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George Osborne says he will have to slash public spending and increase taxes in an emergency Budget to tackle a £30bn “black hole” if the UK votes to leave the European Union.
The chancellor will say this could include raising income and inheritance taxes and cutting the NHS budget.
But 57 Tory MPs have said his position would be “untenable” if he tries to cut NHS, police and school spending.
And Vote Leave criticised Remain’s “hysterical prophecies of doom”.
The UK votes on whether to remain in the EU or to leave on 23 June.
FTSE 100 steadies after Tuesday’s sell-off
(Open): The FTSE 100 opened higher, recovering some of the ground lost on Tuesday when the index fell sharply on worries over a possible Brexit.
The UK’s benchmark share index rose 51.01 points, or 0.9%, to 5,974.54.
Microsoft has announced that it is buying the professional social networking website LinkedIn for £18bn in one of the biggest tech deals in history.
LinkedIn’s share price rose by 50% when the news broke.
Analysts say the deal will help Microsoft boost sales of its business and email software.
UK unemployment rate at lowest since 2005
The UK unemployment rate has fallen to 5%, the lowest since October 2005, according to official figures.
The unemployment total fell to 1.67 million in the February-to-April period, down 20,000 from the previous quarter, the Office for National Statistics (ONS) said.
The number of people in work rose by 55,000, with the employment rate remaining at a record high of 74.2%.
Earnings, excluding bonuses, rose by 2.3% compared with last year.
The rise was bigger than analysts had expected, and pay growth in April itself was 2.5%, which the ONS said was partly due to the introduction of the National Living Wage.
Rolls-Royce says Brexit will heighten investment risk
Engineering giant Rolls Royce has written to employees saying it wants the UK to stay in the European Union.
Brexit would “limit any company’s ability to plan and budget for the future,” the firm said.
Meanwhile, the CBI has said a vote to Leave would “put British businesses out in the cold”.
But Leave campaigners said the CBI does not represent British business and is “the voice of Brussels”.
Rolls-Royce chief executive Warren East said Brexit would give the aero-engine maker’s big American rivals a competitive advantage.
Nissan UK-built Qashqais accused of emission cheat by South Korea
Nissan Qashqai cars built at the firm’s Sunderland plant in the UK were fitted with so-called emissions defeat devices, South Korean officials allege.
South Korea’s government said earlier it plans to fine the Japanese company 330 million won (£195,000; $279,920) for manipulating emissions tests.
It is the first time Nissan has been officially accused of cheating. It “firmly” denies the accusation.
The UK said its tests had found no evidence of cheating.
However, it tested older models – the Euro 5, while South Korea tested a Euro 6.
The Department for Transport said that it would continue to monitor emissions investigations in other countries with interest.