IFS: Brexit job losses for UK would have “severe” consequences for Budget
Job moves from the UK to the EU after Brexit would be a disaster for the public finances, according to the respected Institute for Fiscal Studies (IFS).
Paul Johnson, director of the IFS, said: "If high-paid jobs and EU citizens, who are well represented among high earners in the UK, relocate elsewhere the consequences for the Exchequer will be severe."
Some 10 per cent of British-based EU 15 nationals – those from the EU's core countries, before its enlargement in 2004 – earn more than £66,000 per year, placing them in the top five per cent of all earners in the UK, the IFS said. Five per cent of EU citizens are in the top bracket.
Multiple big banks have announced they will move hundreds of jobs out of London, although the initial outflow has been less than previously thought. Consultants Oliver Wyman estimated in October 2016 that as many as 75,000 jobs could move to the EU under the worst-case scenario.
The "disproportionate" presence of EU 15 nationals in the top five per cent of earners means it is "very important" for the public finances that jobs and the tax revenues that come with them do not relocate after Brexit, said Carl Emmerson, IFS deputy director.
Tax cuts by the Conservative government since 2010 have taken millions of people out of the income tax net, meaning revenues are "very dependent on a very small number of taxpayers to pay a very large fraction of the overall tax bill," according to Johnson.
The proportion of adults who pay income tax has fallen from 66 per cent in the 2007-08 fiscal year, before the financial crisis struck, to 56 per cent now.
The top one per cent of taxpayers contribute 28 per cent of income tax revenues, meaning tax revenues are now highly sensitive to the behaviour of a relatively small number of people.
Providing certainty to businesses over the course the government aims to take on the future trading relationship would give a boost to economic growth, the IFS said.
Johnson said: "There's no question that the uncertainty around Brexit is having an effect, and the closer we end up to the customs union and the Single Market the better that will be over the medium run."