should allow for comprehensive and regular review making the SOL responsive to changing and emerging markets.

56. The UK Government should engage meaningfully with Scotland and the other devolved administrations when considering the enhanced role of the MAC and consider how the expanded composition, status and remit can be structured to maximise their needs.

57. The UK Government should work collaboratively with the Scottish Government and the other devolved administrations to jointly design and develop a rural pilot in line with the recommendation from the MAC.