Brexit could mean benefit cuts for poor families, NIESR says

Low income families may stand to lose hundreds of pounds in benefit payments, if not far more, should Britain decide to leave the European Union, one of the UK's leading think-tanks said.

Should Brexit take place and assuming Westminster stays the course on balancing the government's books by 2019/20, then current tax and spending policies would need to change, which would have a potentially large impact on low income households, the National Institute of Economic and Social Research (NIESR).

Revealingly, the study finds that tax credit and benefit payments compromise about 29% and 73% of low income household’s average annual income.

In its central forecast, if the government places 50% of the burden of adjustment on welfare spending, low income families could receive between £930 and £2,771 per year less in tax credits and benefit payments in 2020.

However, if the government places 100% they could receive between £1,861 and £5,542 per year less.

The analysis was carried out under the assumption, derived from published estimates, that national income would fall by 6% by 2020 if Britain decides to leave the EU.

NIESR also took into consideration the impact of possible changes in migration and in net contributions to the EU.

Furthermore, if the government did stick to its deficit reduction targets then it would need to save at least £44bn by 2020 and most of it could come from the welfare budget, NIESR said.

According to the Office for Budget Responsibility, the welfare budget represents about 28% of government spending.

Dr Angus Armstrong, co-author of the report said: “Based on these assumptions, our results show that a disproportionately large share of the costs of Brexit is likely to fall on low income households.”

Dr Katerina Lisenkova, co-author also said that low income families could lose their share of national income and “lower welfare payments in order to meet the spirit of the Fiscal Charter. The effect on low income families is likely to be large.”

However, the Vote Leave campaign was sceptical of the findings, as reported by BBC News.

Matthew Elliott, chief executive of Vote Leave, said: “This is yet another report from a former supporter of the euro masquerading as new research that is simply recycling and repackaging previous reports.

"That means the same dodgy assumptions of establishment economists and the Treasury underpin the findings - it is the same people who predicted the world would end if we did not join the euro."