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Brexit 'could add two years to austerity', IFS finds Brexit could add two years to austerity, IFS says
(about 4 hours later)
Austerity measures could be extended by two years should the UK vote to leave the EU, the Institute for Fiscal Studies (IFS) has said. The UK could face an extra two years of austerity measures if it votes to leave the EU, the Institute for Fiscal Studies (IFS) has said.
The consensus of economists was that the UK economy would shrink after a Brexit, the thinktank said. The consensus of economists was that the UK economy would shrink after a Brexit, the think tank said.
Ministers could react to a post-Brexit GDP fall with either deeper cuts, or by extending them, the IFS said. It warned ministers could react to a post-Brexit GDP fall with either deeper cuts, or by extending them.
But Andrea Leadsom, the energy minister and Vote Leave campaigner, said Brexit would "turbocharge" the UK economy.But Andrea Leadsom, the energy minister and Vote Leave campaigner, said Brexit would "turbocharge" the UK economy.
A vote to leave would let the UK "secure our economic security for future generations based on expanding our trade across the globe, turbocharging our economy and taking control of our borders". A vote to leave would let the UK "secure our economic security for future generations based on expanding our trade across the globe, turbocharging our economy and taking control of our borders", she said.
'Austerity extended' Military warning
The think-tank said a vote to leave could result in a £20bn to £40bn hit to the public finances in 2019/20, if GDP was 2.1% to 3.5% lower over the period, as predicted by the National Institute of Economic and Social Research (NIESR). The IFS assessment comes as a dozen former senior military officers have warned that the EU's policies are undermining the UK's combat effectiveness.
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." Speaking out in favour of Britain leaving the EU, they said Nato, and not the EU, should remain the cornerstone of Europe's defence.
Ex-military officers fight for EU exit
Would Brexit add two years to austerity?
Vote Leave focuses on immigration
The IFS said a vote to leave could result in a £20bn to £40bn hit to the public finances in 2019/20, if GDP was 2.1% to 3.5% lower over the period, as predicted by the National Institute of Economic and Social Research (NIESR).
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."
The IFS said the UK could use its contribution to the EU - estimated at £8bn a year - to help shore up its finances if it voted for Brexit.The IFS said the UK could use its contribution to the EU - estimated at £8bn a year - to help shore up its finances if it voted for Brexit.
However, it said this could be overshadowed by the negative impact on the UK economy, with a 0.6% fall in national income offsetting the benefits.However, it said this could be overshadowed by the negative impact on the UK economy, with a 0.6% fall in national income offsetting the benefits.
Paul Johnson, IFS director, said: "Leaving the EU would give us an immediate £8bn boost to the public finances, but the overwhelming consensus is that the economy would be smaller than otherwise following Brexit. Mr Johnson said: "Leaving the EU would give us an immediate £8bn boost to the public finances, but the overwhelming consensus is that the economy would be smaller than otherwise following Brexit.
"If the economy is just a few percentage points smaller than it otherwise would have been, we will be a bit worse off," he told the BBC. "If the economy is just a few percentage points smaller than it otherwise would have been, we will be a bit worse off."
The UK "could perfectly reasonably decide that we are willing to pay a bit of a price for leaving the EU and regaining some sovereignty and control over immigration and so on", Mr Johnson said. "That there would be some price, though, I think is now almost beyond doubt." The UK "could perfectly reasonably decide that we are willing to pay a bit of a price for leaving the EU and regaining some sovereignty and control over immigration and so on", Mr Johnson said.
'Propaganda' "That there would be some price though, I think is now almost beyond doubt."
Vote Leave questioned the neutrality of the IFS, saying it was "a paid-up propaganda arm of the European Commission".Vote Leave questioned the neutrality of the IFS, saying it was "a paid-up propaganda arm of the European Commission".
It said that the NIESR, whose figures the IFS based its calculations on, "has been wrong time and time again on the EU".It said that the NIESR, whose figures the IFS based its calculations on, "has been wrong time and time again on the EU".
Patrick Minford, co-chair of Economists for Brexit, said that the IFS analysis acknowledged that the free trade approach recommended by his organisation "would be the best option for the UK following an exit from the EU". Patrick Minford, co-chairman of Economists for Brexit, said that the IFS analysis acknowledged that the free trade approach recommended by his organisation "would be the best option for the UK following an exit from the EU".
Gerard Lyons, co-chair of Economists for Brexit, added: "The UK needs to break away from the short-termism and the group think that had dominated UK policy making and embrace Brexit as this is the best way to position the economy for longer-term future growth." Gerard Lyons, his co-chairman, added: "The UK needs to break away from the short-termism and the groupthink that had dominated UK policy making and embrace Brexit as this is the best way to position the economy for longer-term future growth."