25 February 2014

What am I really bid? - the small print of the MAC report

The Migration Advisory Committee (MAC) today released its much leaked report on the Tier 1 (investor) visa route. The MAC was asked to report on the the investment thresholds and economic benefits of the visa route. Much press comment has centred on the proposal to auction visas to rich foreigners, but what does the report really say?

One of the recurrent themes of the report is that investment in gilts, which it appears are the investments of choice for the majority of investor migrants, are of little benefit to the UK. Its recommendations are therefore designed to drive investment away from gilts alone.

The MAC recommends that: -

  • the minimum investment level be increased from £1m to £2m. Given that the visa route and its original threshold of £1m was introduced in 1994, this recommendation is really just an adjustment for inflation;
  • the class of investments that qualify be widened considerably; it suggests including Venture Capital funds, Infrastructure bonds, collective investment schemes, a UK Government operated fund for business similar to the existing Business Growth Fund provided by the Department for Business, Innovation and Skills (BIS) but it does not come out in favour of philanthropic contributions or donations. This is a welcome recommendation but will require much detailed policy development if implemented;
  • investors should not have to ‘top-up’ their investments to cover losses caused by market fluctuations. Again, this is a welcome recommendation;
  • the use of borrowed funds be discontinued. This will not be welcome to those financial institutions that have developed ‘products’ involving the use of loans;
  • consideration should be given to the introduction of an auction, to allow the market to set the price for residence by investment. This concept is to be a ‘premium route’, subject to a quota (suggested to be 100) which would continue to offer accelerated settlement for the main applicant, with a qualification period of two years. The real attraction lies in the recommendation that the Government relaxes residence requirements for those who make use of the premium route, such that the individual need only be resident in the UK for a period of 90 days per annum instead of the current six months (which is cited as one of the main reasons for people choosing not to come to the UK). They will still need to invest £2m in qualifying investments in the UK but the excess over that achieved through the auction process will go into a specific ‘good causes’ fund to be administered by the government. Successful applicants would remain, as is the case now, subject to strict due diligence checks by the Government and financial institutions.

Finally, it must be remembered that the report is just a set of recommendations from the MAC. There is no obligation on the government to implement any of them and the outcome will be driven by the political agenda. It does, however, give a clear steer to the government through the fog of self-interested lobbying by various stakeholders. What is also clear is that a lot of work needs to be done in developing the detailed policy relating to any changes that may be implemented, in particular the widening of the class of permitted investments.

We will be working with our numerous contacts in the wealth sector to coordinate recommendations for policy development in the light of the MAC report. Anyone interested in participating should contact Philip Barth at philip.barth@witherswordwide.com.

Category: Article