Motion to Consider
My Lords, this is the first fees order made using Sections 68 and 69 of the Immigration Act 2014. The order sets out the menu of immigration and nationality functions for which fees may be set in subsequent regulations. It sets out maximum amounts for different categories of fees, limiting the amounts that may be charged in subsequent regulations. The changes made are designed to address two issues with the previous framework.
First, the Immigration Act makes clear that fees may reflect the cost of other immigration and nationality functions. This ensures that those who use and benefit most from the immigration system continue to contribute proportionately towards the cost of running the system.
Secondly, the new framework is more flexible and responsive, making it easier to amend fees without the need for a new affirmative statutory instrument. In previous years, immigration and nationality fees were set out in two statutory instruments; that is, a negative instrument for cost-recovery fees and an affirmative instrument for all other fees. Moving forward, all immigration and nationality fees will be set out in a single, negative set of regulations. The benefit is that where a change is made to the Immigration Rules requiring consequential changes to fees, these may be made within weeks rather than waiting for the next annual fees update in April. This also applies where new services are introduced to meet customer demand, or where operational or legal requirements necessitate fees changes.
We continue to ensure that sufficient checks and balances are in place to enable appropriate scrutiny of our proposals to ensure that immigration and nationality fees are set in the best interests of the UK. Fees proposals must be scrutinised and approved by a number of government departments and an impact assessment produced before they are presented to Parliament. The Government balance their policy that users should pay with consideration of the impact of fees on businesses, education institutions and economic growth. The new framework requires fee maximum amounts to be set out in a fees order.
This is a new requirement and means that Parliament may consider the “menu of charged services” and fees at the same time. This is an improvement on the old framework, which had been criticised because there were separate debates on the “menu” and fee levels. Individual fee levels will be set out in negative regulations. This is consistent with most other government fee arrangements. We have published a fees table that shows what we expect individual fees to be in 2015-16. I will turn to those in a moment. In practice, we expect that most fees will continue to be set following an annual review cycle, consistent with departmental budgeting arrangements. This order will last for one year.
I will now turn to the contents of the order before noble Lords. First, it separates the various chargeable applications and services into clear groupings. I believe that this categorisation is much clearer than in the past. For example, the previous fees order provided that leave to remain applications are chargeable, but gave no further detail. It is now easier to understand that fees will be charged for sponsored workers, students, settlement applications and so forth. The order also proposes maximum fee levels for groupings of similar applications and services. The maximum amount for each grouping reflects the amount we expect to charge for the highest individual fee in that grouping. These maxima are not targets. Most groupings will contain a number of individual fees, charged at different rates below the proposed maximum.
I will now explain the fees proposals for April 2015 that will be set out shortly in regulations. In order to cover a larger proportion of immigration and visa costs through fee income, most immigration and nationality fees will increase. The Government’s approach, consistent with previous years, is to protect certain routes as far as possible and balance this through making targeted increases where reasonable, in particular where the benefits to applicants are greater, where services are optional or where there is evidence that customers are willing to pay more or that UK fees are priced below those of other countries. Percentage increases are then applied to other fees as appropriate.
We propose that tourist visas should rise by £2, which is around 2.5%, and that some fees should be frozen or even reduced. For example, the 10-year visit visa and shortage-occupation worker fees will be frozen, while exceptional talent fees will be cut. Also, a number of fees will still be set at unit cost. The highest increases are proposed for the routes that provide the most benefits and entitlements, and for optional, premium services. For example, indefinite leave to remain and investor visas, which may provide an accelerated route to settlement, will be subject to large increases. Similarly, expedited visa services overseas and mobile biometric services in the UK will increase significantly. Most other fees will rise by between 4% and 12%. In general, lower increases are proposed for the routes that support economic growth with higher increases for the routes that provide greater entitlements or where unit costs are higher.
We expect to lay regulations shortly to come into effect on 6 April. This fees order as an enabling provision provides us with the means to generate sufficient resources to sustain a high-quality immigration system, reduce the cost of the system for the general taxpayer and ensure that those who use and benefit from the system pay a fair price. I beg to move.
My Lords, I thank the noble Baroness for her explanation of the order and the information she provided. It is helpful to have the outline. She will be aware and will know from debates we have had previously on the Bill that we support the principle that the Home Office’s costs and visa costs should be borne by those who are using the service. I make it clear that we support the order before us today. We were clear in Committee and during the passage of the Bill. I think there is further detail to come on the levels of charging.
However, I have some questions. I have been working through the impact assessment and the consultation document trying to work things out, and if the noble Baroness can give me some clarification it will be helpful. It in no way changes our support for the principle but I think there are always three things. First, there is principle, which we have signed up to and fully support; secondly, there is the detail and how it works in practice; and thirdly, the political purpose and the impact. It is the detail and the impact that I particularly want to ask her about.
One of the things I could not quite work out from the documents I had was how the maximum costs have been calculated. What was the evidence base and how was the assessment made to come to those figures? I appreciate that the Government recognise that there is a different impact on different kinds of immigration and the different categories, but what was the basis for setting the levels? I have been looking at them to see how they were ascertained and for the impact on, for example, the tourist industry, which is singled out in the impact assessment.
The Explanatory Memorandum says that responses were,
“broadly supportive of the proposals”.
It is right that they were broadly supportive of the principles behind the proposals, but some questions were raised, particularly from the universities regarding the impact on students and from some employers regarding the impact on their businesses. It would be helpful to know what points came up in the consultation that the Government were able to respond to and make changes in the statutory instrument to address.
I have one issue. All these things have to be evidence-based, and in the language and rhetoric we use we would always want to be fair to everybody, including those concerned about the impact of immigration and immigrants themselves. However, on the issue of other key non-monetised benefits from the main affected groups, page 2 of the impact assessment says:
“If some migrants decide to leave the UK, there may be some wider benefits in terms of improved social cohesion, reduced congestion and transport costs”.
It says that these are “expected to be negligible”, but it sounds like they were digging around to find something non-monetised as a benefit. I am not sure that its tone and lack of evidence base—“basically, if some foreigners leave there will be increased social cohesion”—is the kind of thing we should be seeing in an impact assessment in such a subjective way. Unless the Government can provide evidence to that effect I am uncomfortable with that being in the impact assessment.
We are looking at all the evidence here. I want to draw attention to page 5 of the impact assessment where the point is made that:
“Potential changes to the immigration system, and the inexactness of projection methods, mean that application forecasts are not considered to be accurate over a ten-year period. Impacts are therefore assessed over a five-year period”.
There are some questions about how robust the information is.
It was interesting to read the comments on page 6 about the impact on application volume. The Government quite rightly recognise, as it states there, that:
“The UK competes with other countries for tourists, students and workers, thus it is possible that increasing fees in the UK may encourage substitution effects in that applicants may apply to other countries or may not apply at all. The impact of raising fees stems primarily from the deterrence of potential migrants from entering the UK”.
The Minister will be aware from the number of discussions that we have had, particularly on the Immigration Bill, of how nervous the universities are that potential university students, who pay fees and contribute to the economy—and who are unfortunately included in the Government’s net migration statistics—may be deterred from coming to the UK. This is recognised in the document, which continues:
“The analysis has therefore not yet delivered estimates of the relationship between price and demand for visas that are robust enough for use in impact assessments”.
That implies that the Government do not know what impact the change of fees will have on applicants such as students. Perhaps the Minister could make some comment on that. I worry that the evidence base is weak. I hope that it is not the Government’s intention to deter through cost levels students or those with skills whom we want to employ in this country, but the impact assessment appears to state that the Government do not know.
Page 7 of the impact assessment makes the specific point that,
“the impact on an individual student to changes in the visa fee … does not describe the response of international students in aggregate ... Evidence suggests that places at UK institutions are oversubscribed by international students, and that the number of international students in higher education has continued to increase over time, suggesting that past increases in tuition costs, living expenses and visa fees haven’t significantly damaged demand”.
It goes on to say that there is no evidence that this measure will do. Can I press the Minister on this point? I was speaking last week to a friend who is a lecturer at a university in Tokyo who said that her students are now far more reluctant for a number of reasons to come to the UK and are applying to Australia and America. If we are looking at the impact of past increases, are we making any future projections? What analysis is being done? Are we looking at these issues in the round, or in isolation at what this order does? There seem to be a number of pressures on employers and students, not just those with which the order is concerned.
I want to ask the Minister about the table in the impact assessment which shows the net revenue from fee changes for those who continue to apply. Despite the increase in revenue that the Government are looking at, the table shows that the amount of projected income will go down from £75.3 million in 2015-16 to £60.8 million in 2019-20. Is the purpose to ensure that the number of immigrants is reduced, because fewer of them are coming into the country, or is just to ensure that the fee system is fair on those who do? Is this a way in which the Government are trying to deal with the net migration statistics, which, as we saw last week, are a failure by their own standards—although I am not sure that that on its own tells us very much? What are the assumptions behind the net revenue being foreseen to reduce in that way and why is it the case? The point that I am making is about the robustness of the analysis that has been undertaken. We are fully signed up to the principle that those who use the system should pay for it, but I am not clear that the evidence has been produced to show that the Government understand the impact of all the changes being made.
A significant reduction, for example, in the number of overseas students coming to the UK and paying fees may help the Government’s target, but it will not help the UK economy or our universities. It would be helpful to learn whether the Government have given any consideration to post-implementation analysis of the impact. Such an analysis might give us the opportunity to assess in the different categories of immigration the impact not just of the fees but of a range of changes being made and whether the impact is positive or negative. We support the order, but I worry about the robustness of the evidence being provided.
I thank the noble Baroness for her questions. I will go through, hopefully, all of them in order.
The first question that the noble Baroness asked was how the costs have been calculated. We will continue to work within the strict financial limits agreed with HM Treasury. Within those limits, we set fees that reflect the cost of processing and the value of a successful application while ensuring that the UK remains an attractive destination for work, study and tourism. The fees have Treasury and cross-governmental approval. We must have agreement from HM Treasury before we introduce or amend any fee. She asked a lot of questions today about the impact assessment of fee proposals. In terms of the criteria, the fee levels are considered very carefully, taking into account a complex range of factors, which includes, as I said, the administrative cost of processing an application; the benefits and the entitlements given to an individual if their application is successful; the international pricing comparisons; economic growth; mutually beneficial arrangements between the UK and other Governments; and the cost of running the immigration system as a whole.
One important point that the noble Baroness raised was on the tone of the language in the impact assessment if people leave. I have to say that, from a personal point of view, I agree with the noble Baroness. That point was raised in the other House. The assessments are produced by economists and the approach and language that they use is factual rather than policy based, but I totally get where the noble Baroness is coming from.
I am grateful to the Minister for that comment. I thank that that is helpful. It is very good to have that on the record and I appreciate it. Although the tone is a concern, my problem also is whether there is evidence to back up what was said. I could not find that anywhere in the impact assessment. It may be economists making the statement, but where in the impact assessment is the evidence that backs up that statement? That is an objective comment.
I thank the noble Baroness for that intervention. I can come back to her in due course after today. I think that we understand each other on that point.
On the consultation, we targeted over 1,100 representatives from the education, employment, business and tourism sectors, who were sent the document and encouraged to reply. We held workshops with representatives from different sectors and immigration lawyers. The document was also available to members of the public. We consulted on the principles of charging for immigration and the nationality fees, and that included questions on the simplifying of the fee structure; fee levels; legislation; optional and premium services; Border Force services; commercial partnerships; refunds; and administration fees. The responses were generally supportive of our charging strategy; of the principle that fast-track service at the border and premium services should be expanded to provide more choice and convenience for customers; and of the suggestion that the fee structure should be simplified.
The noble Baroness stopped for quite a while on students. There has been a 4% growth in the route increase and there is no evidence that the fees affect demand. I understand that she is talking about future projections, but we do not think that there will be a direct relationship between the visa fee and the volume demand at these price levels.
The price of a Tier 4 visa represents less than 0.5% of the total cost of coming to study in the UK for three years and the fees are insignificant compared with other costs. I do not decry that the other costs are not quite huge, but as a proportion the fees are quite small. Research by Universities UK on the 2013-14 academic year indicates that the mid-range for an undergraduate student’s tuition fee was £11,400 per year for a classroom-based degree and £29,200 for a clinical medical degree. Research by the NUS for the 2012-13 academic year shows that the average cost of living inside London was £13,388 and just over £12,000 outside London. Some of the analysis will be retrospective, so we will see what effect it has had in a year’s time, but as a percentage of the general cost of non-EEA students coming here, it is quite a small proportion.
The UK is still attractive for students. We have seen strong growth in the number of study visas granted to key emerging markets: for example, 3% growth from China, 12% from Saudi Arabia and 7% from Malaysia. Estimates on future projections of student numbers are developed by the Home Office and are shared with other departments each year. For the reasons I have just outlined, the impact of fees is believed to be zero or negligible. The impact of the policy is different for further education and for higher education. We have seen some further education student numbers decline, but we have tackled some of the bogus colleges that have abused the further education route.
I hope that I have answered most of the noble Baroness’s questions, but I will come back to the point that the economists made on the benefits of people leaving. There was one final point on how robust the methodology used in the impact assessment was and how accurate we believe the estimates to be. We think that the methodology used is as robust as it can be, given the limitations in available data. We have taken further care to demonstrate this uncertainty by introducing a range of estimates, thus providing high and low case impacts for the effect on demand.
With that, and if the noble Baroness is satisfied—
I have just one further point. I am grateful to the Minister. I think that most of the points I have raised have been addressed. I think she is right that they are as robust as they can be, but the impact assessment says how non-robust they are. I have one final point: I asked her about some kind of post-implementation review to try to understand the impact. I would appreciate it if she could comment on that.