EU Immigration and GDP: The accountant’s perspective

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istock_narvikk
Imprudent Accountant
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An unnamed firm
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The government has finally put our money where its mouth is regarding EU immigration.

If the BBC reports about a document leaked to those renowned lefties at the Guardian are correct, then some accountants might find themselves in a quandary.

As responses on AccountingWEB have showed in the past, a significant proportion of readers (or maybe just responders?) have been voluble in their support for the Leave campaign and what has become known as a hard Brexit.

The latest manifestation, as demonstrated by an 82 page document that somehow found its way to a newspaper prior to publication, centres on unskilled workers from EU countries. These will typically be people who work zero hour contracts earning little, if anything, more than the National Living Wage.

The government has finally got the bit between its teeth and delivered a major policy document stating its intended policy, which it expects to come into force on the big day in March 2019.

Its plan would prevent unskilled EU workers from staying in this country for longer than two years, while at the same time forcing prospective employers to show that they are unable to find equally unskilled British workers capable of doing the job.

This will have the desired effect of keeping immigration from the EU to a much lower level than at the current time but at what cost?

While few of us would wish to see foreigners preventing Brits from getting jobs, there is a big question about the fiscal consequences of this plan.

Apparently, the government blithely accepts that it will lead to a reduction in our GDP, although there will be compensation at local level.

If GDP is going down overall but increasing in certain specific localities, it must by definition be going down even faster elsewhere. This could have a deleterious effect on economies in some of the hardest-hit parts of the country.

Regardless of that, we are effectively saying that UK plc is happy to take a cut in income and therefore profits for the privilege of keeping Europeans out. This makes no accounting sense at all. It will be compounded by the fact that when fewer people are employed tax revenues must inevitably diminish both as a result of reduced corporation tax on profits that are no longer made and a smaller PAYE and NIC take, given the assumption that fewer employees mean less employment tax.

On a microcosmic level, any reader that is currently employing unskilled workers might in future find himself or herself having to carry out a detailed search for UK equivalents who do not exist, prior to being given permission to take on somebody who will have to be replaced after two years.

This is certainly a bold step by the government, although whether it can get through parliament must be open to serious debate. In any event, it hardly makes the prospect of unanimity at Westminster or across the country more likely, which is a shame.

We certainly live in interesting times and it appears that they will continue for at least a couple more years.

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07th Sep 2017 15:26

Perhaps if employers wish to employ continental workers they should set up operations on the continent.

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08th Sep 2017 10:40

Isn't GDP per head of population more relevant than total GDP?

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By DJKL
to sheila t
10th Sep 2017 12:19

Yes, to a degree.

There are however certain government expenditures that are fixed and do not directly vary with population, say defence spending and transport systems. With a lower tax burden from a reduced workforce the amounts paid per capita in taxes to support these will likely need to increase.

However a lot of tax spend is to a degree variable with population, so the fixed element should not be overstated, but nor should it be ignored.

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