Who gets the Gerald Ratner Award for his or her outstanding contribution to the destruction of the UK's economy? That the two leading contenders are Gordon Brown and Alistair Darling requires little explanation. Surprisingly there is a third candidate - immigration minister Liam Byrne MP, whose points based system of immigration may well damage the economic health of the UK in a manner the others could scarcely even contemplate.

Mr Byrne has spun the story of the new points based system in three misleading ways. Firstly he has said that it is based on the system operated in Australia, secondly that the new system would mean that only the migrants the UK needs would come to the UK, and thirdly that the entire system amounts to a huge shake up of the UK's border security.

The minister announced the implementation of the new system in New Delhi in February of this year. He said:

"Our points system is starting on time and on plan. I've no problem with taking the best systems in the world, like Australia's points system, and bringing them to the UK. This is a key part of the huge shake-up to our border security this year."

"The points system means only those migrants Britain needs can come to the UK. We know that migrants contributed to our economy to the tune of £6 billion to GDP in 2006. A strong system for highly skilled migrants is vital to Britain winning these benefits because these migrants are well-educated and pay lots of tax."

A new Australian-style system

In reality the "points based system" is not new at all. In the only form in which the system operates so far - it is simply the Highly Skilled Migrant Programme (or "HSMP") renamed as Tier one of the "points based system". But even before the HSMP's introduction in January of 2002 the Immigration and Nationality Directorate had implemented its policy whereby "innovators" could be admitted to the UK on a path to eventual settlement. The Innovator scheme was launched in July of 2000 initially as a pilot for two years. In September of 2002 it was extended indefinitely. It was then introduced into the immigration rules (as rules 210A to 210H) with effect from 1 April 2003.

The Innovator scheme (and later the regime established in the relevant immigration rules) was modelled upon a similar system used by the Canadian immigration authorities. It created a route of entry for entrepreneurial applicants who were unable to meet the work permit requirements or those for businesspersons under the rules as they were then, perhaps due to their not possessing sufficient amounts of their own money. Applicants had to satisfy the Secretary of State that their proposed business would lead to the creation of full-time employment for at least two people who were already settled in the UK, and, crucially, were required to score a minimum number of points in respect of three separate features; their personal characteristics, the contents of the business plan and the economic benefits of the plan.

The immigration rules in respect of Innovators were finally deleted at the end of last month, and those who had leave in this category are entitled to switch into any of the new Tier 1 General, Entrepreneur or Investor categories of the points based system. All these categories, along with "Tier 1 (Post-Study) Work" were introduced into the immigration rules on 30 June 2008.

The HSMP was introduced by the then Secretary of State from January of 2002. Under the programme people could apply to come to the UK on the basis of points scored for their work experience and qualifications as well as for significant career achievements. Applicants did not need to have a job and could intend either to be employed or self employed. Upon satisfying the Home Office that he or she merited the required number of points the applicant then made his or her application for entry clearance. Like all other visa applications, this was processed by an entry clearance officer at the diplomatic post in the applicant's home country. If the officer was satisfied that the applicant met the requirements of the HSMP a visa was issued accordingly. The UK's immigration rules were adapted to include the HSMP from March of 2004.

"Tier 2" of the points based system – which is not yet operational – replaces the current system whereby workers can enter the UK with a work permit. The system, which has been much praised for its flexibility in responding to the needs of UK employers, is straightforward. Applications are made by UK employers to the Sheffield based Work Permits UK, a branch of the Home Office with a highly experienced staff which then processes the application and approves or disapproves the issue of a work permit. This process rarely takes longer than one week, and in many cases it is completed within a matter of days. If issued, a work permit is then forwarded to the employer by Work Permits UK. The intended employee can then apply for entry clearance to the overseas post.

Under Tier 2 of the points based scheme the meticulous examination of employers' applications by a specialised department of the Home Office is replaced by a system whereby employers must to the Home Office in Croydon for "licences". Upon being licensed an employer is entered on the register of sponsors. The employer can then issue a Certificate of Sponsorship to any intended employee. The Certificate effectively takes the place of the work permit. Armed with the certificate of sponsorship the employee can apply for a visa to enter the UK. The first stage of this application consists of on line self assessment – the applicant enters his or her details into an electronic form which indicates whether or not the necessary number of points can be reached. If it can be the formal application is then considered by outsourced visa processing facilities who have to do little more than work out whether the applicant has enough points to get a visa to enter the UK under Tier 2.

Neither of these changes is new. They are merely modifications of the systems which preceded them. The only differences are that the much admired features of the first incarnation of the HSMP – due to its flexibility it was described as the "most dramatic development in commercial immigration law for the past 30 years" and the efficiency of the system operated by Work Permits UK, have been removed.

The promise that the system is "Australian-style" also does not bear scrutiny. The points based system's first incarnation was based on a Canadian model. The Australian system, in place since 1979, has not done away with the exercise of discretion by its immigration officers in considering applications to enter Australia to work. The Australian system moreover demands far more information from applicants than that which Mr Byrne has proposed for the UK.

Only the migrants the UK needs?

The points allocation in both Tiers 1 and 2 is weighted heavily towards young graduates. By being young and by having a degree their applications will largely succeed. By contrast, senior business people with years of experience will not. For example, Steve Jobs, the co founder and chairman of Apple computers would fail in an application for entry to the UK under the points based system.

A huge shake up of border security

This promise seems likely to come true but not in the way suggested by the minister.

The inherent lack of security in the proposed system is clear from the fact that any UK employer which appears on the new Sponsor Register will be able at the touch of a button to issue employment authority to any migrant with minimal checks and minimal risk of exposure. The 'soft touch' system for employers will lead to a soft touch system for any migrant with unwelcome intentions. Badly trained visa staff will effectively be left to replace the renowned team at Work Permits UK and assess a migrant's eligibility to work in the UK via a tick box formula a school child could operate.

So far the record for the security of applications processed under the new system or its pilot schemes has not been good. The vulnerability of the on line system to abuse is already established. In May last year it became clear that it had been possible to "hack" into the website containing the personal details of those who made their initial visa applications to VFS, the processing facility commissioned by UKvisas in India, and to view them. The individual who drew UKvisas' attention to this had expressed similar concerns as long ago as December of 2005. This time he contacted the public notification section of MI5's website to let the UK know of this apparent breach of security.

The Independent Monitor for Entry Clearance refusals investigated the security breaches. She produced a report in July of 2007 in which she concluded that:

  • There had been an unwillingness from those at UKvisas, who wanted to get on with the processing of applications via outsourced facilities, to listen to the concerns of IT and data professionals with regard to the security of the systems being operated

  • UKvisas had never asked the Foreign and Commonwealth Office for advice as to IT security

  • Comprising what had been a "serious and very basic failing" no third party penetration tests had been carried out by either UKvisas or VFS either in the development phase of the online system or after it had been launched.

  • UKvisas had itself recently obtained an expert assessment of the basic data security provided by the VFS online website which had shown that the site contained "many security weaknesses, and that many of these weaknesses were amongst the most understood and documented security concerns in the computing industry

  • Ongoing data security protections were missing or wholly inadequate.

In other words the UK's "frontier" created by entry clearance procedures carried out in posts abroad, outsourced to aspirant local IT companies like VFS was capable of being breached. Adequate precautions to protect it were lacking. The kinds of strict monitoring procedures which would be expected to be applied in all stages of the process of enabling an individual to enter the UK were absent.

Things have got worse since then. The UK Borders Agency has instigated a practice whereby the passports given to overseas diplomatic posts by people applying for visas to come to the UK are not examined and – if the applications are approved – endorsed with an appropriate visa by an entry clearance officer based in that post before being returned to the applicant.

Instead – presumably as a cost cutting exercise – "a hub and spoke system" has been introduced, whereby hub offices are established around the world. The spokes are effectively branch offices in different countries which forward the visa application forms, correspondence and passports to the centre hubs for endorsements. Following endorsement (or refusal of the application) the passports are returned to the spoke from the hub.

This means that bags full of passports endorsed with visas entitling the holder to enter the UK are being sent around the world. It is a security nightmare of which it is inconceivable that the UK's security services would have approved. The failure of what was UKvisas to obtain approval from the Foreign and Commonwealth Office for its outsourcing of the examination of on line visa applications was of course noted by the Independent Monitor for Entry Clearance refusals in her July 2007 report.

This is hardly the kind of shake up of border security that the UK needs.

Security aside – the disadvantages of this absurd system for the economy are also obvious. The system has now meant that businesspeople who require visas to travel to the United Kingdom urgently cannot do so. The minimum period time for processing a visitors' visa for business purposes for businessmen who do not reside in a country where a hub is located, is at least a week to ten days. This makes the United Kingdom singularly uncompetitive. No doubt, Mr Byrne would explain that other countries like the United States take time to issue visitors' visas, but it is difficult to see how, when you are seeking to establish the UK's excellence as a financial centre, you would create a system which is retrograde to put you in a similar or worse position than your competitors.

We recently had a case where the client submitted an application at a spoke. His application was forwarded to the hub, which then forwarded the application to the Home Office. After some delay the Home Office approved the application and the client was asked to return to the spoke to deliver his passport for onward transmission to the hub for endorsement. Two and a half weeks later, the spoke could not give any information of the whereabouts of the application, other than that it was sitting in the hub. They could provide no indication as to how it was being dealt with.

On contacting the Foreign Office, they confirmed that they had sent emails or an email to the hub that had not yet had a response. How in the world is a country going to compete on a competitive business level with this type of service? This is the new innovative immigration system created by Mr Byrne that is going to give Britain what it needs.

For these reasons Mr Byrne looks likely to take the trophy in the race for the Gerald Ratner award. He is miles ahead of the competition.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.