Economic hit would outweigh post-Brexit budget savings for UK
LONDON – Any budget savings Britain would make by cutting its funding to the European Union would be wiped out by even a small economic slowdown that could result from leaving the bloc, a leading think tank said on Wednesday.
In a report swiftly rejected by “Leave” campaigners, the Institute for Fiscal Studies said Britain’s government would on the face of it save around 8 billion pounds a year in membership fees to the 28-nation club.
But if economic output ends up just 0.6 percent smaller in any given year than it otherwise would have been after leaving the EU, this would completely offset any benefit to Britain’s public coffers.
“The overwhelming weight of analysis suggests that the economy would shrink by more than enough to offset the positive effect on the public finances of the reduced financial contribution to the EU budget,” said Carl Emmerson, IFS deputy director.
Britons are due to vote on June 23 on whether to stay in the EU. If the economy ends up being 2.1 percent smaller in 2019 after a so-called Brexit – the most optimistic estimate offered by the National Institute for Social and Economic Research – government borrowing would be 20 billion pounds higher than currently planned, the IFS said.
A less optimistic scenario would push government borrowing 40 billion pounds higher by the end of the decade, the IFS added.
The IFS report was funded by Britain’s Economic and Social Research Council. The council in turn is financed by the government, which advocates staying in the EU.
“Leave” campaigners said the IFS report and similar studies ignore the risk of what happens if Britain remains in an ailing EU, stricken by the cost of propping up a damaged currency union.
“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 Andrea Leadsom, Conservative energy minister and “Vote Leave” campaigner.
Prime Minister David Cameron said on Monday that leaving the EU would be economic self-destruction for Britain, as he presented a finance ministry report warning of recession, a tumble in the pound, and half a million lost jobs. -Reuters