Osborne warns of emergency Brexit budget

If Britain votes for Brexit there will be an emergency budget which will include spending cuts and a rise in taxes, Chancellor George Osborne warned on Wednesday.

Osborne said when the country votes in the EU referendum on the 23 June the UK was facing a recession in just over a week’s time.

The basic rate of income tax would rise from 20p to 22p, the top rate would rise from 3p to 4p and inheritance tax would rise 5p to 45p in the ‘Brexit Budget’.

There would also be cuts to state budgets: 2.5bn cut to the NHS, £1.2bn to defence and £1.15bn to education. Spending on pensions would be cut by £2bn, Home Office, transport and local government by £5.8bn. Alcohol and petrol duties would rise by 5%.

Osborne said the figures were based on a study by the Institute of Fiscal Studies (IFS). The IFS said Brexit could trigger an extra one to two years of austerity.

However, 57 MPs including Dr Liam Fox, Owen Paterson and Iain Duncan Smith wrote a letter saying they would vote down the proposed Brexit Budget, as reported by Sky News.

Both George Osborne and his predecessor Lord Darling wrote in The Times, ahead of a planned speech on Wednesday, that Brexit will have a "profound economic shock that would hit the economy and could tip Britain back into recession.

"We know all too well what happens when Britain loses control of its public finances. We're agreed that a vote to leave risks doing the same thing to Britain all over again."

Osborne told BBC Radio 4’s Today programme on Wednesday morning: "For first time for we have a Conservative and Labour chancellor agreeing the scale of the decisions needed to fix the public finances if we quit the EU. There would have to be increases in tax.

“There would have to be cuts in public spending to fill the black hole. We have the markets warning us now what will happen. You’ve got the experts spelling out the consequences. It would be self-imposed austerity for many years to come. For years we’ve been dealing with the consequences of the last recession”.

He added that the people on low and middle incomes will be affected the most due to job insecurity. He warned that Brexit will be an “enormous leap in the dark” and that it will be “one-way exit.”

However, Leave campaigner and MP Chris Grayling dismissed the claims and predictions of the pound falling and a reduction in consumer spending as unreliable.

He added: “I don’t think its coincidence this is happening when the Remain campaign is struggling in the opinion polls.”

If the UK votes to leave the UK and a Brexit Budget proposed, the voting down of the budget by the 57 MPs could lead to an early general election as budgets are considered a vote of confidence.The Conservative government has a narrow majority of 12 MPs in the House of Commons.

Shadow chancellor John McDonnell said the Labour Party would never support Osborne's proposed post-Brexit emergency budget.

"This maybe a natural Tory approach but no Labour chancellor would respond to an economic shock in this manner. And neither did Alistair Darling in 2008," he said.

"Any credible economist would tell you that raising taxes or cutting spending or both in response to an economic shock is the wrong thing to do."