The Government's target to cut net migration from outside the EU below 100,000 has been blasted as "bizarre and unachievable" by a leading employers' organisation, after a parliamentary report found a central plank of the policy was "not fit for purpose".
The House of Commons Home Affairs Committee said the annual cap on visas for skilled workers from outside the EU coming to take up job offers in the UK was having "no effect" on bringing down overall migration, and had even "stimulated" recruitment of workers from European countries.
And the committee found that the "perverse" consequences of the limit had come close to causing a nursing crisis in the NHS this winter, until Home Secretary Theresa May stepped in with an emergency relaxation of the cap.
Following the release of the report, the Institute of Directors renewed its call for a comprehensive review of immigration policy, warning that the Government's "arbitrary" target made it impossible to develop a sensible plan to manage migration in a way which supported business and the national economy.
IoD head of employment and skills Seamus Nevin said that a "toxic" debate over migration had left businesses "caught between needing to address specific skills shortages to raise productivity while being unfairly attacked for having to hire from overseas".
Mr Nevin said: "The committee rightly points out that the cap has had 'no effect' on reducing net migration but has prevented businesses from recruiting people with the skills they need. The Government must listen to the concerns raised by the Home Affairs Select Committee.
"The Government's bizarre and unachievable net migration target has not only caused great difficulties for British employers, but has also put off foreign businesses from investing in the UK."
The immigration cap, introduced in 2011, puts an annual limit of 20,700 on the number of Tier 2 (General) visas granted to skilled workers from outside Europe with offers of jobs in the UK, with lower caps for each individual month.
The committee report found that while it may have discouraged some skilled non-Europeans from coming to the UK, it had also stimulated recruitment from within the EU. With a third of a million migrants coming into the UK each year, the limit on Tier 2 visas appeared to play "a very limited role" in reducing migration, said the cross-party panel of MPs.
Although the annual limit has not been breached since its introduction, the committee heard that "a large number" of applications from nurses were being rejected under the monthly cap. Once the monthly limit is reached, applications are subjected to a salary threshold, which the committee said was "unacceptably high" and excluded many nurses.
The cap made planning recruitment difficult, leading to the rejection of applications from engineers, IT professionals, accountants on graduate training schemes and teachers as well as nurses.
Committee chairman Keith Vaz said: "The Government's immigration cap does not fit, it may even be counter-productive. It is having no effect on bringing down net migration.
"The latest net migration figures show a third of a million people entered the UK last year, roughly the size of Cardiff, making the Tier 2 cap of 20,700 minimal in comparison.
"Yet it blocks the recruitment of vitally-needed skills required by individual employers and the economy as a whole. When the monthly allocation is used up, employers are left with a stark choice between a nurse or an engineer. Britain must be open for business, to achieve this we need skilled workers."
Mrs May was forced to step in and put nurses on a shortage occupation list in October after complaints from NHS Trusts that their inability to recruit from overseas was raising questions over safe staffing levels in hospitals.
Mr Vaz welcomed the temporary relaxation - due for review in February - but said the fact that a "panicked adjustment" of this kind was necessary showed that the immigration cap system was "not fit for purpose".
"When the cap was reached earlier this year, we saw the perverse effects of the system, as the cap prioritises higher-paid jobs," said Mr Vaz. "In June, nurses were being prevented from working in the UK, which necessitated the Government taking emergency measures to allow recruitment to continue.
"Whilst this was a very welcome move, it is clear to see that the system could have caused a crisis in the NHS this winter. A system which encourages panicked adjustments to be functional is not fit for purpose. Nurses should remain on the shortage occupation list."