Brexit could mean 8p hike in income tax, George Osborne claims

Posted On: 
18th April 2016

Leaving the EU could mean income tax going up by 8p in the pound, George Osborne claimed this morning.

George Osborne suggested Brexit could mean an 8p hike in income tax
Credit: 
Lauren Hurley/PA Wire/Press Association Images

The Chancellor issued the stark warning as he laid out the Treasury's analysis of what Brexit would mean for the UK economy.

According to their 200-page report, if the UK adopted a Canada-style trade agreement on leaving the EU, Britian's economyGDP would shrink by 6.2% within 15 years - leaving a £36bn "black hole".

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"This is more than a third of the NHS budget and equivalent to 8p on the basic rate of income tax," said Mr Osborne

Speaking in Bristol alongside Cabinet colleagues Liz Truss, Amber Rudd and Stephen Crabb, Mr Osborne said today’s report is a “sober, serious and conclusive” analysis of the impacts of Brexit.

The ministers set out the three main alternative models for Britain on leaving the EU: the ‘Norway model’, the ‘WTO model’ and the ‘Canada model’, each of which they claimed would leave the UK significantly worse off.

The worst arrangement for the UK is the ‘WTO model’, where Britain remains in the World Trade Organisation but without a specific agreement with the EU. Under this scenario, GDP would be 7.5% lower by 2030, equivalent to a £45bn slump in tax receipts.

The least damaging option is to remain in the European Economic Area, which the Treasury calculates would lead to a 3.8% drop in GDP.

Other than these three scenarios Mr Osborne said there was no realistic prospect of another arrangement in the event of exit.

“It’s a complete fantasy to claim we could negotiate some other deal where we have access to the EU’s single market but don’t have to accept the costs and obligations of EU membership. Other member states have made it very clear in recent weeks that is not on offer,” he said.EU membership. Other member states have made it very clear in recent weeks that is not on offer,” he said.

‘ECONOMICALLY ILLITERATE’

Earlier Mr Osborne hit out at those campaigning for a Leave vote for failing to come clean about the economic cost of Brexit.

He told the Today programme: “What is not honest and what is economically illiterate is to say we can have all the economic benefits of being in the EU and at the same time leave. That is having your cake and eating it.”

The final comment will be seen as a swipe at Mayor of London Boris Johnson, who famously said his policy on cake was “pro having it and pro eating it”.