We'll close this unfair low-wage loophole

Britain needs a Labour government that will drive up skills and stop allowing agencies to pay below the going rate to foreign workers

Scapegoats? Fears created by Romanians arriving at Heathrow airport need to be allayed

In the past few months, the immigration debate has focused on the lifting of transitional controls on Bulgaria and Romania. Whatever the numbers of people that eventually come here, the concern that this has highlighted is not going away.

Our country faces a fundamental question. Britain has succeeded through the centuries as an economy that reaches outwards to the world. Can we maintain that tradition and meet deep public concern about immigration?

I believe we can. But only if we understand the sources of anxiety and act on them.

The British people are going through an historic squeeze on their living standards, a squeeze that has gone on longer than at any time since the 19th century.

People are hurting and they are asking what is happening and why nobody seems to be making a difference. And this cost-of-living crisis goes beyond the difficulties of making ends meet today. It is about the nature of work, the future people envisage for their children tomorrow, the whole way our economy is set up.

This cost-of-living crisis is the most important context for the debate about immigration.

It understandably makes people more fearful of the change that immigration brings. When millions of workers already have low pay and poor job security in Britain and we add high levels of low-skilled migration mostly from the EU, some benefit but some lose out.

Unless we act to change our economy, low-skill immigration risks making the problems of the cost-of -living crisis worse for those at the sharp end. It isn't prejudiced to believe that.

That's why Labour has changed on immigration since 2010.

Nigel Farage would have you believe that the solution starts and ends at the border. It sounds simple enough. Erect a fortress around Britain and hold back the world.

But closing Britain off in the 21st century would be a disaster for jobs, for living standards, for our society and for our children. Apart from anything else, we would lose the contribution of high-skilled workers, never mind the impact on many Britons who would presumably have to return home from working in other EU countries.

Of course, effective border control is important and while all the evidence is that most people come here to contribute, we need a benefits system that is seen to be fair. But this can only be a part of the solution because public concern about immigration is also a symptom of a deeper problem: an economy that no longer works for most working people.

We have to change our country's chronic dependency on low-skill, low-wage labour. A dependency that is getting worse, not better.

What chance of rising living standards for all when unscrupulous firms can exploit workers from abroad to get around the minimum wage?

What chance of giving everyone a fair shot when recruitment agencies are allowed to recruit only from overseas, excluding locals from even hearing about jobs?

What chance of skills for the next generation when too many employers can just import them without having to train people here? Who would have predicted that just 14 years into the 21st century IT apprenticeships would be falling? Not because we don't need IT skills but because they are too often just brought in from overseas.

If people want a party that will cut itself off from the rest of the world, or pretend we should try, that is not the Labour Party. But if people want a party that will set the right rules to stop a race to the bottom with workers coming here from abroad, Labour is that party.

Labour won't conduct this debate in the shrill way that this Government does, for example, trundling vans through our cities telling people to "Go Home".

Instead, we will reform an economy hard-wired into a cycle of low wages, low skills, insecure jobs and high prices that is tearing into the living standards of ordinary families. It means taking measures to stop unscrupulous employers using workers from abroad to undercut wages and worsen conditions.

Official figures suggest that around 300,000 workers in Britain, often from overseas, are paid below the National Minimum Wage. But there have been hardly any successful prosecutions for breaking this law in the past three years and the Government has rejected Labour's efforts to tighten the legislation.

I have already set out many of the steps which would be taken by a Labour government.

The next Labour government will substantially increase the fines for breaching the National Minimum Wage, stop the use of tied housing that undercuts the minimum wage and ban recruitment agencies from having a policy only to hire foreign workers

The next Labour government will require all large employers hiring skilled workers from outside the EU also to take on an apprentice so that both business and young people will be equipped with the skills they need to succeed.

And it goes wider than that.

If we are to win a race to the top, Britain needs a Labour government with measures to drive up skills and drive out exploitation. That means skills for the forgotten 50 per cent of young people who don't go to university, guaranteeing work for young people out of work for more than a year, and outlawing exploitative zero-hours contracts.

And it also requires that we do more to strengthen the rules designed to help protect the living standards of Britain's families.

There is a loophole in the laws around agency work which allows firms to avoid paying agency workers at the same rates as directly employed staff. This is being used in sectors where levels of employment from abroad are high, such as food production, and now accounts for as many as one in six of those employed by agencies.

The next Labour government will work with British business to close this loophole and ensure that agency workers cannot be used to undercut non-agency staff.

Some in business might be concerned that greater rights for vulnerable workers will impede flexibility. But they should also understand that Britain can only maintain the open economy it needs to succeed if there is proper protection to stop this very openness fuelling a race to the bottom.

I said in my New Year message that Labour would be relentlessly focused on tackling the cost-of-living crisis. Britain is a more prosperous country because we draw on the talents of people from all over the world. But I am determined that government, business and people work together to ensure that this vision of Britain works for all and not just for some.

Ed Miliband is the leader of the Labour Party