EU Referendum

More Project Fear, Chancellor? Osborne says Brexit could trigger 8p rise in income tax after warning of £4,300 cost for every family

  • Chancellor publishes new ‘sober and serious’ dossier warning of dire consequences of leaving EU
  • Says it is ‘dishonest’ and ‘economically illiterate’ to argue the UK can have benefits of membership without costs
  • Document claims there could be a £36bn hole in the public finances by 2030 – equivalent to 8p on the basic rate of income tax
  • But Eurosceptics dismiss the Treasury analysis as ‘absurd’ and accuse him of scaremongering 
  • Bank of England and IMF have also warned voters against leaving EU

The Chancellor launched a fresh offensive in the increasingly bitter referendum battle as he published a Treasury assessment of the risks.

The 200-page dossier predicts that quitting would trigger a 6 per cent slump in GDP and cost every household £4,300 a year.

The black hole in the public finances could be £36billion by 2030 – equivalent to 8p on the basic rate of income tax.

Unveiling the document flanked by Cabinet colleagues Liz Truss, Amber Rudd and Stephen Crabb, Mr Osborne rejected criticism that he is ‘scaremongering’.

He insisted officials had carried out a ‘sober and serious’ analysis of Britain’s prospects outside the EU.

George Osborne, pictured with Environment Secretary Liz Truss in Bristol today, has published a 200-page report claiming Britain could be poorer by £4,300 per household if it leaves the EU

‘This is a sober and serious look at the costs and benefits of remaining in the EU or leaving it – not just for Britain but for the individual families of Britain,’ he said at the event in Bristol.

Eursceptics should not pretend the UK can ‘have our cake and eat it’, he insisted.

Mr Osborne said while this report dealt with the long-term impacts of Brexit, the government will be producing a study on the short-term fallout later in the campaign.

The launch of the dossier came after tensions in the campaign ratcheted up. Mr Johnson bluntly dismissed claims UK trade would suffer after Brexit as ‘b******s’, and claimed David Cameron had been told to ‘bog off’ by EU counterparts after asking for more powers to control immigration.

Interviewed on BBC Radio 4’s Today programme earlier, Mr Osborne said the analysis by civil servants ‘stepped away from the rhetoric’ and ‘set out the facts’.

Tory MP Bernard Jenkin vented his fury on Twitter

Tory MP Bernard Jenkin vented his fury on Twitter

‘Britain would be permanently poorer if we left the EU, to the tune of £4,300 for every household in the country,’ Mr Osborne said.

Singling out Mr Johnson for criticism, he branded those who claimed that the UK could leave and negotiate better terms with the rest of the EU ‘economically illiterate’.

‘You completely misunderstand Britain’s negotiating position if you think we can get a better deal than France of Germany,’ he said.

‘Take the free trade agreement that Canada has signed. By the way, cited by the Mayor of London as his preferred model. The problem with the Canadian model is that you don’t have access for your services industry – that’s 80 per cent of the British economy, 80 per cent of the jobs in the British economy.

‘You can’t have your cake and eat it. These people who go around saying Britain would have all the benefits of the European Union without having any obligations – that is economically illiterate.’

Mr Osborne went on: ‘Yes of course we can be outside the EU, but we are not going to get all the benefits of EU membership…

What is not honest and what is economically illiterate is to say we can have all the benefits of the EU and at the same time leave.’

Mr Osborne also insisted the poorest would be the hardest hit by Brexit. He said the country would not be ‘all in this together’ after leaving.

‘The richest in our country would go on being rich,’ he said. ‘It would be the poorest.’

The document, published by the Treasury, includes predictions for three potential post-Brexit models.

Officials considered Norway-style membership of the European Economic Area (EEA), a Canada-style bilateral trade agreement with the EU, or Russia-style World Trade Organisation  (WTO) membership without any formal deal.

They estimated that the first scenario would lead to a £2,600 reduction in GDP per household, the second £4,300 and the third £5,200.

‘The negative impact on GDP would also result in substantially weaker tax receipts,’ the report said. ‘This would significantly outweigh any potential gain from reduced financial contributions to the EU.

‘The result would be higher government borrowing and debt, large tax rises or major cuts in public spending.

‘After 15 years, even with savings from reduced contributions to the EU, receipts would be £20 billion a year lower in the central estimate of the EEA,

‘£36 billion a year lower for the negotiated bilateral agreement and £45 billion a year lower for the WTO alternative.

‘£36 billion is more than a third of the NHS budget and the equivalent of 8p on the basic rate of income tax.’

The dossier was immediately dismissed by the Leave camp as government propaganda designed to scare the public.

The Chancellor launches the report in Bristol today
The Chancellor launches the report in Bristol today

He also referred to the Treasury’s decision to enter the European Exchange Rate Mechanism (ERM) – which Britain crashed out of in 1992.

‘Same Chancellor who promised to balance budget by 2015? Same Treasury which supported UK membership of ERM?’ he wrote on Twitter.

Former minister and Tory MP John Redwood said it was ‘absurd’ and ‘worthless’ to make an economic forecast 15 years into the future.

‘It’s an absurd claim from the Treasury, I’m very sorry that they’ve degenerated to these levels,’ he said. ‘This is a Treasury which had to make huge changes to its forecast for the next two years just between November and March because it decided its November forecast was completely wrong.

‘This is a Treasury which failed to forecast the huge damage membership of the Exchange Rate Mechanism inflicted on us and they were always very keen to join and it gave us a huge recession. They failed to forecast the damage to the UK from the Eurozone crisis of 2011.’

In other developments over the weekend:

  • The French finance minister sparked fury by saying Britain would no longer be ‘great’ after Brexit and instead reduced to the status of Jersey or Guernsey;
  • Cricket hero Sir Ian Botham backed Brexit, saying that the country should ‘stand proud’;
  • A row erupted over the delayed publication of a report assessing the impact of migration on schools;
  • A poll found seven in ten Britons think immigration levels have been too high over the past decade.

Voters have already been handed recent warnings from the International Monetary Fund, the Bank of England and big business about Brexit.

Last week Mr Osborne also warned that Brexit could lead to a rise in mortgage rates due to uncertainty about what would happen after a vote to leave the EU.

And yesterday a pro-Remain Cabinet minister – the newly appointed Work and Pensions Secretary Stephen Crabb – claimed a ‘reckless’ vote to leave the EU could trigger an economic shock similar to the hardship suffered after the banking crash in 2008.

Osborne: ‘The IMF’s Brexit warning a taste of things to come’

He went on to describe Brexit as an act of economic ‘self harm’, claiming Britain faces a ‘rupture’ that will bring misery to millions if the country votes to leave the EU.

Businesses would leave the country, factories would close and jobs would be lost, with ‘disastrous’ consequences for families, he told the Sunday Telegraph, adding: ‘Lost jobs and livelihoods take an enormous, indelible toll on families and communities.

‘No one should be complacent about the potential consequences for working people and their families if Britain votes to exit the EU. This is not a theoretical debate.’

However responding to his remarks, Chris Grayling, the Leader of the House of Commons, pointed out that David Cameron said only a few weeks ago that Britain could succeed outside the EU, although he believed the country would be better off staying in.

‘It can’t be logical now for the Treasury to claim doomsday and disaster would follow if we leave,’ he said.

 Chris Grayling on Brexit: ‘President Obama doesn’t understand’


David Cameron would be forced to appoint a senior Brexit campaigner to negotiate Britain’s withdrawal from the EU if he lost the referendum, Tory veteran David Davis said last night.

The former Europe minister said he did not think Mr Cameron would have to resign if voters chose to leave the EU on June 23 – but he would have to stand aside and let someone else negotiate terms with Brussels.

Mr Davis told Sky News: ‘If Brexit wins there will be an argument that people who have been arguing against it can’t renegotiate it.

‘If you’re going to have a negotiator, you appoint somebody who really believes in it and has spent months, if not years, thinking about how this will work – which is what the Brexit team have been doing.’

French finance minister Emmanuel Macron
French finance minister Emmanuel Macron

France’s finance minister has raised doubts about whether Britain would still be ‘great’ outside the EU.

Emmanuel Macron, who warned last week that the UK would still have to contribute to Brussels budgets even if it leaves, also said we would be ‘killed’ in trade negotiations.

Speaking on the BBC’s Andrew Marr Show, Mr Macron said: ‘You are a great country and … your future as a great country is not outside the EU, it’s to be part of the club and to transform the EU with the other great countries.’

Mr Macron said Britain would have a weaker hand in its negotiations with China over issues such as ‘dumping’ of cheap steel.

‘I think UK is not about becoming Jersey or Guernsey. Today, you are strong because you are part of the EU,’ he said.

‘When you discuss your steel industry with China you are credible because you are part of the EU, not because you are just UK. You will be completely killed otherwise.

‘You will never be in the situation to negotiate face to face with the Chinese because your domestic market is not relevant for the Chinese in comparison with their domestic market. EU is the first global domestic market.’

Mr Macron renewed warnings that the agreement allowing British border controls on the French side of the Channel could be scrapped.

He also admitted to fears that Brexit could only be the first departure from the EU.

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