Immigration and border control signs at Edinburgh airport. Photograph: Getty Images.
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Osborne's living wage will increase immigration - but he won't mind

The new £9 rate will give the UK one of the highest minimum wages in the OECD. 

The Tories, in theory, have a policy of reducing immigration to the UK. Despite net migration last year reaching 318,000, the Conservative manifesto reaffirmed the party's aim of limiting it to "tens of thousands". David Cameron's bid to impose a four-year ban on migrant benefits (as part of his EU renegotiation) is designed, in his words, to reduce "the incentives for lower paid, low skilled EU workers to come here in the first place." The disparity between the amount migrants can earn at home and the amount they can earn in the UK (including through in-work welfare) must be narrowed. 

But the defining measure of George Osborne's Budget - a "National Living Wage" - will only increase the incentives for foreigners to migrate. As the OBR noted, the planned rate of £9 by 2020 will move the UK from the middle of the global wage league table to the top. Just seven OECD countries will have a higher minimum wage relative to full-time median earnings. 

This isn't the only draw for migrants. As the Labour MP John Mann, who has called for curbs on the free movement of labour, tweeted: "Biggest winners in today's budget are low skilled Europeans thinking of coming here. Free childcare, pay no tax, higher pay. The UK dilemma." But given the the economic benefits of high immigration, Osborne, a liberal on this issue, may not mind. After achieving a majority despite Ukip winning 12.6 per cent of the vote, the Tories can no longer have to permanently appease Nigel Farage. 

George Eaton is political editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.