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Article / 15 June 2016 at 13:28 GMT

Osborne warns of UK tax hikes, spending cuts if voters shun EU

First in Business Worldwide. /


British finance minister George Osborne, battling to keep the country in the EU, warned voters that he will take new austerity measures if they decide to leave the bloc in next week's referendum.

With opinion polls showing momentum swinging to the "Out" camp, Osborne intensified the tone of his warnings about the consequences of a so-called Brexit, saying he would respond by increasing taxes and cutting spending.

"Quitting the EU would hit investment, hurt families and harm the British economy," he said in a speech on Wednesday.

"I would have a responsibility to try to restore stability to the public finances and that would mean an emergency budget where we would have to increase taxes and cut spending," he said, according to excerpts of the speech which were sent to media by the Britain Stronger in Europe campaign.

An opinion poll published late on Tuesday showed the once double-digit lead of the "In" campaign had narrowed to just 1 percentage point. Other polls have shown the "Out" camp ahead, reducing the value of sterling and wiping billions of dollars off global stock markets.

Paul Ellis I AFP | Getty Images

George Osborne gets tough on the Brexit campaign. Photo: iStock

Osborne detailed £30 billion worth of fiscal measures, half from tax increases and half from lower spending, that he said would be necessary to offset the impact on the budget as estimated by independent forecasters.

He said the basic rate of income tax would rise 2 percentage points to 22% and the higher rate would go up by 3 percentage points to 43%. Inheritance tax rates and duties on alcohol and petrol would also rise.

Spending on health, education and defence, so far largely shielded from Osborne's six-year push to reduce Britain's budget deficit, would be cut 2%, and pensions spending would face a similar reduction, he said.

Osborne spoke alongside his predecessor as finance minister, Alistair Darling, who oversaw Britain's descent into the financial crisis.

"I am even more worried now than I was in 2008," Darling said. "The Leave campaign has no idea, no plan whatsoever. Any political party seeking election on such a flimsy and fraudulent prospectus would have been torn to pieces by now."

Campaigners who want Britain to leave the EU say the economy would flourish and the government could spend more on sectors such as health if it no longer had to pay into the EU budget.

They have accused Osborne, Prime Minister David Cameron and institutions from the International Monetary Fund to the Bank of England of trying to scare voters by warning of dire economic consequences if Britain leaves the EU.

John Mann, a pro-Brexit lawmaker from the opposition Labour Party, slammed Darling, who used to represent Labour in parliament, for planning to join Osborne.

"Instead he should be joining us in campaigning to leave the EU to help remove the need for further Osborne-imposed austerity," he said.

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