Hamish McRae: Not all good migrants are skilled migrants

So the country is, in the words of the Chancellor, "open for business". But we are not open for talented people – or at least not as open as we were before the new cap on inward migration was imposed. It is one of the great dilemmas of our age and one that is particularly sharp for Britain, because we have, over the past couple of decades, become a magnet for talent.

Overall inward migration has been high, partly for historical reasons but also because we opened our labour market to the new European Union member states more swiftly than almost all other countries. Some of that migration has been at the bottom end of the skill range. But the really unusual feature of migration into the UK has been the inward movement of large numbers of people at the very top end.

To take just one snapshot of this, consider the fact that one-third of the heads of the FTSE 100 companies are non-nationals. Or to take another, the London and south-east of England is home to the largest non-national community of professional workers on the planet. The US naturally has more in absolute numbers, but proportionate to local talent there are fewer and they are scattered across the nation.

But, of course, not every immigrant is going to be head of a multinational company, an investment banker – or indeed a manager of our football squad. Most have lower or middle-ranking skills and some have very few at all. Open societies are by their nature open to energetic people who are prepared to travel for working opportunities, for energy is the common quality, not skills.

Inevitably, such migration has led to social tensions and I think it is almost certainly true (though I have not been able to find any data on this) that those tensions have been greater lower down the skill-range. That is because lower-skilled migrants tend to rely more on the social support network, which cannot easily adjust to increased demands, whereas at the top-end the pressure comes more on private sector services, which obviously can and do. (There are also the issues of impact on crime and on welfare abuse but those are really quite separate ones – problems of policing and our welfare system rather than immigration per se.)

So now we have the political response to these concerns. The issue was an acute one at the election and we have this short-term cap on most inward migration from outside the EU, the suggestion yesterday that immigrants should pay for their own health insurance, and the promise of a more substantial revision of immigration rules next year.

The number of work permits for "highly skilled" people without a job offer stays at 5,400 this financial year, the same as last, but the number of points these people will need to achieve will rise: they will either have to have higher levels of education, higher previous earnings or other funds. The number of permits for the next tier down of skills will be cut by 1,300 to 18,700.

You might think, looking at these numbers, that this should be no big deal. It only affects the 5 per cent of migrants who come from outside the EU and demand for labour is going to be slack for the next couple of years until the recovery picks up steam. In any case, the total EU labour market is 215 million. Surely there must be enough people there to fill whatever jobs come up?

You might think so. But already the employers' organisations are voicing concern and that should surely be taken seriously for they simply reflect what employers are reporting. There are a number of specific concerns, for example the extent to which private care homes for older people rely on immigrant staff. You might say that these are not high-skill jobs and, on a tick-the-box analysis, they probably are not. But as anyone who has any experience of caring for the elderly would acknowledge, these homes do rely on people with soft skills – skills at coping in often difficult circumstances – and it would be dreadful if they were unable to recruit freely.

There are two further points. One of the skills we most need, the magic that drives economies forward, is entrepreneurship. That comes from anywhere and everywhere but most people who have it would not pass any "high-skills" test. Politicians talk about it but I don't think they understand it. If they did they would be more careful about new regulation and push for less complicated taxation. So perhaps in this review of migration standards they should at least ask whether the new regime might discourage would-be entrepreneurs.

The other leads on from this and concerns students. There has certainly been abuse of the student visa system, but I understand that universities are really worried that new post-graduate students will not be able to get visas for the coming academic year. Our higher education industry is not just successful in its own right; by bringing clever people to the country this helps build the success stories of tomorrow. If the bright go to the US instead, the odds are overwhelming that they will start their businesses there, not here.

We will inevitably try to control our borders more effectively than we have in the past. The challenge is to do that honestly, sensitively and with a bit of economic nous. It is a strange mixed message to say "welcome to business" but not "welcome to business-minded people" but that is the message we are now in danger of delivering.

h.mcrae@independent.co.uk

For further reading

Interview with Georges Lemaitre, OECD international migration expert, on recent migration trends in the European Union ( www.oecd.org)