Saturday, June 22, 2024

Businesses and universities are getting rich by loading costs onto the rest of us

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If we discovered a business leader had amassed their fortune not only by making a tidy profit on the goods or services they sold, but by also pilfering the earnings and savings of innocent members of the public – people not even connected in any way to their business – we would be outraged. There would be demands for justice: compensation for the victims, and prison for the perpetrator.

But what if something analogous was happening every day in our economy, across different companies and sectors? What if, hidden in plain sight, some of the biggest and richest companies and institutions were profiting handsomely by keeping revenues for themselves – while offloading their costs of doing business on to the public?

Take universities, which have been in the news after the Government’s Migration Advisory Committee (MAC) reported on graduate visas, which allow foreign students to live and work in Britain for a minimum of two years after the completion of their studies. Even though the essay question the Government gave the MAC was written to achieve a positive answer – emphasising the importance of the arbitrary target to attract 600,000 new foreign students to Britain every year – the detail of the report said everything.

Twenty-seven per cent of graduate visa holders, it found, were not working at all. Forty-one per cent earned less than £15,000. The largest groups by nationality were Indian, Nigerian, Chinese and Pakistani, and graduates from these groups earned considerably less than all others: the median Pakistani, for example, earned just £14,402. As Neil O’Brien, the immigration-sceptic Tory MP, points out, “given full-time minimum wage work gets you c. £24k – this is not graduate work”.

To anybody familiar with student migration, this is no surprise. The vast majority of the growth in graduate visas reflects the growth in student visas: 66 per cent of all graduate visas come from students completing postgraduate courses at non-Russell Group universities. As Prof Alan Manning, the former MAC chairman, explains, “universities are not just selling education but also, in part, work permits”.

We should be clear about what this means. Last year, 69 per cent of people taking up the graduate visa had studied in this country for one year or less. And 63 per cent of those whose graduate visa ended switched to another visa route. In other words, a one-year master’s course – whatever the subject, whatever the university – automatically brought three additional years of living and working in Britain, and without much difficulty, then a lifetime.

The benefit for universities and those who work for them, from the lavishly paid vice chancellors to the armies of lobbyists and PR consultants hired to defend their special interests, is obvious. But for society, the benefits are dubious and the costs are clear. Few graduates taking jobs on the minimum wage will become net fiscal contributors over their lifetimes, and the increase in immigration caused by the graduate visa route diminishes our capital stock. The profits rest with the university sector, while the costs fall to the general public.

This kind of hidden subsidy applies to other sectors too. Many customers marvel at the logistical brilliance of fast-food delivery services, taxi apps, and of course the ubiquitous Amazon. The scale of corporation tax Amazon has avoided in Britain is well known, but less debated are the ways in which many of these companies keep revenues for themselves, while leaving the costs to the rest of society.

Three years ago, after a protracted legal case, the Supreme Court ruled that Uber drivers are not independent contractors – as they had previously been treated by the company – but employees, which meant that they were entitled to various labour market rights. The costs added by this ruling, plus a connected decision that Uber should collect VAT for journeys, has reduced its price competitiveness and, in doing so, showed how its business model depended on shifting its costs and responsibilities on to others.

According to an investigation by Transport for London, Uber was responsible for 14,000 fraudulent journeys between late 2018 and early 2019, because the company allowed unauthorised drivers to upload their photographs to other, authorised Uber driver accounts. This prompted TfL to temporarily remove Uber’s licence to operate in London, which has now been restored, but the practice continues with various other firms. 

Companies including Amazon, Deliveroo, Uber Eats and Just Eat all have “substitution clauses”, which allow couriers to lend their profiles to others. With these clauses it is, in the words of Amazon, the original courier’s “responsibility to pay your substitute … at any rate you agree with them” and “you must ensure that any substitute … has the right to work in the UK”.

Unsurprisingly, this can be a recipe for exploitation and immigration crime. Investigations have exposed a trade in couriers lending and selling their delivery accounts online. One found more than 100,000 people on Facebook groups where these identities are traded, but nobody knows how many substitutes are working, because few questions are asked and records not kept. Insurance companies say many unauthorised couriers are caught up in fraudulent motor and personal injury claims.
It is difficult to deny that many companies are privatising profits and socialising the costs arising from their business models, many of which depend upon illegal immigration and illegal working – often by those on student visas – in the black economy. 

And whether we are talking about the private equity funds that extracted huge sums from water utilities while avoiding the costs of their pollution, or the mistreatment of workers in warehouses or the fashion supply chain, tax dodgers in the Channel Islands or any number of other examples, it is too easy, in the modern economy, to leave the negative externalities caused by your business model to the wider public.

The curious thing is that our technocratic classes – so quick to see and tax the externalities of everything from driving a car to taking a flight – fail to see what is right before them. They may, by instinct and ideology, be wedded to the status quo, but we must reject it. Too many profit at the long-term expense of us all. We must not let them take us for fools any longer.

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