EU referendum: Osborne warns of Brexit budget cuts

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Image source, PA
Image caption,
George Osborne and his predecessor Alistair Darling shared a platform to warn of the financial consequences of leaving the EU

George Osborne says he will have to slash public spending and increase taxes in an emergency Budget to tackle a £30bn "black hole" if the UK votes to leave the European Union.

The chancellor said this could include raising income and inheritance taxes and cutting the NHS budget.

But 65 Tory MPs have said his position would be "untenable" if he tries to cut NHS, police and school spending.

And Vote Leave criticised Remain's "hysterical prophecies of doom".

The UK votes on whether to remain in the EU or to leave on 23 June.

In other referendum news:

In the latest of a series of government warnings about the consequences of a vote to leave, Mr Osborne shared a stage with his Labour predecessor, Lord Darling, setting out £30bn of "illustrative" tax rises and spending cuts, including a 2p rise in the basic rate of income tax and a 3p rise in the higher rate.

They also said spending on the police, transport and local government could take a 5% cut and ring-fenced NHS budget could be "slashed", along with education, defence and policing.

Mr Osborne and Lord Darling said the measures - £15bn of tax rises and £15bn of cuts - are based on the Institute for Fiscal Studies' predictions about the economic impact of a vote to leave from lower trade, investment, and tax receipts.

The IFS has said such an outcome could trigger between an extra one to two years of austerity measures.

Media caption,
George Osborne brushes aside Tory MPs' Brexit Budget warnings

Mr Osborne told Radio 4's Today that leaving the EU would be an "irreversible" step that would cause "financial instability" and leave the UK "with no economic plan", demanding an immediate response from government.

"There would have to be increases in tax and cuts in public spending to fill the black hole," he said.

The UK, he suggested, would not be able to "afford the size of the public services that we have at the moment" outside the European Union and would have to "cut its cloth accordingly".

He also played down the threat of Conservative MPs blocking an emergency Budget, suggesting that Labour and Conservative MPs would join forces to "take the necessary measures".

Lord Darling, chancellor between 2007 and 2010, said there would be "severe consequences" for the NHS, schools and other publicly-funded services in the event of a leave vote, saying it was "far better not to make a mess in the first place" than have to clear it up afterwards.

'Damascene conversion'

But Labour leader Jeremy Corbyn, whose party is on the same side as Mr Osborne in the referendum debate, said he would not support an emergency budget.

"We would oppose any post-Brexit austerity Budget, just as we have opposed any austerity Budget put forward by this government," he told David Cameron at Prime Minister's Questions.

Analysis by Laura Kuenssberg, the BBC's political editor

Image source, Reuters

The most drastic warning yet in a campaign laced with fear, has met its most drastic response.

George Osborne, together with the former Labour Chancellor Alistair Darling, vows today that the hit to the economy would be so great if we vote to leave the EU that he'd hold a Budget with cuts and tax rises almost immediately.

But in retaliation, in a direct challenge to George Osborne's authority, 57 Tory MPs, including former cabinet ministers, have issued a statement, incredulous at the chancellor's behaviour - saying it is absurd to make a political promise to punish voters in this way - to break Conservative manifesto promises.

Most seriously for a government with a tiny majority, they say they would vote to block such a Budget, making Mr Osborne's position untenable.

As the chancellor threatens drastic action - so too, by suggesting an open coup against him, his internal opponents threaten him.

Whatever you decide a week tomorrow, the governing party may be changed for good.

He urged the prime minister to "condemn the opportunism of 57 ( of your colleagues who are pro-Leave", who he said had "suddenly" undergone "a Damascene conversion to the anti-austerity movement".

Mr Cameron said "nobody wants to have an emergency Budget, nobody wants to have cuts in public services, nobody wants to have tax increases," but he said the economic "crisis" that would follow a vote to leave could not be ignored.

"We can avoid all of this by voting Remain next week," he told MPs.

In his Today interview, Mr Osborne ruled out seeking any further concessions from the EU on immigration rules, saying his focus was on implementing restrictions on benefits negotiated by David Cameron earlier this year.

'Breaking pledges'

The Conservative government last year introduced legislation not to raise income tax rates, VAT or National Insurance for the duration of the Parliament.

Leave campaigners dismissed the warning from Mr Osborne.

Iain Duncan Smith, Liam Fox and Owen Paterson are among the Conservative MPs who signed a statement saying they "cannot possibly allow" cuts to services their party promised to protect in their 2015 manifesto.

Media caption,
Jacob Rees-Mogg says George Osborne should read European treaties "more carefully".

'We find it incredible that the chancellor could seriously be threatening to renege on so many manifesto pledges," they said.

"It is absurd to say that if people vote to take back control from the EU that he would want to punish them in this way."

They added: "If he were to proceed with these proposals, the chancellor's position would become untenable."

Conservative MP and Vote Leave campaigner Steve Baker said: "I am shocked that the chancellor is threatening to break so many key manifesto pledges on which all Conservative MPs were elected."

And a senior Conservative told the BBC it was "laughable" to think Mr Osborne would still be chancellor if the UK voted to leave, adding: "He'll be carried away by the men in white coats before he gets the chance to make these ludicrous proposals."

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