EU Referendum

Budget 2016: Osborne sparks row with EU warning in Budget

George Osborne at despatch box with Conservative MPs behind him
Image caption About half of Conservative MPs support an EU exit - against David Cameron's recommendation

George Osborne has angered Conservative colleagues by using his Budget speech to warn against the UK leaving the EU.

The chancellor said the UK would be "stronger, safer and better off" inside a reformed EU, warning that a vote to leave would bring economic uncertainty.

But Leave campaigner David Davis MP said the real risk to the UK lay in remaining in the EU, because of the bloc's "failing and unstable" economy.

The UK will vote on whether to remain in or leave the EU on 23 June.

The government's official position is in support of EU membership but half of the party's MPs have broken ranks with Prime Minister David Cameron in favour of an exit and five cabinet ministers are campaigning for a vote to leave.

'Safer choice'

During his Budget speech, Mr Osborne took advantage of his place at the Commons despatch box to touch on the upcoming in-out referendum.

He said he "respected greatly" views on both sides of the argument, but added: "Britain will be stronger, safer and better off inside a reformed European Union.

"I believe we should not put at risk all the hard work that the British people have done to make our country strong again."

He told MPs the economic forecasts drawn up by the independent Office for Budget Responsibility were based on the UK remaining in the EU and did not consider alternatives.

Image copyright AP
Image caption Mr Davis said the "billions" spent on EU membership could be reinvested in the UK's own priorities

Mr Osborne quoted the OBR as saying a vote to leave "could usher in an extended period of uncertainty regarding the precise terms of the UK's future relationship with the EU".

This "could have negative implications for activity via business and consumer confidence and might result in greater volatility in financial and other asset markets", it said.

The OBR said its forecasts were made on the basis of current government policy to stay in the EU and it had not projected what would happen if the UK voted to leave.

OBR chairman Robert Chote said: "But what we have also pointed out is that if you look at the things City economists and other economists are saying, if there were a vote to leave, then people expect a period of uncertainty while the new relationship with the EU is negotiated, and that could have implications for consumer and business confidence, and financial markets.

"So we cited other people's work on that, but we made no explicit judgement ourselves."

'Politicisation'

Mr Davis, part of the cross-party Grassroots Out campaign, issued a statement contesting Mr Osborne's EU claims while the chancellor was still on his feet in the Commons.

He said: "Those who want to scare the British people about the supposed risks of reclaiming our independence will not be successful. The real risks for Britain lie in remaining within the EU.

"Many of the 'cloudy skies' and 'cocktail of risks' the chancellor speaks of originate from a failing, shrinking and unstable European economy."

The "safer choice" for the UK economy and public, he argued, was to leave the EU and "take control of our own affairs".

Image caption OBR boss Robert Chote said it "was not taking a view" on the EU referendum outcome

Vote Leave - another group campaigning for exit - accused the chancellor of trying to "politicise" the OBR.

Vote Leave chief executive Matthew Elliott said Mr Osborne had opted to "drag it into his campaign to keep us in the EU despite the OBR making clear that it was not making a judgement about the referendum".

The OBR said its comments on the EU referendum were not an attempt to quantify the impact of a possible exit as this was outside its remit.

Mr Chote said the watchdog thought it was sensible "to recognise the fact this is a risk" given the extent to which it is being discussed in the referendum debate.

"We're very definitely not taking a view on the long-term consequences of in vs out. That would be inappropriate given the mandate that Parliament has given us," he said.

The Treasury's Budget document - the Red Book - showed the expenditure transfers to EU institutions rising from £10.5 billion in 2015-16, before falling to £9.4bn in 2017-18 and increasing again to £11.bn in 2020-21.

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