Brexit would extend UK austerity by two years, report finds

Lower economic growth would mean two more years of austerity in Britain if the country votes to leave the European Union, the Institute for Fiscal Studies (IFS) has warned. The warning from one of Britain's most respected policy institutes follows this week's Treasury report predicting that Brexit would plunge Britain into a fresh recession.

The IFS also disputed the Leave campaign’s claim that Britain pays £350 million a week into the EU budget, estimating the true figure at about £150 million, after Britain’s budget rebate and other payments are subtracted.

“Ignoring the rebate is clearly inappropriate. It is equivalent to suggesting that were the UK to leave the EU and not make any financial contribution to the EU’s budget then remaining EU members would continue to pay the rebate to the UK. That is clearly absurd,” the IFS said.

The IFS considered the impact of a number of post-Brexit scenarios on Britain's public finances, concluding that the most optimistic – a relationship with the EU similar to Norway's, which has access to the single market – would cost £20 billion by 2020. If Britain failed to strike a deal and relied on World Trade Organisation rules to regulate trade with the EU, the cost could be £40 billion.

Vote Leave cast doubt on the independence of the IFS, which receives a small part of its funding from the EU, and claimed its forecast was based on faulty data.

"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," said energy minister Andrea Leadson, who is campaigning for Leave.

"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," she said.

Minister of State for Defence Paul Kehoe told a business audience in Birmingham on Wednesday that the prospect of a British exit from the EU was a source of "considerable concern" to the Government because successive economic studies showed that the impact on Ireland would be proportionately greater than on other EU member states.

“We are convinced that no alternative arrangement will be better than the one we currently have: a single market and seamless flows of goods, services, capital and people. This trade sustains approximately 200,000 jobs on each side of the Irish Sea including 2,000 in this region of the UK,” he told the British Irish Chamber of Commerce.

“It shouldn’t be forgotten that Ireland is also the only EU member state to have a land border with the UK... The Common Travel Area has only ever operated where both Ireland and the UK were either outside of the EU, or within it. So, we do not know how it would work if the UK leaves the EU.”