Osborne warns over ‘fallout Friday’ if Labour wins election

George Osborne, chancellor, has warned that Britain will face “fallout Friday” if Labour wins this week’s election with Scottish Nationalist support, claiming that investment and business confidence would drain away.

In his starkest warning yet of the business consequences of an Ed Miliband victory, Mr Osborne claimed the economic credibility built up by the coalition over five years would “evaporate in five minutes”.

Labour claims the chancellor has been guilty of scaremongering and hyperbole throughout the election campaign, throwing away his reputation for fiscal credibility and sober economic management in the process.

But Mr Osborne, in an interview with the Financial Times, said Britain was still navigating a difficult global economic situation and that the country should not risk the recovery.

“The world would take one look at the UK and this unlikely alliance between Ed Miliband and Scottish nationalism and say: ‘That’s not the place we are going to put our investment’,” he said.

Mr Osborne claimed that Labour’s agenda of higher taxes on wealth, looser targets for deficit reduction and a tendency to “meddle in markets” would damage Britain’s global reputation.

But he denied Labour’s claims that the biggest concerns for business focused on the Tory plan to have a referendum on Britain’s EU membership by 2017, insisting there was “no uncertainty”.

“We have had this policy for a couple of years now,” he said. “This country has attracted more inward investment from China than France, Germany and Italy put together.”

I would not imagine another referendum being held anytime soon after the result

Mr Osborne claimed the EU referendum would settle the issue of Britain’s EU membership. “I would not imagine another referendum being held anytime soon after the result,” he said.

But wasn’t the same thing said about last year’s Scottish referendum, and now there is speculation of another independence poll if the SNP wins next year’s Holyrood elections?

Mr Osborne suggests a Tory government would not countenance such a demand. “It’s a reserved issue,” he said, pointing out that Scotland would need Westminster’s permission to have another referendum.

“This issue has been settled for my generation,” he said. “Even Nicola Sturgeon has said it’s not something she can imagine coming back anytime soon.”

Speaking after a visit to Ealing Studios in west London, Mr Osborne described as “complete nonsense” claims that he had undermined his own reputation for economic competence during the campaign.

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Labour claims Mr Osborne has assembled more than £20bn of unfunded promises during the campaign, including plans for tax cuts, increased investment in the NHS and a freeze on rail fares.

But the chancellor insisted he could meet all of those promises and still run a budget surplus by the end of the parliament, partly funded by a £12bn squeeze on welfare.

He said that once the books were balanced he envisaged Tory governments in future restoring funding to public services, increasing spending in line with economic growth.

“That should be the default setting if you have your public finances under control,” he said. His answer is his riposte to critics who claim he has fetishised austerity and public sector cuts.

Mr Osborne mocks Mr Miliband’s decision to carve Labour’s election promises on a limestone slab — a “monumental monument to folly” — but wasn’t the chancellor’s own plan to legislate to stop himself putting up taxes an equally risible gimmick?

The chancellor keeps a straight face at the home of Ealing comedies: “It’s about entrenching this plan so that people can plan with certainty that our proposals are not about increasing taxes but reducing taxes.”

Mr Osborne has been told by David Cameron that he will stay at the Treasury if the Tories win Thursday’s election; there is a breezy confidence in the chancellor’s demeanour which suggests he thinks he will be back at his desk soon.