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IFS and ONS pour scorn on Vote Leave’s fiscal failings

by Sam Ashworth-Hayes | 25.05.2016

Vote Leave is a slick, professional organisation. When confronted with the Institute for Fiscal Studies (IFS) flatly stating that the Brexiteers’ £350 million a week “independence dividend” is imaginary, it had an answer ready and waiting: the IFS is “a paid-up propaganda arm of the European Commission”.

The Out camp’s tendency to smear critics rather than engage with their argument has been noted previously, but this time even their own think they’ve taken it too far. Dr Andrew Lilico, chairman of the Vote Leave affiliateEconomists for Britain’, tweeted: “The IFS – for whom I used to work – is not a paid up propaganda arm of the EU. I hope that clears that up.”

The new IFS report analyses the full effect of a Brexit on the public purse. While leaving the EU would mean a reduction in our fiscal contributions to the bloc, the damage a Brexit would do to our economy – and therefore tax revenues – far outweighs this.

The £350 million a week figure doesn’t account for our rebate. InFacts has been pointing out for some time that this is misleading. The IFS makes this crystal clear. The economists said that ignoring the rebate in this way is “clearly inappropriate” and “equivalent to suggesting that were the UK to leave… [the] remaining EU members would continue to pay the rebate to the UK. That is clearly absurd”.

InFacts has calculated that, after accounting for the rebate, for the money Brussels spends in the UK and for the money we count towards our foreign aid targets, the net fee we paid last year was about £6.3 billion, or £120 million a week.

Unfortunately for Vote Leave, a saving would be far outweighed by the damage a Brexit would do to the economy, and therefore to the government’s tax revenues.

A drop in national income of just 0.6 per cent would be enough to wipe out completely any saving from the net contribution. As the IFS points out, using the estimates produced by the National Institute for Economic and Social Research, a Brexit is likely to mean GDP in 2019 being between 2.1% and 3.5% lower than it would have been. That translates to an increase in the budget deficit of £20-£40 billion. Far from enabling a surge in spending on “our NHS”, a Brexit would prolong austerity.

And because the economy would be permanently smaller, government spending in the future would also be lower – by about £48 billion in 2030.

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The IFS takedown wasn’t the only embarrassment the official Leave campaign suffered today. Vote Leave and its supporters have repeatedly justified including the rebate in the £350 million a week figure by hiding behind the Office for National Statistics (ONS).

A new ONS release makes clear that this figure is bunkum. The guardians of the UK’s economic statistics said: “In 2014 the UK’s official gross payments to the EU amounted to £19.1 billion. However, this amount of money was never actually transferred to the EU. Before the UK government transfers any money to the EU a rebate is applied.” The ONS also provided a helpful slideshow, breaking down some of our transactions with the EU. This has been embedded at the end of the article.

The contradiction of Vote Leave’s £350 million figure from two highly respected sources is only the latest in a long line. InFacts has called repeatedly for the Out camp to correct this figure. The Financial Times has called it “far from accurate”, BBC Reality Check has weighed in, and Sir Andrew Dilnot, chair of the UK Statistics Authority, called it “potentially misleading”.

Vote Leave should admit defeat, and drop this figure.

Edited by Jane Macartney