Brexit could force UK to extend austerity by 2 years

LONDON: Leaving the European Union could add tens of billions of pounds to UK government borrowing and force Chancellor of the Exchequer George Osborne to extend austerity into the next decade, according to the Institute for Fiscal Studies. Instead of returning to surplus in the 2019-2020 fiscal year as currently planned, Britain may face a budget deficit of as much as 30 billion pounds ($44 billion) if Britons vote for a so-called Brexit next month, the Londonbased IFS said in a report published on Wednesday.

“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,” said IFS Director Paul Johnson. “Or we could live with higher borrowing and debt.” The intervention of the nonpartisan IFS is a major boost for Osborne and David Cameron as they press the economic case for remaining in the EU in the June 23 referendum. It comes two days after the Treasury warned that a vote to quit the bloc could plunge Britain into a recession and push up net borrowing by 39 billion pounds over the next two years.

“What they’re saying about the effect on our economy of Brexit, that’s very, very powerful, it backs up what the Treasury and others have been saying,” Cameron told reporters traveling with him to the Group of Seven summit in Japan. While not on the formal agenda, the referendum will be a major topic of discussion at the talks, he said. But the IFS was immediately attacked by Vote Leave, the official pro-Brexit campaign, which said the group was in the pay of the EU. “The IFS are part of this cozy establishment which desperately wants to keep us in the European Union,” Conservative lawmaker John Redwood told BBC Radio 4’s “Today” program.

Johnson told the same show that about 10% of the IFS’s income comes from the European Research Council. The money “certainly doesn’t impact on this kind of work,” he said. “There is no sum of money from anywhere in the world which would influence what we say.”