Vote Leave 'Wrong' On Claims Of Brexit Savings

The UK may have to accept two more years of austerity if it votes to leave the European Union, according to the Institute of Fiscal Studies (IFS).

A new report from the think-tank has warned a Brexit could see public finances take a £20bn to £40bn hit in 2019/20.

It (Other OTC: ITGL - news) has also questioned claims by Vote Leave that the UK would save £350m a week from EU contributions.

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 EU.

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

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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)."

The IFS concludes that the UK's net contribution to the EU budget of £8bn a year could be used to help public finances - but a fall in national income of 0.6%, compared to what it would have been if the country stayed in the union, would offset this direct effect.

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.

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Paul Johnson, IFS director and 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."

He dismissed claims the think-tank was a "propaganda arm" of the EU.

This scenario is based on gross domestic product being 2.1% to 3.5% lower over the period, as predicted by the National Institute of Economic and Social Research (NIESR).

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.

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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.

"They also ignore the very real risk of what will happen if we vote In: more money and power to a Brussels interested only in propping up an ailing Eurozone."

:: 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.