Your Explanatory Memorandum dated 12 November was considered by Sub-Committee G at their meeting held on 29 November.

  We recognise that, while the Communication does address a serious issue, it appears to have few implications for the UK since actions are already being taken forward which correspond to most of the suggestions set out by the Commission.

  We would, however, like to have further information about the Commission's assertion that the transitional arrangements limiting the mobility of workers from the new Member States area are a factor hampering the engagement of these workers in declared work, and hence that these arrangements may be increasing the extent of undeclared work (second bullet of section 5 of the Communication).

  Please would you explain for us in what ways the Commission considers that such transitional arrangements exacerbate the problem of undeclared work. In the case of the UK's restrictions on the labour market access of migrants to the UK from Romania and Bulgaria, for example, is the point being made that these restrictions can lead to a greater extent of undeclared work in Romania and Bulgaria? Or, alternatively, is the Commission suggesting that these restrictions may cause there to be illegal immigrants to the UK from these countries who carry out undeclared work in the UK?.

  You make no comment in the Explanatory Memorandum about this statement of the Commission, but confirm that, following a review, it has been decided to maintain the restrictions on the labour market access of migrants to the UK from Romania and Bulgaria until "at least the end of 2008". In addition to clarifying what the Commission mean by their statement, please would you let us know the Government's views about this issue.

  Pending the receipt of your further views on this aspect of the Commission's Communication, we will retain this document under scrutiny.

29 November 2007

  Thank you for your letter of 29 November in which you raise a number of questions concerning the above Communication and my Explanatory Memorandum of 12 November 2007.

  I am sorry for the short delay in responding. When submitting the Explanatory Memorandum I alerted the Committee to the cross cutting nature of the issues covered and while BERR clearly has a strong interest in the free movement of workers within the European Union, immigration controls are primarily a Home Office matter. BERR has therefore consulted with the Home Office in preparing this response.

  The Committee asks why the Commission asserts "that the transitional arrangements limiting the mobility of workers from the new Member States area are a factor hampering the engagement of these workers in declared work, and hence that these arrangements may be increasing the extent of undeclared work". According to the European Commission's Report on the Functioning of the Transitional Arrangements of 8 February 2006 [COM(2006)48 final], the Commission appears to be of the view that there is no direct link between where people move to and where transitional arrangements are in place. The Report suggests that movement relates more to labour supply and demand conditions. This may have led the Commission to a view that undeclared work may come about in circumstances where a high demand for labour exists together with a labour supply with the facility to move to where the work is without being able to take up that work legally.

  The Committee also requested an explanation of the UK view on this issue, and in particular in relation to migrants to the UK from Romania and Bulgaria. Despite the current A2 restrictions, there continues to be access for skilled workers from Romania and Bulgaria who meet the skills requirements of the United Kingdom's work permit arrangements and the Highly Skilled Migrant Programme.

  While access for lower skilled workers is quota limited it does exist for those accessing existing schemes (the Seasonal Agricultural Workers Scheme and the Sectors Based Scheme) for the agricultural and food processing sectors. From 2008, both these low-skilled schemes will be restricted to applications from Bulgarian and Romanian nationals only.

  We have actively sought to remind employers of their responsibilities regarding the employment of all overseas nationals—not just those from Bulgaria and Romania—and the consequences of employing illegal workers. We sent direct mail to 500,000 employers in those business sectors most at risk of illegal working; and undertook both newspaper and radio advertising to reinforce our message. Advice for A2 nationals in the UK was also translated in to Bulgarian and Romanian, and we have worked with the Bulgarian and Romanian Embassies in the UK to disseminate information to the UK-resident population.

  We believe that a background of free movement does present some challenges, but we are clear that those who seek to live in the UK must abide by our laws. Employing illegal workers undercuts legitimate business, leads to exploitation, and is not acceptable. Overall we have not encountered large numbers of Romanian and Bulgarian nationals in our operations against illegal workers, the vast majority of those who were encountered have been working legally. The low figures may demonstrate the success of the awareness campaigns highlighting the need for A2 nationals to obtain permission to work. In terms of impacts on non compliance with HMRC tax obligations there is nothing in our work to date that suggests that A2 nationals have a greater or lesser impact on the informal economy.

  Whilst perceptually the increase in migrant labour has increased levels of non-compliance, there is no specific evidence to suggest that migrant workers present any greater risk than UK workers. There are some sectors, e.g. construction and agriculture, where the level of non compliance generally is relatively high. This, allied to a disproportionately higher level of migrant workers in such sectors, might well result in higher levels of non-compliance by, or involving, migrant workers. However, such non-compliance is sector driven rather than nationality driven.

  The restrictions that the Government has in place for Romanians and Bulgarians were reviewed and a balance struck between the needs of the UK labour market, the wider impact of the migration of accession state nationals on the UK and the positions adopted by other EU countries (as that affects access to the UK labour market). We have looked therefore at the evidence of the benefits and the impacts of migration from the A2 and from the A8 (eight countries which joined the EU in 2004), which we have used to inform this decision. While initial evidence showed that there is a clear positive contribution to the economy from migration, there are some reports of pressures in other areas, including public services. The prudent balance was therefore to maintain restrictions as we monitor the medium to long term effects of accession migration.

17 December 2007

  Your letter dated 19 December was considered by Sub-Committee G at its meeting held on 10 January 2008.

  We were most interested to read your explanation of the Commission's view that transitional arrangements limiting the mobility of workers from the new Member States are a factor hampering the engagement of these workers in declared work, and hence that these arrangements may be increasing the extent of undeclared work.

  We also appreciated your explanation of why the Government does not share the Commission's view on this subject, and of the rationale for the transitional limits it has imposed on the immigration of lower skilled workers from Bulgaria and Romania.

  Against this background, we find it disappointing that the entry relating to this point—in the Policy Implications section of your Explanatory Memorandum about the Communication—gave no indication at all of this important difference of view. We urge that, in your future discussions with the Communication, you challenge the Commission's view on this point, using as evidence the various sources of information which you quote in your letter to us.

  We now clear this document from scrutiny. We ask you, however, to keep us informed of any future evidence that emerges relating to the impact on illegal working of the UK's transitional limits on the immigration of lower skilled workers from Bulgaria and Romania.

10 January 2008