Channel 4 FactCheck goes behind the spin to dig out the truth and separate political fact from fiction.

May 25, 2016 No Comments By Georgia Graham

This morning the Institute for Fiscal Studies released a report estimating that leaving the EU could lead to a budget deficit of £20bn and £40bn higher than it would be if Britain remained within the EU.

In response Vote Leave dismissed the IFS as a “paid-up propaganda arm of the European commission. It would face an £800,000 deficit if we vote leave”.

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So how is the IFS funded?

The IFS receives the majority of its funding from the Economic and Social Research Council, the ESRC – 54% of total funding came from the the ESRC in 2014.

In addition to this the IFS receives some funding directly from the EU and a certain amount of funding directly from UK government departments. In 2014 this was 11% from the EU and 8% from government departments.

The proportion of funding the IFS gets from the EU has increased in recent years – from 5.9% of funding in 2009 to 11% in 2014 – the last year funding has been published.

Overall the IFS says that this funding has been worth €7.8m (£5.9m) since 2009, with €7.5m (£5.7m) of this figure coming from the European Research Council, (ERC).

ERC funding schemes are open to top researchers of any nationality or age who wish to carry out their research in the 28 EU member states or associated countries – including Norway and Israel.

Funding from other European Union agencies over this period – including the European Commission – totaled €300,000.

Specifically the IFS has received €241,000 from the European Commission since 2009. Each year this works out at an average 0.5% of their funding stream.

How was the report commissioned?

For the report the IFS gathered the results from studies by the Treasury, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the National Institute of Economic and Social Research among others, feeding these into its forecasting model for public finances.

The report found that by 2019-20 the British economy outside the EU is likely to be bigger than it is today overall growth would be between 2.1 per cent and 3.5 per cent lower than if Britain stayed in the EU.

The report said that this would would lead to a budget deficit between £20bn and £40bn higher than it would be if Britain remained within the EU.

This specific IFS report was funded by the ESRC through a project called The UK in a Changing Europe.

The ESRC told FactCheck that it received no funding from the EU but rather was funded exclusively by the UK Government.

The IFS say they were funded by the ESRC through the UK Changing in Europe programme to write a report about Britain and the EU ahead of the referendum. The thrust and focus of the report however, was driven by researchers at the IFS.

Will the IFS have a deficit of £800,000 funding if Britain leaves the EU?

Vote Leave say they came to this figure by dividing the overall funding the IFS gets from the EU by the number of years the funding period covers.

Vote Leave came to this annual funding figure by dividing £5.7 million of EU funding by seven years, as IFS published records begin in 2009.

However the vast majority of this funding is not from the European Commission, but rather the the European Research Council which fund research in 28 EU states and “associated countries” outside of the EU.

Other funding streams

The IFS states that it receives 8% of its funding from government departments but this masks the funding stream for it’s major funding source – the ESRC.

The ESRC say they are not funded by the EU but most of their funding comes through the Department for Business, Innovation and Skills and, they say, all of their funding comes from the UK government.

This means that, indirectly, a much larger proportion of the IFS’s funding comes from government departments than might be assumed by its own breakdown.

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