Today, Chancellor of the Exchequer George Osborne and former Chancellor Alistair Darling will come together to warn that an emergency Budget involving tens of billions of pounds of spending cuts and tax rises will be necessary to plug a black hole in the public finances if Britain votes to leave the EU next week.
Sharing a platform for the first time, Mr Osborne and Mr Darling will set out the £30bn of spending cuts and tax rises that would be needed to preserve the public finances in the event of a vote to leave the EU.
This is based on Institute for Fiscal Studies research showing that the economic damage caused by British exit from the EU would cause a black hole in the public finances of between £20bn and £40bn.
They come together to give this warning at a visit to Hitachi Rail Europe’s depot in Ashford, Kent.
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“Thank you to Hitachi and its dedicated staff for welcoming us here to Ashford.
“Behind us you see the great success story of this country.
“An overseas company - employing thousands of British people, manufacturing the hi-tech trains of the future for a high speed railway line connecting up the country.
“Whether you are from right or left of British politics, from the north of the south of the UK - it's this kind of investment we all want to see in every region.
“It creates jobs, livelihoods and prosperity for our country.
“It's this investment we don't want to see put at risk – and it will be if we quit the EU.
“This is why Alistair Darling and I are here together today – sharing a platform and arguing the same case for the first time.
“It's quite simple.
“We have both been chancellor as the economy has faced very difficult times.
“We know what happens when you lose control of the economy.
“We have both had to deal with the consequences of the public finances collapsing and the difficult decisions that means the country has to take.
“And today we are here together because we agree on this: a vote to Leave the EU would do it to us all over again. Quitting the EU would hit investment, hurt families and harm the British economy.
As the Chairman of your firm here, Hitachi, has said “take away the UK’s membership of the EU, and the future investment case looks very different”.
“He goes on investors would ‘hold back on investment, and jobs would be lost. This is the cold economic reality of Brexit”.
“Let's be clear what all this means:
“What happens here at Hitachi would be happening around the country in businesses big and small.
“The uncertainty of a vote to leave would mean businesses delaying investment and deciding not to hire.
“Think of the impact that has on families - worried about their jobs, seeing their wages fall and putting off spending wherever they can.
“Add all that together, and it means less money coming in to the Exchequer for the government to spend.
“And less money to spend means less money for our vital public services – schools, hospitals, local government, roads, pensions, our armed forces – services millions of people work in and millions of people depend on.
“As Chancellors, both of us have had to take difficult decisions. And there would be difficult decisions facing our country once again if we quit the EU. Difficult decisions starting next Friday, in the months ahead, and for years to come.
“The impeccably independent Institute for Fiscal Studies says there would be a £30bn black hole in the public finances which we would have to try to fill.
“And this would be a permanent and structural hole – we couldn’t just borrow more money to tide us over.
“As Chancellor, it would be my responsibility to try to restore stability to the public finances if we quit the EU – and – that would mean there would need to be an emergency budget.
“Legislating for the kind of measures required to tackle a large structural deficit takes time. Britain would need to get on with it.
“You can do it by raising taxes, or you can do it by cutting spending. Almost certainly, you'd have to do both.
“No doubt Alistair and I wouldn't have exactly the same mix - we're from different political parties.
“But as two Chancellors we know the options in the end are quite limited. There are only so many taxes that will raise the money required; only so many areas of government spending big enough to find the savings needed.
“Rather than finding out the consequences for the nation's budget after we quit the EU, the public should know what they are before they take that choice - so they can avoid these hard consequences altogether.
“So today we are setting out examples of the difficult decisions that would have to be made to stabilise the British economy if Britain quits the EU.
“Filling in a £30 billion a year black hole would require sharp and difficult tax rises.
“The sorts of tax rises we could see include:
- A 2p rise in the basic rate of income tax, to 22%
- A 3p rise in the Higher rate, to 43%
- Five per cent increases in duties on alcohol
- A five per cent increase in the basic rate of inheritance tax, to 45%
“Working people and the businesses like these which generate our wealth as a country would be hard hit. And these big tax rises only fill half the hole in the nation’s finances.
“Alistair is going to explain why any Chancellor would have to make difficult decisions on spending too.
“But be in no doubt.
“Far from freeing up money to spend on public services as the Leave campaign would like you to believe, quitting the EU would mean less money. Billions less. And as the economy shrinks, so too would the cash the country has to spend.
“It's a lose-lose situation for British families and we shouldn’t risk it.
“If you doubt it, look at what’s happening on financial markets. The economic uncertainty the Leave campaign carelessly insist won’t be caused by a vote to Leave is already being seen.
“We don’t have to choose this risky and damaging future. A vote to Remain next week means we can see the economy keep on going, go on building jobs, cutting taxes, protecting the public services that people most depend on.
“That’s if we stick with our economic plan and don’t quit the EU, turning our backs on our trading partners and allies.
“Leaving the EU would undo all the hard work we’ve done together to recover from the Great Recession.
“The Leave campaign has no plan. They’ve admitted they ‘just don’t know’ what leaving looks like.
But we do. Leaving is a leap in the dark that would put our children’s future and Britain’s place in the world at risk.
“A vote to Remain is a vote for a strong economy.
“And with all my heart, I will be fighting every hour until next Thursday to persuade people that we’re stronger, safer and better off by voting to stay in a reformed EU.
“We are sharing a platform today because the question we face next week is the most important confronting our country in a generation.
“Conventional party politics is on hold until next Thursday.
“The decision on whether we Remain in or Leave the EU isn't one for the next five years, like a general election.
“It is one for the next 30, 40, 50 years - one that will determine Britain's place in the world for a generation and more.
“I sometimes hear people in this campaign ask: "What has Europe ever done for us? Why should we Remain?"
“I'll tell you why.
“For every one pound we put in to the EU, we get ten pounds back in terms of economic benefits.
“Membership of the EU and the biggest free trade single market in the world has brought us prosperity and will continue to do so.
“Its benefits are unarguable and obvious. It’s about jobs.
“Businesses big and small are able to trade freely across a market of 500 million consumers, and generate wealth that boosts business within this country.
“And people here in Britain are able to buy from that market free from tariffs and higher prices.
“Because Britain is a gateway to Europe, international firms like this one want to invest and create jobs here.
“Workers' rights are protected too.
“Maternity and paternity pay, paid holidays, the right not to be discriminated against at work - all these stemmed from EU law. And they'd be threatened by the Leave campaigners who talk euphemistically about wanting to scrap "red tape" but actually don't believe workers deserve any rights at all. Economic security and social justice go hand in hand – and that’s why the Labour Party is fighting for a Remain vote.
“Being engaged in Europe also means Britain projecting its influence on the world stage. When it comes to great issues of our time - whether it's confronting terrorism, climate change or tax avoidance by big multinational companies - we're stronger together, working with not apart from our closest neighbours and allies.
“Every single credible economic observer in the world now agrees about the impact that a vote to leave would have on Britain’s public finances.
“It is beyond doubt that it would lead to a profound economic shock that would hit the economy and tip Britain back into recession.
“If you don't want to believe the forecasts, look at what is happening in the real world, right now, just because of the possibility of a Leave vote.
“Sterling is more volatile even than during the financial crisis I had to contend with as Chancellor.
“Investment decisions are on hold. Almost £100bn has been wiped off the FTSE in recent days. And, for the first time ever, we saw long term German government bonds offering a negative yield – in other words, investors are paying Germany to look after their money as they seek safe havens.
“All of this will damage investment and productivity.
“Imagine what will happen if we actually vote to leave next Thursday.
“In my experience, once you light a blue touchpaper in our economy you can never be sure where it will end up - but you know an explosion will follow.
“Look at what happened in 2008 when I was Chancellor. When the financial crisis started, many people underestimated its effects.
“But we are still living with the consequences of the global crash today.
“We were able to stabilise the banking system and avert a complete economic meltdown because the UK had the firepower to do so.
“We had that firepower because of the size and strength of our economy. Every sensible authority is agreed that if we vote to Leave, our ability to deal with the consequences will be reduced – and what’s more, the markets will know it.
“That is why I am even more worried now than I was in 2008.
“The Leave campaign has no idea, no plan whatsoever. Any political party seeking election on such a flimsy and fraudulent prospectus would have been torn to pieces by now.
“We know we'll have not just a short period of uncertainty - but years and years of it.
“Why on earth would we inflict that on ourselves all over again?
“As the head of the World Trade Organisation has made clear, it will take a decade or more for Britain to negotiate new trading arrangements.
“Britain’s economy would be smaller and Britain’s families would be poorer.
“There would be not just one emergency budget – but one after another.
“Far from having more to spend on public services - the giant con trick at the heart of the leave campaign - we'd have tens of billions of pounds less.
“We know from bitter experience that it’s the poorest who suffer when the economy fails.
“Clearly there will always be choices about the balance between tax and spend, and the pace of fiscal consolidation.
“But any chancellor would have to look at both tax rises and spending cuts to make, in a central scenario, the £30 billion of savings required by 2020.
“You've heard about some of the tax measures that would have to be considered.
“But even with those, you'd still have half the money to make up through spending.
“So you’d have to consider cutting NHS, education and defence spending by two per cent in real terms. That means a £2.5 billion a year cut to the health service: fewer staff, fewer operations, poorer care. There would be £2 billion to find from the pensions budget.
“Spending in other areas – like the Home Office, transport and local government – would take a five per cent cut, saving £5.8 billion.
“The Leave campaign say nonchalantly "don’t worry, we’ll have more money to spend on our public services outside of the EU’.
“They’re driving around the country withthat lie painted on their bus and they were at it again yesterday. They know they’ve been rumbled, so they’re telling farmers, universities, towns and cities needing investment in transport that they wouldn’t lose out in terms of funding from Europe. They’ve spent their bogus dividend from quitting the EU ten times over.
“Well let me tell you loud and clear today: it’s fantasy economics. Worse than that, it’s a deceit.
“Don't be taken in.
“People need to know the truth before they cast their votes.
“We've only a few days left to persuade them of it.
“We have a lot to gain from a vote to Remain. And so much more to lose from a vote to Leave.”