LEAVING the EU would immediately free up £8 billion a year for the UK’s coffers, but ultimately lead to two more years of austerity, according to a new report from the Institute for Fiscal Studies (IFS).

The economic think-tank said any benefit from leaving the EU would likely be offset by a fall in national income caused by Brexit.

Scotland Stronger In Europe said the report showed the economic argument was now effectively over, while Vote Leave said given the EU’s record on Greece, trusting Brussels to keep austerity at bay was unwise.

In the report, Brexit and the UK’s Public Finances, IFS analysts say the UK’s gross contribution to the EU budget after the rebate is around £14.5 billion a year. Once the money received back from the EU, such as farming subsidies, is taken into consideration, the IFS says it then costs about £8bn a year, or £150 million a week, for the UK to remain in Europe.

The economists claim a vote to leave the EU would lead to an immediate increase in uncertainty, and result in trade being more expensive, and could make the UK less attractive for foreign direct investment.

To cope with dropping national income, the IFS says, the government would have to borrow more than £20bn than is currently planned. To balance the budget, as George Osborne has committed to, there would need to be an additional £5bn of cuts to public service spending, an additional £5bn of cuts to social security spending and a tax rise of more than £5bn.

The IFS says it is unlikely that government would respond to the situation with bigger spending cuts and tax rises, but rather continue austerity for at least another year, but more likely another two.

Carl Emmerson, IFS deputy director and an author of the report, said: “The precise effects of leaving the EU on the British economy and hence the knock-on impact on the public finances is uncertain. But 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”.

Tom Harris, from the Scottish Vote Leave campaign, dismissed the report as scaremongering: “I find it funny people argue the best way to avoid austerity is to stay in a club which has enforced austerity on Greece, Ireland, Spain, Portugal and vast swathes of Europe and left workers across the continent destitute.

“As the report shows, the EU costs us a staggering £8bn every year, Scotland sends £30m every single week to Brussels. Enough to hire almost 1,400 new nurses.”

John Edward, senior campaign spokesperson for Scotland Stronger In Europe said rather than scaremongering, the IFS report helped make the positive case for the EU.

“The economic case is now closed, as the IFS report makes clear that we are far better off remaining in the European Union,” he said. “The IFS joins the OECD, the Treasury and the Bank of England in showing that Scotland’s economy is stronger in Europe and families’ finances would be worse off outside. Rather than risk jobs, public spending and investment, the positive choice is to vote to stay in Europe.”

Meanwhile a report in a newspaper suggested around 100 Tory backbenchers could back a motion of no confidence in the Prime Minister, even if the UK votes to remain in the EU.

The report claims Cameron's backbenchers are furious how he has conducted the campaign, including comments on Monday when he said Brexit would be "immoral".Yesterday, Cameron said he was only doing his job.

It comes as Tony Blair suggested he and fellow former prime ministers Gordon Brown and John Major could be set to join forces in a bid to keep the UK in the EU.

Speaking at an event for Prospect magazine, Blair said leaving the EU would turn Britain into a “free-market offshore trading hub for the rest of the world,” that would affect “the levels of social protection we hold dear in this country.”

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