Thursday, May 8, 2008

UK Population Forecast to Rise - A look at Economic Effects

The office of National Statistics suggest that England will soon become the most Crowded place in Europe. Forecasts suggest that the population of the UK will increase by 33 % in the next 50 years as it becomes the most crowded country in Europe.

Estimates for the population are that it will rise from 50 million to 68 million. This gives a population density of 1,349 person for every square mile as opposed to 1,010 for every square mile in the future. Population rises will be focused in the south and south west.

There have been 1.5 million immigrants in the past decade into the UK.

Economic Effects of Rising Population.

Push Up Long Term House Prices.
It may be hard to imagine it at the moment, but, if the population continues to rise, then long term house prices will continue to rise.This may be exacerbated by demographic changes which are encouraging smaller population sizes and the difficulty of building new houses in the UK. Higher house prices reduce the standard of living, especially for younger, first time buyers. It means a higher % of their disposable income goes on mortgage payments or rent. It will also increases intergenerational inequalities.

Pressure on Social Services such as schools and hospitals.
However, if there are more people there will be more tax revenue to pay for more schools and hospitals.

Road congestion.
Road congestion already costs the UK economy over £25bn a year in lost output. Increased population would only make the situation worse. Furthermore, it is difficult to increase the supply of roads; in many cities it is difficult to find space to build more roads.

Higher GDP.
A higher population will increase GDP; although a rising population should, ceteris paribus, not alter GDP per Capita.

Tax Benefits
If the population increases because of immigrants in their 20s and 30s there will be an economic benefit. The UK has an ageing population which places a strain on government finances, they pay less tax and require pensions and health care spending. This ageing population will place a strain on government finances. Young immigrants will help boost tax revenues and help deal with the public sector finances. Media might like to portray immigrants as benefit scroungers' But, the real drain on public finances comes from an ageing population. From the perspective of national finances, immigration is beneficial so long as they are predominantly young. Countries with a declining population like Japan and Germany face a difficult future.

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