An emergency austerity budget featuring £30bn (€38bn) worth of tax rises and spending cuts would be needed within a couple months of a vote for Brexit in order to stop Britain plunging into an “economic tailspin”, chancellor George Osborne has warned.
With just seven days to go before the June 23 referendum, Osborne joined his Labour predecessor Alistair Darling to warn that the government might have to hike the basic rate of income tax by 2p to 22% and raise the higher rate by 3p to 43% to fill the “black hole” in the public finances which ministers expect if Britain pulls out of the EU.
Furious pro-Brexit Tories branded the idea a “punishment budget” and warned they would vote to block it. Some 57 Conservative MPs signed a statement saying the chancellor’s position would be “untenable” if he tried to push the package through — with one backbencher calling for Osborne to resign now.
Labour leader Jeremy Corbyn made clear that his party would not support any post-referendum Budget which slashes public services or increased austerity.
Darling said that any government dealing with the consequences of a vote to leave the EU would be confronted with the necessity to take “difficult choices” similar to what he faced as chancellor during the 2008 financial crash.
“It’s one of the unfortunate facts of life,” said Darling. “If you create a mess you have to clear it up. Far better not to create the mess in the first place.”
Osborne said a Leave vote on June 23 would hit investment, force firms to delay hiring workers, and impact on families, leading to a reduction in tax revenues to pay for public services.
Standing beside Darling at a Hitachi train plant in Ashford, Kent, Osborne said: “We know what happens when we lose control of the economy.
“We both had to deal with the consequences of the public finances collapsing and the difficult decisions we then had to make.”
Failure to deal with the hit to the public finances caused by Brexit would result in an “economic tailspin and a complete loss of confidence”, said Osborne.
His words were echoed by Prime Minister David Cameron: “There is only one thing worse than not addressing a crisis in your public finances through a budget, and that is ignoring it.”
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