Osborne warns of €38 billion Brexit black hole

British chancellor George Osborne said he would have to slash public spending and increase taxes in an emergency budget to tackle a €38 billion “black hole” if the UK votes to leave the European Union.

He said this could include raising income and inheritance taxes and cutting the NHS budget.

Reacting to the statement, a leading Brexit-backing Tory said he was “shocked” the government was threatening to break manifesto pledges.

And Vote Leave criticised Remain’s “hysterical prophecies of doom”.

The UK votes on whether to remain in the EU or to leave in a referendum on 23 June.

In the latest of a series of government warnings about the consequences of a vote to leave, Osborne will later share a stage with his Labour predecessor, Lord Darling, setting out €38 billion of “illustrative” tax rises and spending cuts.

These include a two pence rise in the basic rate of income tax and a three pence rise in the higher rate, while they will also say spending on the police, transport and local government could take a 5% cut.

They will also say the ring-fenced NHS budget could be “slashed”, along with education, defence and policing.

Osborne and Lord Darling will say the measures would be based on the Institute for Fiscal Studies’ predictions about the economic impact of a vote to leave from lower trade, investment, and tax receipts.

The IFS has said such an outcome could trigger between an extra one to two years of austerity measures.

Writing in The Times ahead of their speech, Osborne and Lord Darling said that leaving the EU would lead to 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,” they wrote.

But Leave campaigners strongly dismissed Osborne’s warnings.

Conservative MP and Vote Leave campaigner Steve Baker said: “I am shocked that the chancellor is threatening to break so many key manifesto pledges on which all Conservative MPs were elected.

“I could not support these plans to cut the NHS and increase taxes on hardworking families.”

Baker said leaving the EU would allow the UK to “take back control” of millions sent to the EU and reinvest in the NHS.

He accused the Remain campaign of panicking, adding that “no one will believe these hysterical prophecies of doom anymore”.