Why Theresa May should back down on immigration bonds

A £3,000 visitor bond will hurt the poorest families, while doing nothing to deal with illegal immigration.

During his latest international tour, David Cameron again told us we are in a "global race". In Pakistan he righty declared, "we want to see the trade and investment relationship between Britain and Pakistan grow." On Tuesday in the House of Commons, the Prime Minister reinforced his message telling us it was "vital that we expand our trade and increase overseas investment into the UK” and that he raised the issue of trade with Pakistan’s new Prime Minister. He had a similar message on his trip to India a few months ago, though as I said at the time his rhetoric often failed to match the reality

Well, here we go again. While David Cameron’s rhetoric abroad is laudable, the reality back home is very different. In recent weeks, Theresa May has been busy briefing Sunday newspapers on her new plan for a £3,000 visitor bond for visitors entering the UK. Which are the countries selected for her pet pilot scheme? You guessed it: India and Pakistan, along with Bangladesh, Sri Lanka, Nigeria and Ghana. So while David Cameron tells us he wants to develop trade with India and Pakistan, Theresa May lets it be known these countries need a bond scheme for visitor visas because she considers them 'high risk'.

With pressure from her backbenchers on immigration and big promises made at the last general election, the Home Secretary wants to be seen to be tough. No doubt she is keen to create an impression that somehow her £3,000 bond proposal will lower net immigration levels. However, immigration as measured by the International Passenger Survey only counts migrants who plan to stay in the UK for more than a year. Since these visitor visas are only issued for up to six months, the bonds will have no impact on net immigration at all.

Meanwhile, the reaction in those countries we want to deepen our trade with has been less than enthusiastic, placing strain on our economic ties and diplomatic relations. India’s Hindustan Times reported the news with the headline: "UK plans visa bonds for 'high-risk' Asians, Africans", highlighting that Theresa May’s plans only affect immigrants from non-white countries. Pakistan’s Foreign Office has protested against the bond requirement, and a leading Pakistani newspaper Dawn reported that "despite the apparently strong political ties, visa issue has remained a major irritant relationship (sic)". The paper also highlights the fact that "over one million Britons of Pakistani origin have contributed significantly to the deepening of bilateral relations", adding to the insult by this government. Nigeria has retaliated too. One of the country's politicians, Abike Dabiri-Erewa, stated that if the changes go ahead, the government would force Britons to pay £20,000 to enter the country.

So the economic rifts that will be caused by this policy are damaging to say the least. Labour politicians have been urging the government to do more to promote trade. Chuka Umunna, in what I think is a first for a shadow cabinet business spokesman, recently led a trade mission to Africa and has been pointing out the long term investment potential of nations such as Nigeria and Ghana. Chuka reminded us that "Ghana is on course to be the eighth fastest growing economy in the world between 2011 and 2015. The IMF expects the Nigerian economy to grow by 7 per cent this year alone."

Nigeria is the seventh largest country in the world and, according to a UN report, its population is set to exceed that of the United States by 2050. In fact, the west African nation will start to compete with China as the second most populous country in the world.

With such a fast-growing population, infrastructure requirements will be absolutely key to Nigeria’s development and the UK now risks losing engineering and trade links with the country because of the British government’s perceived hostility on this issue.

Similarly, we all know that India is a rising force to be reckoned with. The country's economy is growing at an average of, with the IMF forecasting its 2018 GDP levels at $2,980bn. But despite the Cameron government's rhetoric, visa restrictions are already having an impact on the UK’s economic ties with India, with universities reporting a fall in student numbers. The Home Secretary might as well put up a sign saying the UK isn’t open for business.

When I asked the Prime Minister this week if he thought the bond scheme would help or hinder trade, he told me that Theresa May was looking at bonds in order to deal with 'economic migrants' but the bond scheme is no answer to the problem he wants to solve. There are serious questions about how the scheme will work. A £1,000 bond scheme for visitor visas was considered by the last Labour government but soon dropped for fears that it would be unworkable and unfair to the poorest families, while doing nothing to deal with illegal immigration.

 

In recent days in my own Leicester constituency, diaspora communities have reacted with dismay. Everyone accepts we need a system of managed migration alongside measures to deal with illegal immigration. But a bond scheme will hurt genuine visitors who don’t abuse the system. At a local temple over the weekend, constituents asked me if it was really fair that their relations should have to put up £3,000 to attend a graduation or a family wedding or a funeral, or even just visit an old friend. It’s a fair question, so here’s hoping the Home Secretary backs down.

Theresa May arrives to attend a meeting at Downing Street on May 23, 2013. Photograph: Getty Images.

Jon Ashworth is Labour MP for Leicester South. 

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.