Does the UK-India trade deal sell out British workers?

The new trade deal between the UK and India has been heralded as a ‘huge economic win’ by the British government, with Downing Street’s press release boasting that ‘British shoppers could see cheaper prices and more choice on products including clothes, footwear and food products, including frozen prawns, as UK liberalises tariffs’. It expects the deal to generate an extra £4.8 billion for the UK economy over the long run.

Dominating discussion of the trade deal has not been the price of food or clothing, however. Reform UK leader Nigel Farage, Tory leader Kemi Badenoch and most of today’s front pages have highlighted the deal’s tax exemptions for Indian workers who have been seconded to Britain. As part of the new agreement, a ‘double-contribution convention’ has been struck. This means that Indian workers, from Indian companies, who are then posted to the UK will not have to pay national-insurance contributions for three years, although they will continue to make social-security contributions in their home country. If they stay longer than three years, they will revert to paying UK national insurance. This aspect of the deal has drawn widespread anger, provoking accusations of a ‘two-tier’ tax system that will undercut British workers.

The Indian government certainly boasts that the tax deal is an ‘unprecedented achievement’, which will make ‘Indian service providers significantly more competitive in the UK’ – at least more competitive than previously. Meanwhile, Labour has been quick to downplay this concession, pointing out that the UK already has similar agreements with other countries.

Both critics and defenders of the deal seem to overstate their case. It is true that the UK has struck similar reciprocal arrangements on social-security contributions and benefit entitlement with other countries such as the Republic of Ireland, Canada, New Zealand and the US. None of these deals caused such alarm in the past. Of course, none of these countries is anywhere near as populated as India. Nor are they comparable to India in terms of salary expectations and living standards. Crucially, they also have much longer-established connections with the UK labour market.

What’s more, while the arrangement is reciprocal, as the same social-security exemption applies for British workers sent to India, the direction of work-related migration between the two countries very much skews towards the UK. This is not balanced by any stretch of the imagination. Inevitably, any easing of the process of posting Indian workers to the UK will increase this form of migration, precisely at a time when the Labour government has promised to cut the number of arrivals.

Claims that the deal will significantly cost the UK Treasury are currently difficult to scrutinise. The UK government hasn’t yet said how much it expects to lose from national-insurance contributions being directed to India (essentially a kind of formalised remittance payments by temporary Indian workers), nor how many workers will take advantage of the scheme. One thing that is certain, however, is that UK officials have a habit of greatly underestimating net migration to Britain. It would be safe to bet it will underestimate the take-up of this scheme, too.

What’s more, the new arrangements could easily create a situation that is wide open for exploitation in future. Although India and Britain’s social-security rates are currently roughly level, a hike in UK national insurance would quickly create an imbalance. This could then create an incentive for Indian businesses in the UK to deploy more Indian workers to staff their British premises, swapping them for a new batch of their compatriots every three years to avoid paying national-insurance contributions. This could cause considerable disruption in certain sectors, which will not be of benefit to the wider UK economy.

Whether the worst fears about the deal are realised remains to be seen, but the timing of the announcement and the government’s attempts to sell the deal have been woeful. Less than a week after Reform UK stormed the local elections, Labour has announced a plan that, at the very least, could lead to more migration, if not the undercutting of British workers that some initially feared.

The fact that Labour did not anticipate this row reveals just how out of touch it is with the electorates’ concerns. This is a government that clearly lacks any instinct for protecting the interests of British workers. It seems happy to reduce modern Britain to a globalised economic hub, where domestic workers are at best an afterthought. But at least we have those cheap sandals and prawns to look forward to.

Rakib Ehsan is the author of Beyond Grievance: What the Left Gets Wrong about Ethnic Minorities, which is available to order on Amazon.