18 June 2018

How to tackle Britain’s immigration Hydra

By Philip Salter

If you were to invent an immigration system from scratch, only a lunatic would come up with the bureaucratic mess we have in the UK.

Fortunately, new Home Secretary Sajid Javid is reversing some of the damage. First on his hit list was the Tier 1 Graduate Entrepreneur visa, which will morph into a much-needed startup visa.

We didn’t always have it so bad (and I don’t just mean pre-World War 1, when passports and visas were rarely needed. The current system started rationally enough and easily enough for migrants to understand.

Between 2008 and 2010, the Labour government phased in a points-based system (PBS) for non-EU migrants. The system was based on assessing individuals’ income, education level and language skills, but eventually whole routes were shut and the process made purposely more complex to deter applications.

The Tier 1 Graduate Entrepreneur route – which will be turned into a startup visa in Spring 2019 – was never fit for purpose. In the year ending March 2018, there were only 839 approved applicants from a cap of 2,000. The problem isn’t that graduates don’t want to become entrepreneurs – a survey we undertook with the NUS found that 42 per cent of international students want to start up their own business following graduation – it’s that too few universities encourage and support prospective entrepreneurs down this visa route.

Universities are failing to support international entrepreneurs’ ambitions for a variety of reasons, but the most pertinent is rational self-interest. Endorsing a graduate entrepreneur opens up universities to huge risk. Universities generate significant revenues from foreign students, but if it were to turn out their graduate entrepreneurs were working in Starbucks rather than startups, they could lose their Tier 4 license, which allows them to bring in foreign students. It is understandable that most universities are keen to defend this vital revenue stream.

However, Javid is right to avoid tinkering with the universities’ incentives because they aren’t the best institutions to endorse startup entrepreneurs. As we recommended in the Migration Advisory Committee consultation that informed Javid’s decision, the Graduate Entrepreneur visa should be converted into a startup visa, with the powers of universities extended to business accelerators. This is exactly what is happening.

Accelerators have huge incentives to endorse the world’s best entrepreneurs. Unlike universities, accelerators are explicitly designed to help businesses scale and are run by people with the skills and experience to spot entrepreneurial talent. Also, unlike universities, most accelerators take equity in their startups, which gives them a financial incentive to track down the founders and startups with the greatest chance of success. (Even Milton Friedman couldn’t have invented an institution with better incentives for a policy like this.)

Of course, the graduate entrepreneur visa is only one small (but important) cog in the system. If I were to prioritise Javid’s next steps – largely based on impact and the ease of getting it past Theresa May – I would suggest he: lowers the threshold for the Tier 1 (Investor) visa, so more rich foreigners come here to spend money, as well as banning them from investing them in gilts, so their cash goes towards risk capital for Britain’s entrepreneurs; lifts the ban on asylum seekers working (Germany allows those seeking asylum to work after three months); and reintroduces the Tier 1 (Post Study Work) visa, so that graduates can remain in the UK for one year after graduating.

That last one was a joke. Based on her actions so far, May appears to lose little sleep over the plight of international students, so that one will have to wait until her she is no longer the PM.

Preferences for different immigrants – whether based on compassion, economics or the whims of politicians or perceived public sentiments – make our system inherently complex. But there is no excuse for the defending the status quo. There are calls in some quarters for Javid to replace the Prime Minister at some point. If that comes to pass, let’s hope he continues to take as strong an interest in goings on at the Home Office as May does.

Our Hydra-like system isn’t fit for purpose. Hercules eventually defeated the Hydra (spoiler alert) by burning the neck of each head as it was cut off. The monster that was the graduate entrepreneur visa route has been defeated: one sub-visa route reform down, plenty more to go.

Philip Salter is the founder of the Entrepreneurs' Network