A report from the respected Institute for Fiscal Studies suggests the £8bn a year the Government might save from Britain leaving the European would be dwarfed by the hit that would be taken by the public finances.
The IFS calculates Whitehall would have to borrow as much as an extra £40bn in 2020, over and above money saved by withdrawal.
That extra borrowing would destroy George Osborne’s plans to balance the Government’s books by 2020.
IFS director Paul Johnson 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.
“Or we could live with higher borrowing and debt.”
While the Treasury has issued several warnings about the possible impact of ‘Brexit’ on the UK economy, Leave campaigners have dismissed the analyses as rigged to fit the Government’s pro-Remain agenda.
But the intervention of the IFS will be more difficult to for Leave campaigners to explain away.
Vote Leave last night questioned the thinktank’s neutrality because it has previously received EU funding.
Energy Minister Andrea Leadsom, a Vote Leave supporter, said:
“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.
“So many of these studies are based on entirely negative assumptions about our economy and the future decisions a UK Government outside the EU would make, but ignore the pressing need of EU countries to continue trading with the UK.
“They also ignore the very real risk of what will happen if we vote ‘In’; more money and power to a Brussels interested only in propping up an ailing eurozone.”
Yorkshire UK Independence Party MEP Jane Collins described the findings as “nonsense”.
Sheffield University has today published two studies suggesting poorer parts of the UK such as Yorkshire are more likely to feel the impact of Britain leaving the EU.