Brexit Would Cost UK £40bn, Warns Report

Respected think-tank the Institute for Fiscal Studies has dismissed claims it is an EU "propaganda arm" after warning that Brexit would cost the UK up to £40bn.

Vote Leave rubbished the IFS report on the effect of Brexit as "biased" saying that the organisation was unlikely to be critical of Britain’s membership because it was funded by the EU.

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But IFS director Paul Johnson told Sky News the accusations were "frankly absolutely outrageous" saying the think-tank's 30-year reputation was staked on its independence.

Arriving in Japan for the G7 summit, David Cameron said findings from the IFS were "always held out as the independent gold standard".

The report warned the UK would have to accept two more years of austerity if the UK left the EU and would see public finances take a hit of between £20bn and £40bn.

It (Other OTC: ITGL - news) also questioned claims by Vote Leave that the UK would save £350m a week from EU contributions, saying it might gain back the £8bn a year given to the EU but would lose out through market uncertainty and trade deals.

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The IFS report states: "Claims that we would have an additional £350m a week to spend are wrong.

"They imply that, following a UK exit, other EU countries would continue to pay a rebate to the UK on contributions it was not making.

"Such claims also imply we would simply stop all existing EU subsidies to farming and poorer regions (such as Cornwall and west Wales)."

Mr Cameron said: "What they are saying about the £350m claim and what they are saying about the effect upon our economy of Brexit, that is very, very powerful and it backs up what the Treasury and others have been saying."

But Vote Leave dismissed the IFS as a "paid-up propaganda arm of the European Commission" - it received around 11% of its funding in 2014 from the European Research Council.

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The campaign claimed: "The IFS is not a neutral organisation. It would face an £800,000 deficit if we vote Leave."

According to its report, the Government would need to find the equivalent of £5bn in public spending cuts, £5bn worth of savings from social security spending and roll out tax rises worth £5bn if it wants to balance the books by the end of this parliament.

Chancellor George Osborne has pledged to return the UK to a surplus by 2020, with the Office for Budget Responsibility forecast stating that the UK would have a budget surplus of £10.4bn in 2019/20 and £11bn the year after.

Mr Johnson, an author of the report, said: "Getting to budget balance from there, as the Government desires, would require an additional year or two of austerity at current rates of spending cuts."

Vote Leave campaigner Andrea Leadsom MP said: "It's no wonder people are being turned off this debate given the continuous campaign to do down the British economy from EU-funded organisations.

"So many of these studies are based on entirely negative assumptions about our economy and the future decisions a UK government outside the EU would make, but ignore the pressing need of EU countries to continue trading with the UK."

:: Sky News is hosting two special programmes before the referendum. David Cameron will face live questions in the first big television event of the campaign, at 8pm on Thursday, 2 June.

And then on Friday, 3 June it will be the turn of "Leave" campaigner, Michael Gove - also at 8pm.