The Prime Minister and her Chancellor appear to be falling out over how tough to be on controlling immigration.

Theresa May seems determined to do everything she can as prime minister to honour the promise she failed to fulfil as home secretary, which was to reduce net immigration to the tens of thousands. But Philip Hammond is worried about the cost to the economy. The issue is central to what Britain should be demanding in the Brexit negotiations, but it goes wider than that. More than half our immigrants come from outside the EU. This week the spat focused on whether foreign students should be included in the immigration figures. Who’s right?

The argument surfaced in public this week after Mr Hammond appeared before the House of Commons Treasury Select Committee. He was asked whether he stood by a letter he wrote a year ago (when he was foreign secretary) demanding a change in the way immigration figures were calculated. Net migration is the difference between the gross number of immigrants coming to this country each year and the gross number emigrating. Last year it stood at 320,000, way above the promise made before 2010 to reduce it to ‘the tens of thousands’. A year ago Mr Hammond had wanted foreign students to be excluded from the count. The committee wanted to know whether he still did.

The Chancellor replied: ‘We are having conversations within government at the most appropriate way to record and address net migration. As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy. It is true that student visas have been abused in the past. The previous home secretary [Theresa May] did sterling work tightening up on bogus educational institutions. … It’s not whether politicians think one thing or another, it’s what the public believe and I think it would be useful to explore that question.’

This reply was widely interpreted as meaning that Mr Hammond was persisting with his demand that foreign students should be excluded from the calculations. The reference to the ‘sterling work’ of Mrs May as home secretary seemed to imply that he thought the rules had been tightened up sufficiently. And the mention of what the public believes seemed a nod to polling evidence that shows that even those who want net migration to be cut don’t regard foreign students as part of the problem.

It is not hard to see why a chancellor might want to encourage rather than discourage foreign students from coming to Britain to study. In simple economic terms, providing student courses for foreign students is an export industry and a substantial one at that. At a time when Britain is saddled with a huge trade deficit any chancellor is going to want to do all he can to promote exports and so, in this case, foreign students. Furthermore, there seems little cost in doing so. It has been estimated that only about 1% of foreign students break the terms of their visas by staying in Britain longer than they are entitled to do (though this figure has been disputed). Mr Hammond knows too that in the aftermath of the referendum, universities have been expressing deep alarm that by excluding foreign students (and indeed foreign academics), Britain risks losing its international reputation in higher education.

But No 10 is having none of this. After the Chancellor’s appearance before the Treasury Committee, the Prime Minister’s spokesman said: ‘The government objective is to reduce annual net migration to the tens of thousands, and in order to deliver this we are keeping all visa routes under review. Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included.’ The firmness of the word ‘categorically’ was taken to be a very firm public rebuke of the Chancellor by his boss.

But foreign students are not the only immigrants with whom Mr Hammond appears to want to take a softer approach. The week before he was reported to have challenged a proposal made by the current home secretary, Amber Rudd, for a visa-entry scheme for EU workers to be available only to skilled workers, so closing the door to low-skilled workers from EU countries. The Chancellor seems to believe that the economy would be harmed if low-skilled EU migrants were denied the opportunity to work in Britain.

It is a view echoed by Adam Marshall, the director-general of the British Chambers of Commerce, who said: ‘Businesses across the UK report skill shortages at a number of different levels, from agriculture and hospitality at the lower skilled level right up to educated individuals at the top of their profession. Businesses are pretty clear they will need workers from overseas with various skill levels in the years ahead, even if we train more people at home. The risk is the government arbitrarily decides whether an individual is skilled or unskilled when really the requirements of the vacancy should do that.’ The CBI expressed much the same view.

The political problem lies in part in the embarrassment of the Tories in failing so far to honour their promise to cut net migration to the tens of thousands. But it is also about the difficulty of interpreting the Brexit vote. Few people dispute that the issue of immigration was one of the chief factors that swung the vote for Leave. Yet it is still hard to be certain what exactly the message about immigration was that voters were sending to their leaders. For the most part, the vote for Brexit was highest in areas where immigration was lowest, and vice versa. For example, around 40% of immigrants settle in London, and yet London voted resoundingly for Remain. In the aftermath of the result it has even been suggested that London should able to issue its own visas simply in order to allow a high level of immigrants to come to the capital.

Similarly, some recent polls have suggested that even those who are keen for net migration to fall are not prepared to pay a high economic price in order to allow it to happen. Their vote for Leave has therefore been interpreted differently. Immigration was important to them, it’s suggested, not so much in relation to numbers as to control: they wanted Britain to retake control of immigration even if the result turned out to be still high net migration in order to keep the economy afloat. It is these people Mr Hammond seems to want to represent. The Prime Minister, however, seems more intent on finally honouring her promise to cut net migration to the tens of thousands.

Who do you think should win this battle? Should the government stick to its declared aim of reducing net migration to the tens of thousands no matter what the hit is to the economy? Or should it prioritise economic growth even if that means allowing net immigration to remain high? And where do you think foreign students should fit in all this: should they be part of the count or not?

Let us know your views.

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