Institute for Fiscal Studies says Brexit could blow £40bn hole in public finances
Despite saving £8bn a year from no longer contributing to the EU budget, Brexit could put a multi-billion pound black hole in the public finances, the Institute for Fiscal Studies (IFS) has said.
In a new report, published today, the number crunchers say that leaving the EU could result in the UK needing to find somewhere between £20bn – £40bn to fill the gap through lost tax receipts.
Vote Leave dismissed the IFS as a "paid-up propaganda arm of the European Commission", claiming the group itself would face an £800,000 funding deficit if it stopped receiving cash from Brussels.
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Using the central estimates of the economic impact of Brexit from 14 different organisations, the IFS concludes that GDP only needs to fall by 0.6 per cent to erode the gains made from no longer contributing to EU budget.
“There is near consensus that leaving the EU would have a greater negative effect on the UK’s economy than that,” the IFS noted.
Paul Johnson, director of the IFS said closing the gap would not be “unmanageable”, but would require the equivalent of another two years of austerity in the form of spending cuts or tax rises.
Figures out yesterday showed that the government's deficit was five per cent higher last year than originally forecast at £76bn.