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The Guardian - UK
The Guardian - UK
Politics
Andrew Sparrow

EU referendum: Mark Carney suggests Brexit could lead to banks leaving London - as it happened

Mark Carney hints Brexit could prompt banks to leave London – video

Afternoon summary

  • George Hamilton, chief constable of the Police Service of Northern Ireland, has told MPs that if Britain left the EU, cooperation with EU police forces would become more difficult. He told the Northern Ireland affairs committee it would be possible to replace existing treaties on data sharing, extradition and investigations. “But it would be slower, complicated and more costly from a practical policing perspective,” he said.
  • An Opinium poll has given Labour’s Sadiq Khan a 5-point lead over the Conservatives’ Zac Goldsmith in the race to be the next London mayor. Khan is on 31% and Goldsmith on 26% on first-preference votes. The poll suggests Khan would win the run off by 55% to 45%.
  • John Whittingdale, the culture secretary, has said that he is opposed to the BBC cutting BBC News. He made the comments in a speech to the press gallery.
  • The government has accepted a recommended 1% pay rise for public sector workers, including doctors and nurses. As the Press Association reports, the awards covers more than one million employees, including staff in the armed forces. Ministers said the award was in line with its policy of an average 1% pay increase in 2016-17. NHS staff, doctors and dentists, and members of the armed forces will receive an average of 1%, while Prison Service staff will get 1.36% as an “exceptional award” for “highly ambitious” prison reforms. Health union leaders said 1% was “way below” what workers needed.
Priti Patel at the launch of Women for Britain
Priti Patel at the launch of Women for Britain Photograph: Stefan Wermuth/Reuters
  • Opposition parties will oppose George Osborne’s current plans to cut their funding from taxpayers but have offered concessions designed to persuade ministers to forge a deal on the issue, a document reveals. As the Press Association reports, George Osborne announced proposals in November to cut so-called Short money allocations to opposition parties by 19% and then freeze them in cash terms until 2020. In a joint response to the government consultation on the plans, opposition parties opposed the cut.But the document, obtained from a source close to the negotiations, reveals they have offered concessions, including publishing more details about how the money is spent, for example on advisers’ salaries, in an effort to improve transparency. The parties have also offered to absorb a £2.3m cut from previously planned allocations by indexing increases in the grant to a different measure of inflation and backdating it to the beginning of the parliament.

That’s all from me for today.

Thanks for the comments.

Lord Lawson, the Conservative former chancellor, has accused Mark Carney of making comments supporting the case for Britain staying in the EU to please George Osborne and to improve his job prospects when he leaves the Bank of England, the BBC’s Laura Kuenssberg reports.

Sir Andrew Large, a former deputy governor of the Bank of England, told the World at One that Jacob Rees-Mogg’s claim that the Bank was showing bias in the EU referendum campaign (see 1.18pm) was “very wide of the mark”. Large said:

Having myself been on the monetary policy committee and been at the Bank of England, I’m reasonably familiar with the sort of issues that the Bank is likely to be contending with now. [Expecting] it to stay silent where there are issues at stake here as to what could happen, I think, is in a way asking it to abdicate its responsibility.

My colleague Seumas Milne (still technically my colleague, because he’s only on leave of absence from the Guardian while he works as Jeremy Corbyn’s director of communications) is sometimes subject to the scurrilous allegation that he’s a Stalinist.

Thankfully John Whittingdale, the culture secretary, has been able to disprove that. Whittingdale was speaking at a press gallery lunch this afternoon and his party piece was to produce documentary evidence showing that that cannot be true because, actually, he’s a Maoist.

Or he might have been - a long time ago.

Whittingdale was at Winchester with Milne and here’s the poster Milne produced when he was standing in a school election. Milne tried to persuade his contemporaries of the merits of Chinese-style worker democracy, Whittingdale told the lunch, but from what he can remember Milne’s manifesto didn’t prove a vote winner.

As for Foster, anyone know what became of him?

Foxtons is warning about the consequences of Brexit, the Press Association reports.

Estate agency Foxtons warned London’s property market could be hit if the capital loses its standing as a major financial centre in the event of a Brexit.

The agency said it was too early to predict the impact on housing sales amid “short-term political and economic uncertainty” caused by the June 23 referendum on European Union membership.

But it cautioned over the risk to the sector if the UK voted to leave the EU, which could knock the City’s position as one of the world’s biggest financial centres.

This is from the Wall Street Journal’s Mike Bird.

Here is Matthew Elliott, chief executive of Vote Leave, commenting on Mark Carney’s evidence.

Mark Carney made clear that there are financial risks to Britain voting to stay in the EU. He stressed the need for the UK to retain flexibility but the government failed to secure any meaningful reforms to protect UK taxpayers.

As the previous governor Lord King has warned, the euro is likely to “explode”. If we vote to remain our money will be used to bailout the euro when it next hits crisis point.

Voting remain means giving away more power, and more of our money every year to Brussels. The safer option in this referendum is to Vote Leave and take back control.

Mark Carney's evidence to the Commons Treasury committee on Brexit - Summary and analysis

Mark Carney, governor of the Bank of England, began the Treasury committee hearing by insisting that the Bank would not be making a recommendation as to whether or not Britain should remain in the EU and he spent the next three hours doing his best to avoid saying anything that sounded as if he were trying steer people in one direction or another. A more unwilling recruit to Project Fear is hard to imagine. Carney said that the Bank’s focus was on financial stability, and that the referendum raised issues that went well beyond economics. Even on economic matters, he insisted on being nuanced and equivocal. He said the Bank was not making any forecasts as to what impact Brexit would have on jobs or inflation, and when questions got particularly contentious, the jargon-count seemed to shoot up and his answers became notably more opaque. (See below his comment on inflation, for example.) He was trying valiantly not to take sides.

But it was in vain. Carney’s words are going to end up in the EU referendum ammunition dump whether he likes it or not. And it is the Remain side that has gained the most. Carney did make some comments that will support the Leave case, principally about the risks of monetary union, but on balance his evidence favoured Remain.

(Which is why Jacob Rees-Mogg was so unhappy. Rees-Mogg clearly did not asborb the lesson from Andrew Rawnsley’s terrific Observer column: My new rule for the EU referendum - If you’re whingeing, you’re losing.)

Here are the main points.

  • Carney told MPs that leaving the EU could lead to financial instability, higher inflation and jobs being lost from the City of London.
  • He said that the prospect of Britain voting to leave the EU posed “the biggest domestic risk to financial stability” that the UK faces. But the threat posed by a possible global downturn was bigger, he said.

I’m saying it is the biggest domestic risk to financial stability. I would say that, in my judgment, the global risks, including from China, are bigger than the domestic risk.

  • He said that the City of London would lose some banking jobs if Britain voted to leave the EU. But exactly what would happen would depend on what relationship Britain had with the EU, and whether banks continued to submit to EU regulation, giving them full access to the single market. Asked if banks would relocated in the event of Brexit, he said:

One would expect some activity to move. Certainly, there is a logic to that.

There are views that have been expressed publicly and privately by a number of institutions that they would look at it. I would say a number of institutions are contingency planning for that possibility - major institutions, foreign headquartered, which have their European headquarters here.

There would be an impact. I can’t give you a precise number in terms of institutions or jobs or activity, because we don’t know where we would be on that continuum between full mutual recognition or pure third-country access.

He said that Britain could negotiate a deal that would allow banks access to the EU single market, but that this would take time and that it would involve “ceding sovereignty” over regulation and losing the flexibilities in the realm of prudential and macro-prudential supervision secured by David Cameron’s EU renegotiation.

  • He suggested that leaving the EU could push up inflation. That was because the pound would fall in value, pushing up the price of imports, he suggested. But other effects could have a deflationary effect, he said.

An adjustment in sterling, a notable depreciation of sterling, if that were to occur associated with the decision to leave, creates a challenge, not an insurmountable challenge, but a challenge for the monetary policy committee ... That level adjustment, and the pass-through that would come from a lower exchange rate, would be considerable and influence the stance of monetary policy.

  • He said firms trading with Europe could face a bigger regulatory burden if Britain left the EU. That was because they would have to comply with UK regulations and EU regulations. But smaller firms could face lower regulatory costs if Britain left, he said.
  • He said staying in the EU carried risks, mainly because of what might happen with the completion of the monetary union.

We are saying membership of the European Union brings risk as well, and the principle risks, because there are more than one, are associated with the unfinished business of European monetary union.

  • He said the Bank of England was not forecasting what impact Brexit would have on jobs or prices.
  • The Conservative MP Jacob Rees-Mogg accused the Bank of England of being biased in favour of the EU. At one point, after listing some allegedly one-sided comments made by the Bank, Rees-Mogg said:

It is beneath the dignity of the Bank of England to be making speculative pro-EU comments.

And later he told Carney:

What concerns me is that the influence and the strength of the Bank of England is in its Olympian detachment from day to day political partisanship. And in your evidence, in your letter and in your speech you are getting into political partisanship, removing yourself from your Olympian detachment, damaging the Bank’s ability to regulate through influence, which has historically been just as important as the letter of the law.

Carney was visible irritated by this, and strongly rejected the claim that the Bank was being biased.

  • Carney denied being leant on by Number 10 to promote the dangers of Brexit. When the Conservative Steve Baker asked if this had happened, Carney replied:

We are expressing views that are the views of the institution. We are not leaned on by anybody. It would have no effect if they tried.

  • Carney said the Bank of England would not be producing any further reports on the consequences of Brexit.
  • He said that Boris Johnson’s announcement that he has was campaign for Britain to leave the EU probably did contribute to the pound falling in value.
  • Andrew Tyrie, the Conservative chair of the committee, said that the safeguarding mechanism Cameron negotiated to protect non-Eurozone countries was too weak. He said non-Eurozone countries do not have an absolute right to take a matter to the European Council if they fear that the Eurozone countries are going to outvote them on a key issue; the non-Eurozone countries only have the right to request a referral to the European Council. Tyrie suggested this was not good enough. “I would not like to rely on it on a dark night,” he said.
  • Jon Cunliffe, deputy governor of the Bank of England, has suggested that Britain should delay initiating the EU withdrawal process if it votes to leave until it knows what it wants. But Cameron has said that he would invoke article 50 (launching the withdrawal process) immediately. The issue is significant because the two-year time limit for withdrawal negotiations only starts to apply once article 50 of the Lisbon treaty has been triggered.

Updated

Jacob Rees-Mogg, the Conservative member of the Treasury committee, is on the World at One now escalating the criticism of Mark Carney he made during the hearing. He has just accused Carney of propagating “scare stories”.

Q: Is this the Bank’s last word on this issue?

Yes, says Carney.

He says his letter to the committee is a response to questions from the committee.

He will be asked questions at future hearing.

But what he says in future will be in line with what he has said today in his letter.

He has no plans to produce another report on this, he says.

And that is it. After almost three hours, the hearing is over.

I will post a summary soon.

  • Carney says Bank of England will not be producing a further report on Brexit.

Q: Would we need to trigger article 50 immediately?

Cunliffe says it is up to the state that wants to leave to trigger the article 50 process.

Q: Would there be merit in the UK delaying that?

Cunliffe says one would start the clock running when one knew what one wanted.

  • Cunliffe suggests that, if Britain votes to leave EU, the government should delay triggering EU withdrawal process until it knew what it wanted. (David Cameron has said he would trigger article 50 immediately.)

Carney says Brexit is biggest domestic risk to financial stability UK faces

Andrew Tyries goes next.

Q: Would you accept that leaving the EU would not create a profound economic shock?

Carney says there would be material financial stability.

He says Tyrie was quoting the G20 statement. That was there view.

Q: But would be worse then just some volatility?

Carney says it is the biggest risk to financial stability the UK faces.

Or the biggest domestic risk, he says. Developments in China could pose a bigger risk.

  • Carney says Brexit is biggest domestic risk to financial stability UK faces.

Rees-Mogg accuses Carney of undermining Bank's reputation for impartiality

Jacob Rees-Mogg goes again. He says Carney has stressed the advantages of being in the EU in his answers but not the disadvantages. He says he is concerned that the Bank is supposed to be impartial. Carney is removing himself from that, he says. He says could damage the Bank.

Carney says “with respect” he is concerned by Rees-Mogg’s selective memory. Rees-Mogg said he mentioned the negative regulatory impact on big firms, but he did not mention that Carney had also mentioned the potential positive regulatory impact on small firms.

He cites another area where he thinks Rees-Mogg has misrepresented him.

He says the Bank makes its assessment dispassionately.

It is making contingency plans.

Any claim that the Bank is slanted is “entirely without foundation”.

Earlier Jacob Rees-Mogg asked Carney about a comment David Cameron gave in an interview saying Carney would have something to say about the EU referendum. (See 9.48am.)

It was in the Sunday Post here.

Cunliffe clarifies his earlier comment. He says it might take a long time to negotiate a trade deal with the EU, but it might not take so long to work out the outline of what both sides wanted, he says.

And he says you could have a situation where it was clear what the UK wanted, not not clear what the EU wanted.

Q: How much would investment fall during the period of uncertainty?

Carney says it is difficult to say.

Labour’s Helen Goodman is asking questions.

Q: How long would it take to negotiate a new trade deal?

Cunliffe says trade negotiations take a long time.

The capacity for trade negotiations is “pretty full at the moment”.

Q: Don’t you think the government is exaggerating when it talks about a decade of uncertainty?

Cunliffe says, when he talked about uncertainty following a Brexit vote, he was thinking of a period of one to two years after the vote.

But trade deals take a long time to negotiate.

Q: So you are talking of uncertainty of up to seven years?

Cunliffe says he would not like to put a number on it.

Cunliffe says the negotiation to leave the EU would not be the same as the negotiation to create a new relationship with the EU.

He says article 50 of the Lisbon treaty, that would be used to initiate withdrawal, has not been used before. And it is a short article, he says.

He says he assumes that negotiation would just cover exit.

But he says the negotiation over a new relationship could be taking place at the same time.

Q: Do you accept it would have been a mistake to join the euro?

Cunliffe says he was responsible for the five tests that led to Britain not joining the euro.

Q: Do you think Boris Johnson’s announcement about supporting the Brexit campaign contributed to the fall in sterling?

Carney says the fact that there was an agreement on the Friday, and news about the campaign, concentrated minds in financial markets. That is what happens.

Those views were expressed in the currency market.

They were relatively large moves.

Q: Will the Bank sell sterling in the run-up to the referendum?

No, says Carney.

He says the Bank’s reserves are small. They only use them for monetary policy purposes. The reserves of the country are larger, he says, but the Bank does not control those.

Q: And you would resist pressure to sell sterling?

Carney suggests he would.

Updated

Steve Baker, a Conservative and a leading Out campaigner, goes next.

Q: Has a Number 10 official contacted you about what the Bank says?

Cunliffe says no Number 10 staffer has contacted him.

He says he has great confidence in the integrity of the Bank of England’s staff. They respect and value the Bank’s independence.

The Bank takes its independence very seriously at all levels.

Carney says he and Cunliffe wrote the letter to the Treasury committee.

He says if Downing Street had tried to lean on them, there would have been considerable push-back, because that is what happens when governments try to influence central banks.

Updated

Carney suggests leaving the EU could push up inflation

Q: If sterling were to fall by 20%, what impact would that have on inflation?

Carney says this would create “a challenge, not an insurmountable challenge” for dealing with inflation.

He suggests it would push up inflation.

But you have to look at the causes of that, he says. It would be uncertainty. And that could have a downward pressure on inflation.

He offers to provide the committee with a “ready reckoner” that would explain this. But he says it would be “heavily caveated”. He would not want to be seen to be giving a running commentary, he says.

  • Carney suggests leaving the EU could push up inflation.

Mann accuses Carney of being 'reliant on fear factor'

The Labour MP John Mann, a member of the committee, has been tweeting about the hearing.

According to the Guardian’s guide to how MPs will vote in the referendum, Mann has not declared whether he will vote to stay in the EU or to leave.

Q: Does the volatility in sterling reflect the uncertainty around the referendum?

Carney says the level of sterling is affected by a number of factors.

Q: In 1975 the Bank of England prepared for a run on sterling in advance of the referendum. Do you still think most of the uncertainty impact would be on sterling?

Carney says a host of asset prices could be affected. But the Bank has a better framework than it did in 1975. There is a floating exchange rate.

Labour’s Rachel Reeves goes next.

Q: Which CEOs have told you they are making contingency plans to leave London if Britain votes to leave the EU?

Carney says a number of firms are making contingency plans. That is what you would expect.

He suggests some foreign firms are thinking about leaving. But it would not be appropriate to name them, he says.

Carney says it is “early days”, but there have been signs of the markets preparing for a fall in the value of sterling.

Here is my colleague Larry Elliott’s first take on the committee hearing.

And here is how it starts.

The governor of the Bank of England has provided a boost to David Cameron’s bid to keep Britain in the European Union but faced accusations of bias from pro-Brexit MP Jacob Rees-Mogg.

Mark Carney said the prime minister’s Brussels deal addresses issues identified by the Bank as necessary to secure the UK’s monetary and financial stability.

While insisting that nothing the Bank said should be interpreted as backing EU membership, Mark Carney said the settlement negotiated by Cameron last monthcovered the issues highlighted by Threadneedle Street as important.

Mark Garnier, a Conservative, goes next.

Q: Why did you make the announcement yesterday about the Bank of England offering a liquidity facility?

Cunliffe says the Bank was going to do this. And it learnt from the Scottish independence referendum that it was best to say so in advance.

Q: You say in your letter EU membership reinforces the dynamism of the economy. But isn’t there a worry about a generation of deflation in the Eurozone. So where does the dynamism come from?

Carney says the EU is the largest economy in the world. It is a very wealthy economy. There are elements at the cutting edge in various sectors. And there are opportunities for British firms to expand their market share, he says.

So there are opportunities for British firms, particularly in services, and particularly as they extend into digital services.

Q: Does membership of the EU magnifies Britain’s influence over global regulation?

Carney says it magnifies it.

Here is the BBC’s first story with a take on the committee hearing.

It leads on what Carney says in his letter to the committee. Here is how it starts.

The governor of the Bank of England has said that Britain’s membership of the EU has re-inforced the “dynamism of the UK economy”.

Carney says Brexit could bring “challenges to financial stability” in the short term

The SNP’s George Kerevan goes next.

Q: Is financial stability enhanced or diminished by membership of the EU?

Carney says the Bank can deliver financial stability today.

It is best to look at what would happen if there were a change to the status quo.

He says the Bank is satisfied with the EU renegotiation deal.

In the long term, there cannot be a conclusive answer, he says.

You could create a system to deliver financial stability, he says.

But, in the short term, leaving the EU could create some problems.

The situation could bring some challenges to financial stability.

  • Carney says Brexit could bring “challenges to financial stability” in the short term.

Q: In some areas the UK has gone further and faster than the EU in developing financial regulation. So is the public being deceived if it thinks there will be a bonfire of red tape if Britain leaves the EU?

Carney says the Bank of England wants to retain control of macro-prudential regulation because it has the most complex financial services industry in the world.

He says the Bank does not want the UK to be “maximum harmonised to the lowest common denominator”.

The UK needs additional protections, he says.

Labour’s Wes Streeting goes next.

Q: Would the UK have to implement most EU financial services regulations into law if it left?

Carney says it is reasonable to expect that.

Q: What aspects of financial regulation would you like us to jettison, without abandoning our international obligations?

Carney says the Bank of England thinks a more proportionate approach should apply to the Basel III capital liquidity requirements. Smaller institutions should be exempt, he says. That would promote competition.

Q: So would compliance costs increase for firms if Britain left the EU?

It would depend, he says. For domestically-focused firms they could go down, he says. But firms trading in the EU would probably see compliance costs go up, because they would trade in both jurisdictions.

  • Carney says regulatory costs could go up for big firms in the UK if Britain leaves the EU. But they could fall for small firms, he says.

Carney says the Bank of England thinks the EU’s bonus cap does not promote financial stability.

It also has concerns about the proposed financial transaction tax.

Cunliffe says if there was a deal to allow the City access to the single market, Britain would not have a say in setting the rules.

Carney says negotiating deal to protect City of London after leaving EU would take a long time

Q: So if we did not get full mutual recognition, there would be some degree of loss of business in London.

Without question, says Carney.

Q: And how hard would it be to get mutual recognition arrangements?

Carney says they are possible to achieve, but that they would take a long time to achieve.

And he says Britain would lose influence over the regulations. It would have to cede sovereignty.

  • Carney says negotiating a deal to protect the City of London after leaving the EU would take a long time.

Here is the BBC’s Laura Kuenssberg on Carney’s letter to the committee.

Carney suggests Brexit could lead to banks leaving London

Q: Some people, like your old firm Goldman Sachs, have said leaving the EU would be bad for the City. Do you agree?

Carney says it would depend on what Britain negotiated with the rest of the EU.

The key issue would be what degree of recognition was granted to financial services in London. Could a mutual recognition framework be negotiated that would mirror the current regime. As we moved away from that, some firms could consider relocating.

  • Carney suggests Brexit could lead to banks leaving London.

Updated

Chris Philp, a Conservative, goes next. He addresses Cunliffe.

Q: There is a disagreement as to how binding the EU renegotiation deal is on the European court of justice. What is your view?

Cunliffe says he is not a lawyer. His understanding is that this is binding. The European court of justice has to take it into account when interpreting law.

Q: Cameron says it is legally binding and irrevocable. Is that right?

Cunliffe says it is legally binding. And it can only be revoked by all EU member states.

He says the words in the treaty about it having “interpretive effect” as similar to those used in other treaties.

Q: What would happen if these changes were not embodied in the EU treaties when treaty change next happens?

Cunliffe says the idea is to incoporate these plans in the EU treaties when treaty change next takes place. If that did not happen, that would be a breach of the agreement.

Carney says continuing membership of EU carries risks, mainly through completion of monetary union

Carney says membership of the European Union carries risks. The main ones are associated with the completion of monetary union, he says, and its possible impact on the UK.

  • Carney says continuing membership of the EU carries risks, mainly through the completion of monetary union.

Britain Stronger in Europe has been tweeting some lines from Carney’s evidence to the committee.

Carney says leaving the EU could lead to instability, and that instability is associated with “poor economic outcomes”.

Carney says Bank of England is not forecasting what impact Brexit would have on jobs or prices

The Labour MP John Mann goes next.

Q: How many jobs will be lost if Britain leaves the EU?

Carney says the Bank has not looked at this. It has focused on the impact Brexit would have on financial stability and monetary stability.

Q: So you don’t know?

We have not carried out than analysis.

Q: What effect would there be on prices?

Carney says different effects could push either way.

Leaving the EU could lead to lower economic activitiy, with lower investment and spending. (This could lead to prices falling, he implies.)

But leaving the EU could also lead to the value of the pound falling, which might push up prices, he suggests.

Q: So you do not have a view on what effect leaving the EU would have on jobs, wages and prices?

Carney says the Bank of England is focusing on the impact Brexit would have on economic stability. But it is not forecasting the impact on other issues.

  • Carney says Bank of England is not forecasting what impact Brexit would have on jobs or prices.

He says the Bank has not prepared an analysis of the long-term economic impact of leaving, and it has no intention of doing so.

Tyrie mentions the ratchet effect in EU law. He has published a report on this for the Centre for Policy Studies thinktank.

Q: In the European Banking Authority there is a double majority system that means decisions have to be agreed by Eurozone countries and non-Eurozone countries. But those rules only apply so long as there are five countries outside the euro.

That’s right, says Cunliffe.

Tyrie says mechanism to protect rights of non-Eurozone countries in EU renegotiation looks too weak

Andrew Tyrie is still questioning Cunliffe.

Q: The agreement just gives non-Eurozone countries the right to request that an issue gets taken to the European Council if it is worried that Eurozone countries are acting against its interest. But that is not a guarantee that this matter will get taken to the European Council, is it?

Cunliffe says in practice the president of the European Council would always accept this request. He is “pretty sure” that if a country like Britain said a matter was so important it had to go to the European Council, that is what would happen.

(Once a matter goes to European Councils, EU leaders have to settle the issue themselves, and they decide things by unanimity.)

Andrew Tyrie says this safeguarding mechanism is not very strong. “I would not like to rely on it on a dark night.|

Cunliffe disagrees. He says he thinks it is “quite strong”.

  • Tyrie says the mechanism to protect rights of non-Eurozone countries in the EU renegotiation does not look very reliable.

Updated

Here is the paragraph from Carney’s letter to the committee summarising the Bank of England’s verdict on the EU renegotiation.

Sir Jon Cunliffe, the Bank of England’s deputy governor (financial stability), is giving evidence alongside Carney.

Tyrie asks him about the EU renegotiation deal.

Cunliffe says it was significant.

There was recognition of the need to respect the rights of non-Eurozone members.

And non-Eurozone countries will continue to regulate their own banks, he says.

Sir Jon Cunliffe
Sir Jon Cunliffe Photograph: Parliament TV

Tory MP Rees-Mogg accuses Carney of damaging Bank of England’s reputation’s with “speculative” pro-EU claims

Rees-Mogg raises a speech Carney gave last year. He wants to raise some “non-factual elements” in it, he says. He says he is not saying Carney was wrong. But he made some claims that went beyond the evidence, he says. He says Carney said being in the EU contributed to economic “dynamism”. How can that be justified?

Carney says the EU had a positive effect on the economy at two points, when Britain joined the EEC, and when the single market was created.

He also mentions foreign direct investment.

Q: But Britain was getting more FDI than some other countries put together before the single market was created. So it did not have an impact.

Carney says he does not accept that.

He speaks to investors, he says.

There is a reason why banks are headquartered in London. It is partly because of the cluster of expertise. But it is also because of the “passporting ability” of this economy, by virtue of being in the EU.

Rees-Mogg says Carney is coming out with standard claims from the pro-EU campaign. He says that is doing Carney’s reputation “harm”. He is making “speculative” claims, he says.

Carney rejects that.

Take trade, he says. He mentions “gravity models” of trade (ie, models that take into account how much trade should grow because of one country’s proximity to another). Those show the UK’s trade with the EU has grown more than one might expect.

He says the language the Bank of England has used in its report on this is “careful”.

  • Tory MP Rees-Mogg accuses Carney of damaging Bank of England’s reputation’s with “speculative” pro-EU claims.

Andrew Tyrie, the committee chair, says Carney is choosing his words with care. He is like someone who in another career might have been a bomb disposal expert.

Updated

Q: David Cameron said in an interview recently he was sure you would have something to say about the EU referendum. What did he mean?

You will have to ask him, says Carney.

He says he does have conversations with Cameron, and with George Osborne.

What he has told Cameron is consistent with what he has put in the public domain, he says.

He says under the status quo, he has the tools to deliver the Bank’s remit (economic stablity, and controlling inflation).

Carney has sent a letter to the Treasury committee setting out the Bank of England’s assessment of the EU renegotiation deal secured by David Cameron at the summit just over two weeks ago.

Here it is (pdf). It runs to 19 pages.

Jacob Rees-Mogg, a Conservative, asks about the proposed financial transaction tax (the “Robin Hood” tax), and its possible impact on financial stability.

Carney says it is relatively low down his list of concerns. That is partly because he sees it as an efficiency issue, not a financial stability issue.

And he suggests there is also little chance of it coming into force.

Mark Carney questioned by MPs about EU referendum

Mark Carney, the governor of the Bank of England, has just started giving evidence to the Commons Treasury committee about the EU referendum.

He started by saying the Bank of England would not be making a recommendation. There were issues at stake that went beyond economics, he said.

  • Bank of England will not make any recommendation in relation to EU referendum, Carney says.

This is what Boris Johnson said outside Downing Street about the EU referendum gag.

So far as that edict was ever operative, it is now officially countermanded. It is over. It is dead, it is rescinded. As they say in Brussels, it is caduc.

Here is some more footage of Boris Johnson disowning the City Hall EU referendum gag email. This shows him being doorstepped as he arrived at Downing Street for this morning’s political cabinet. (He attends political cabinet, but not full cabinet.)

Boris Johnson arriving at Downing Street

Johnson says his EU referendum gag was never enforced

Boris Johnson was doorstepped by reporters outside his home this morning. This is how he announced his U-turn.

Nobody has been gagged. I’m afraid I was only made aware of this edict very late last night and it ceased to be operative as soon as I was made aware of it.

It obviously hasn’t been operative because you’ve got members of my advisory teams taking a very different view from me. So they can, so they shall, with complete impunity too, by the way. So there you go.

Johnson denied being consulted about the email before it was sent out.

And he admitted it was embarrassing.

Yes, it’s a cock-up. I perfectly accept that. It is not something that I agree with. My staff, my team have complete freedom to say what they want. Indeed, they already are and have been for some day. Let 100 flowers bloom, folks.

(Earlier the BBC said Boris Johnson quoted Mao saying ‘Let 1,000 flowers bloom”. Actually, although the phrase is commonly quoted like that, Mao actually talking about letting 100 flowers blossom, and so Johnson seems to be closer to the original.)

Boris Johnson
Boris Johnson Photograph: BBC

You only have to look at today’s Daily Mail splash to see why reports that Boris Johnson was trying to gag his City Hall staff were so damaging; the John Longworth affair continues to dominate the headlines, with the Mail saying Longworth received a “dressing down” from Number 10 after he gave his speech saying he supported Brexit.

Here’s the story. And here is how it starts.

A senior aide to David Cameron gave a telephone dressing-down to the business chief who dared to speak out in favour of Brexit.

Daniel Korski, who is paid £93,000 a year, rang John Longworth just hours before the British Chambers of Commerce sensationally suspended him from his post as director general.

Friends of the businessman claim Mr Korski intervened to question why he was calling for Britain to leave the EU when the body had taken a neutral stance on the referendum.

Number 10 has denied putting pressure on the British Chambers of Commerce to suspend Longworth. But the Mail claims its revelation undermines this assertion.

The Daily Telegraph has a more detailed story saying that, as well as the call from Korski to Longworth, there was also a call from a Downing Street aide to Nora Senior, the BCC’s president. But it doesn’t quite prove that Number 10 was calling for Longworth to be disciplined.

Here’s an excerpt.

On Saturday a Downing Street spokesman said: “We are clear no pressure was put on the BCC to suspend him. Of course No 10 talks to business organisations regularly - but to be clear: no pressure was applied. This decision is entirely a matter for the BCC.”

However Ms Senior told The Telegraph that a Number 10 official had phoned her on Friday morning to ask about the row “about getting clarity on BCC’s position on the referendum”.

She added: “I think there might have been one Number 10 official. That would have been on Friday. All the media stuff started to come out and a lot of it had aligned John’s comments to the BCC. Really it was about getting clarity.”

Boris Johnson describes EU referendum gag email as 'a cock-up'

Here is more on Boris Johnson’s U-turn, from the BBC’s Norman Smith.

The BBC’s James Landale thinks Boris Johnson may not be wise quoting Chairman Mao.

City Hall do not have any more details yet of the details of Boris Johnson’s U-turn. He made a comment after being doorstepped this morning, but his press office don’t know any more yet than what they’ve heard on the BBC.

Here are some more tweets from MPs and peers who were accusing Boris Johnson of hypocrisy before he announced his U-turn a few minutes ago.

From Chris Bryant, the shadow leader of the Commons

From Barry Sheerman, a Labour MP

From Tom Blenkinsop, a Labour MP

From Sarah Ludford, a Lib Dem peer

At the weekend Boris Johnson, the mayor of London who is campaigning for Britain to leave the EU, said it was “absolutely scandalous” that John Longworth had been suspended from his post as director general of the British Chambers of Commerce. Longworth, who subsequently resigned, was suspended because he gave a speech saying he was opposed to Britain remaining in the EU even though the BCC is officially neutral and more of its members are in favour of remaining than are in favour of leaving. Longworth, to be fair, made it clear that he was speaking in a personal capacity, but the BCC board clearly felt this nuance might have been lost on some members of the public.

Johnson said Longworth had been “crushed by the agents of Project Fear”. People were entitled to hear what he thought, Johnson said. “The British public deserve to have the facts put before them. They deserve a proper debate.”

And so is Johnson keen for his staff at City Hall to speak out on the subject of the EU referendum if they disagree with his own position. Er, no. As the BBC reports, Edward Lister, Johnson’s chief of staff, has sent an email to senior staff at City Hall saying that if they think Britain should remain in the EU, they should not say so if they are acting in an official capacity. The email says:

Boris is entitled, as mayor, to adopt a public position on this issue and then, as with all other mayoral policies, to receive support from GLA officers in relation to that policy position.

The advice also makes clear that GLA officers can, when not at work, express personal opinions (which be contrary to the mayor’s views). Whilst this is the formal position for you also, I would expect, given your roles, you either to advocate the mayor’s position or otherwise not openly contradict it.

Labour’s Chuka Umunna accused him of hypocrisy.

Johnson seems to have accepted that Umunna had a point because within the last few minutes it has been reported that Johnson has changed his mind.

I will post more on this as it comes in.

Later, I will be covering Mark Carney, governor of the Bank of England, giving evidence to the Commons Treasury committee about the EU referendum.

As usual, I will be covering the breaking political news as it happens, as well as bringing you the best reaction, comment and analysis from the web. I will post a summary at lunchtime and another in the afternoon.

If you want to follow me or contact me on Twitter, I’m on @AndrewSparrow.

I try to monitor the comments BTL but normally I find it impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer direct questions, although sometimes I miss them or don’t have time. Alternatively you could post a question to me on Twitter.

If you think there are any voices that I’m leaving out, particularly political figures or organisations giving alternative views of the stories I’m covering, do please flag them up below the line (include “Andrew” in the post). I can’t promise to include everything, but I do try to be open to as wide a range of perspectives as possible.

Updated

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