Britain's chancellor labelled 'Pinocchio' over claims of financial 'shock' after Brexit

Fellow Tory heavyweight Iain Duncan Smith accuses Osborne of cooking the books

Former Tory leader Iain Duncan Smith has compared his former chancellor George Osborne to Pinocchio after for claiming house prices will slump if the UK leaves the European Union.

A British Treasury report on the short-term impact of Brexit, due for publication next week, predicts people's homes would lose between 10% and 18% of their value by 2018.

But the former work and pensions secretary, who is campaigning for the UK to leave the EU, said forecasts by the Treasury have often been wrong.

He said: "When I heard that, I did think of Pinocchio and the nose growing rather long.

"Let me just remind everybody that it was the Treasury and George Osborne who said, when we came into power in 2010, 'we couldn't trust Treasury reports because they were always fiddled with by Chancellors of the Exchequer'.

"So, we gave that over to the OBR, that is independent, because we couldn't trust Treasury reports.

"Now what we have had is a whole series of Treasury reports telling us the world is going to end, we are going to end up with lower house prices, the economy is going to be bad."

An average home in the UK costs £292,000 and this is currently forecast to rise by 9.4% over the next two years, says the Office for Budget Responsibility (OBR).

But Mr Osborne said that, if the UK voted to leave the EU on 23 June, the effect on house prices would be the equivalent of a loss of £32,000 to £57,500 by the middle of 2018.

The loss for more expensive homes would be even higher, he said.

Speaking during a meeting of G7 finance ministers in Japan, the British Chancellor said mortgages would also become more expensive and first-time buyers would find it more difficult to get a home loan if the UK was not in the EU.

The Group of Seven finance ministers and central bank governors also issued a joint warning of the risks from a "shock" to the world economy if Britain votes to leave next month.

Mr Osborne told the BBC: "People will not know what the future looks like and, in the long term, the country and the people in the country are going to be poorer.

"That affects the value of people's homes and the Treasury analysis shows that there would be a hit to the value of people's homes by at least 10% and up to 18%.

"And at the same time first-time buyers are hit because mortgage rates go up, and mortgages become more difficult to get. So it's a lose-lose situation.

In April, he said that leaving the EU will cause the UK economy to shrink by 6% by 2030.

Mr Osborne described the analysis provided by Treasury civil servants as "independent" and said it was backed up by "a whole range of external views".