"Net zero migration (NZM) would have clear fiscal consequences for the UK economy: lower tax revenues would leave the government needing to raise taxes to close an increasing funding gap over the long-term, according to analysis contained within the National Institute of Economic and Social Research's latest quarterly Economic Outlook. Slower employment growth and a smaller tax base would reduce revenues, increasing the budget deficit by around 0.8 per cent of GDP, equivalent to approximately £37 billion in today's prices, by 2040."
"This is because fewer workers and a lower population could result in the size of the economy being 3.6 per cent smaller. While in the short run there would be higher GDP per capita, real wages and real personal disposable income (RPDI), driven by firms using more machinery relative to staff increasing productivity, these gains come at the cost of weaker headline GDP growth and a material worsening in the fiscal position over time."
Net zero migration would lower tax revenues, forcing higher taxes to close a funding gap. Slower employment growth and a smaller tax base would raise the budget deficit by about 0.8% of GDP, around £37 billion by 2040. Public sector net debt as a share of GDP would follow a higher path because fewer workers and a smaller population could shrink the economy by about 3.6%. Short-run gains in GDP per capita, real wages and real personal disposable income would arise from higher capital intensity but accompany weaker headline GDP growth and worse fiscal outcomes. Positive net migration would expand the working-age population and help stabilise the debt ratio.
Read at London Business News | Londonlovesbusiness.com
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