Osborne warns of tax hikes if Brexit camp wins

British finance chief says he will introduce emergency budget but Tory group vows to block move

The chief executive of Britain's Rolls-Royce has written to its UK staff to tell them the engineering company is better off in the EU.
About 30 trawlers steamed past Parliament yesterday in a protest against EU fishing quotas.
About 30 trawlers steamed past Parliament yesterday in a protest against EU fishing quotas.PHOTO: EUROPEAN PRESSPHOTO AGENCY

ASHFORD (England) • Finance Minister George Osborne yesterday said he would introduce an emergency budget if Britain voted to leave the European Union (EU), but 57 of his own Conservative Party's lawmakers said they would block his spending cuts and tax hikes.

The escalation in the ruling party's internal war over the EU raised the prospect of a government unable to operate normally in the event of a victory for "Leave" in the June 23 referendum on whether to stay in the bloc.

The latest development came as UK Independence Party leader Nigel Farage joined a flotilla of pro-Brexit fishing boats sailing up the River Thames yesterday, ahead of next week's knife-edge referendum over EU membership.

With opinion polls showing momentum swinging towards Brexit, the chief executive of aerospace and engineering group Rolls-Royce wrote to British staff warning that a "Leave" vote could result in important investment decisions being postponed.

Mr Osborne, who along with Prime Minister David Cameron is leading the "Remain" efforts, said he would have to respond to a Leave vote with tax rises and spending cuts worth £30 billion (S$58 billion). "There will be a big hole in the public finances and... we would have to raise taxes and cut spending," he said during a visit to Ashford, south-east England.

Measures could include a 2-point rise in the basic rate of income tax to 22 per cent and increases in tax rates and duties on alcohol and petrol, while spending on health, education and defence could be cut by 2 per cent.

The official "Vote Leave" campaign hit back with a statement signed by 57 Conservative lawmakers who said they would block the proposed measures in Parliament.

"If the Chancellor is serious then we cannot possibly allow this to go ahead... If he were to proceed with these proposals, the Chancellor's position would become untenable," they said.

The government has a working majority of 17 in the House of Commons. The opposition Labour Party, which has 229 lawmakers to the Conservatives' 330, would oppose the emergency budget, its leader Jeremy Corbyn told the House.

Mr Osborne said he would aim to launch the emergency steps within two months of a "Leave" vote.

But some independent economists said Mr Osborne's promise of a tighter budget after an "Out" vote could make it harder for Britain's economy to cope with its uncertain future.

"In the short run, tax increases or spending cuts would be entirely the wrong response to a Brexit shock," Mr Jonathan Portes, principal research fellow at the National Institute of Economic and Social Research, a think tank, said.

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.

Pollster BMG Research said a Web page purporting to show a press release giving the results of its latest EU referendum polling was a hoax. Markets have been increasingly jittery in the run-up to the vote and sterling has reacted sharply to some opinion polls.

"The battle line of this referendum is ordinary folk and their communities up against the big establishment," Mr Farage told media on board one of the boats which were decorated with Union Jack deckchairs and balloons. The procession of around 30 trawlers that steamed past Parliament was a protest against EU fishing quotas.

Events took a bizarre turn when rocker and Live Aid mastermind Bob Geldof, a "Remain" supporter, pulled up in a rival boat, shouting "Nigel you're a fraud" through a loudspeaker, only to be hosed with water from a "Leave" boat.


A version of this article appeared in the print edition of The Straits Times on June 16, 2016, with the headline 'Osborne warns of tax hikes if Brexit camp wins'. Subscribe