'Emergency budget' warning as Brexit camp makes gains

LONDON: Britain would be forced to rush through an emergency budget of tax hikes and spending cuts if it left the EU, its finance minister warned Wednesday ahead of next week's knife-edge referendum.

As the anti-EU camp prepared to sail a flotilla of fishing vessels through London, the government issued its starkest warning yet of the economic implications of a Brexit.

Finance minister George Osborne, who is campaigning for Britain to remain in the 28-member bloc, announced that schools, hospitals and the army would all have their funding slashed if Britons vote to leave in the June 23 referendum.

Leaving the bloc would blast a £30-billion ($42.4-billion, 37.9-billion-euro) hole in national finances, he warned.

In response, the basic rate of income tax would be raised, inheritance tax would be hiked, and the budget for services including the National Health Service (NHS) would be cut, he said.



"Quitting the EU would hit investment, hurt families and harm the British economy," he said in pre-released remarks.

"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."

Osborne was joined by former finance minister Alistair Darling from the opposition Labour Party, who was in charge of Britain's economy during the 2008 financial crisis.

"I am even more worried now than I was in 2008," Darling said.

Osborne's warning came as opinion polls indicate a surge of support for the Brexit camp, sparking a dive in global markets.

But deputies from Osborne's own Conservative party slammed the "blackmail budget" and vowed to vote against it.

Fifty-seven Tory MPs said Osborne's warning was the result of a "reckless teenage temper tantrum" and that his job was under threat if he pushed ahead with the plans.

"If the chancellor is serious then we cannot possibly allow this to go ahead," said the statement.



"If he were to proceed with these proposals, the chancellor's position would become untenable."

The pro-Brexit camp was to unveil Wednesday its blueprint for a post-EU Britain, in which it will vow to channel EU contributions to the NHS, end the free movement of people from the EU and try to secure a trade deal with Europe by 2020.

With feelings running high, Prime Minister David Cameron's questions session on Wednesday, the last day of parliament before the vote, is likely to be fractious.

Shortly after Cameron faces MPs, UK Independence Party leader Nigel Farage is set to sail past the Houses of Commons leading a flotilla of 30 fishing trawlers up the River Thames in a Brexit protest against EU fishing quotas.

Investors have responded to the pro-Brexit momentum by selling stocks and putting their money in safe havens, with Europe's main markets down sharply on Tuesday -- although rebounding slightly at the opening Wednesday -- and the euro hitting a three and a half year low.



Reflecting business uncertainty, engineering giant Rolls Royce on Wednesday urged staff to vote to stay in the union, warning in a letter that "as a company with three quarters of our workforce based in the EU, we have a clear interest in this debate".

As the campaign enters its final stretch, a poll by ComRes showed the race on a knife edge, with support for remaining at 46 percent and the pro-Brexit side at 45 percent.

This contrasts with a result from the same pollster just one month earlier in which the pro-remain side had an 11-point lead.

On Tuesday, rivals from the remain and leave camps clashed in a debate live-streamed on YouTube.

"The whole European project is a machine for generating excessive bureaucracy and red tape," said Boris Johnson, a Conservative former London mayor and leading pro-Brexit campaigner.

Alex Salmond, the former Scottish National Party leader who is campaigning to remain, countered that the EU brought social and worker protections and allowed Britain access a trade market of 500 million people.

The bloc had brought "peace and stability" to Europe, he said.