Last month UK Home Secretary Amber Rudd said her office didn't have a position on post-Brexit immigration.

The revelation astonished Members of Parliament who accused the British government of being unprepared for exit day.

A fight within Prime Minister Theresa May's Cabinet over how it should approach immigration in Brexit talks is delaying progress in policy-making, sources have told Business Insider.

There is also concern that the Home Office doesn't have the capacity to deliver the changes.

LONDON — A row within Theresa May's Cabinet over how Britain should tackle immigration in negotiations with the European Union is preventing the government from deciding what it wants from post-Brexit immigration.

Two weeks ago, Home Secretary Amber Rudd revealed to the Home Affairs Select Committee that the Home Office had not yet reached a position on what it believed the best post-Brexit immigration system for Britain should be.

To committee chair Yvette Cooper's visible astonishment, Rudd said that 21 months on from the 2016 Brexit referendum, the government had not decided what migration model it wants to work towards.

"At the moment, my commitment is to make sure the prime minister and David Davis have the information they need to get the best deal for the UK in their negotiations with the European Union," Rudd told Cooper. Davis is the Secretary of State for Exiting the European Union.

The committee was concerned by the apparent lack of progress in one of the most important areas of Brexit policy.

"Immigration was the biggest issue in the referendum nearly two years ago, and yet we are running out of time to have serious discussions in cabinet and in parliament about what we want our immigration system to look like in the future," Cooper, the Labour MP for Normanton, Pontefract and Castleford, told Business Insider this week.

"The country needs answers now – the Government can’t just keep kicking the can down the road."

Cabinet without consensus

Well-placed sources have told BI that Theresa May is trying to manage an argument between senior ministers over what she should offer to the EU in regards to immigration, in ongoing negotiations on the future relationship.

The debate concerns whether Britain should incorporate preferential treatment for EU migrants into its post-Brexit immigration system. In practice, this would mean fewer obstacles in the way of EU citizens from migrating to the UK, compared to migrants trying to reach the UK from elsewhere in the world.

It's between Theresa May — who is the most restrictionist prime minister in living memory when it comes to immigration — and the rest of the Cabinet, which is largely moderate and sensible.

A source with knowledge of Cabinet discussions told BI that ministers who want Britain to have close ties with Brussels after it has departed the bloc have pressured May to offer preferential post-Brexit treatment for EU citizens, in order see "what it can unlock" in negotiations, an example being greater market access. However, the Cabinet's chief Brexiteers pushed back, arguing it would keep Britain too close to the EU.

"There was a huge argument about whether immigration in a broader sense — in particular around preferential migration regime for EU citizens — would be up for grabs in talks," the source said. "It won't surprise you to learn that certain parts of the Cabinet said absolutely not."

But that is not the only disharmony within May's so-called Brexit "War Cabinet," Jonathan Portes, Professor of Economics at King's College and immigration expert told BI.

"There is no prospect of consensus within the Cabinet on immigration after Brexit and that's not so much a Remain-Leave divide," he said. "It's between Theresa May — who is the most restrictionist prime minister in living memory when it comes to immigration — and the rest of the Cabinet, which is largely moderate and sensible."

The prime minister is no rush to have decisive discussions about post-Brexit immigration because "she knows she'd be in a small minority" on the question of how tough immigration controls should be, Portes claimed.

For example, May remains committed to getting net migration below 100,000. The pledge was introduced in 2011 by ex-prime minister, David Cameron, but successive Conservative governments have failed to get anywhere close to it.

"Some of the policies she introduced to try and meet the target have already done economic damage. If she were to go further in that direction she would do further economic damage," Portes added.

A Home Office on the brink of crisis

Even if the Cabinet was to reach a united position on post-Brexit immigration, there are big questions over whether the Home Office would have the capacity to even deliver it.

It is set to have two years to process residency status for around 3.5 million citizens, plus those who'll have the right to arrive during the proposed transition period. This will require an application to be completed every four seconds. This is before civil servants even begin to think about building a brand new migration system.

"This would be a serious challenge for any department, let alone one with a record of making mistakes in immigration applications and with 1,200 new staff to recruit and train," Cooper told BI.

Rudd's under-pressure department is planning to hire an extra 1,500 members of staff by September 2018 to help with the mammoth task of Brexit, according to Institute For Government research published last month. This will see Home Office staff numbers return to levels not seen since before Whitehall downsizing got underway in 2010.

The Home Office is also accelerating its outsourcing. It is using around 50% more agency staff per month than it was in 2015, the IfG report adds. It will spend nearly £40 million more on agency staff in 2017/2018 than it did between June 2015 and June 2016 if it continues at this rate.

Yet, as the Institute For Government's Joseph Owen explained, this recruitment drive will not necessarily address the fundamental institutional problems within the Home Office.

"It's quite easy to bulk up capacity by recruiting low to mid-level civil servants, often generalists with a few years experience," he told BI this week. "But it's more difficult hiring the more experienced civil servants who are going to be making the big decisions and working out how to manage trade-offs. They're not easy to find."

Digital resources are also an issue, Owen added. The Home Office currently has two IT systems for dealing with migration, and designing a new one for post-Brexit Britain will require designers who are in limited supply. However, the designers the department has are busy "with the burning issues in front of them, in the settled status and registration schemes," Owen said.

The Home Office is allegedly so anxious about its capacity to deliver Brexit that it has taken steps to delay the process.

In July, Rudd asked the Migration Advisory Committee to produce a report on how ending the free movement of people will impact the UK labour market. The move was well-received as it suggested the government wanted to put evidence before dogma in the formulation of its immigration policy. Its findings are expected later this year.

However, a source close to the Home Office told BI that one of the reasons Rudd chose to commission this report was to give her department more time to clear the decks before work on post-Brexit migration must begin.

"The decision to go for the Migration Advisory Committee report on future migration was a quite convenient move in that the Committee is taking a year to produce its report," the source said.

"It's a good way of kicking the can down the road so the Home Office can focus on the cliff-edge issues which need to be ready in either 2019 or 2020."

A Home Office spokesperson denied all of this in a statement sent to BI.

"It’s nonsense to suggest that the Home Office, a department with 30,000 members of staff, is incapable of doing more than one thing at once and is overwhelmed by Brexit," they said.

"Work to develop a new digital application system for resident EU citizens and the rules that underpin it is well under way. We will be setting out further details before the summer and it will launch at the end of the year."

Portes made the point that if May had successfully secured a transition period without the free movement of people, the challenges facing the Home Office now would be existential.

"The Home Office would be in total chaos," he said. "Given she has capitulated on that, free movement will continue for nearly two years, and that gives a reasonable amount of time. I'm not saying we won't get to a crisis point given all the other demands on the Home Office and government in general, but it's probably too soon to massively panic."