Afternoon summary
- Nicola Sturgeon, the Scottish first minister, has joined those criticising the Treasury’s Brexit document, effectively accusing George Osborne of insulting people’s intelligence. Sturgeon is in favour of staying in the EU, but she said the chancellor’s stark claims about the negative consequences of leaving could be counter-productive. She said:
I think you only have to look at the Scottish referendum to know that that kind of fear-based campaigning, that starts to insult people’s intelligence, can have a negative effect. I would much rather we were campaigning positively. I think in Scotland certainly, we have got lots of experience of Treasury reports during referendum campaigns, and I think people have got savvy - to be able to see through some of the overblown claims.
She spoke as Leave campaigner continued to attack the Treasury’s methodology. Lord Lawson, the Conservative former chancellor, said government officials had been forced to “prostitute themselves” to give Osborne figures he wanted. Speaking of the Treasury, Lawson said:
They’re not independent in the slightest; they are creatures of government. I’m sorry that the Treasury officials and even economists who I have high regard for from the past have been made to prostitute themselves in the cause of a political campaign, but there it is.
- Experts have said patients may have to hold on for longer to get the latest medicines if Britain votes to leave the European Union, with one forecasting an extra 150 days of waiting for drug approvals. As the Press Association reports, at a press conference on what a Brexit in the referendum would mean for drugs and medical devices, Professor Patrick Vallance, president of pharmaceutical research and development at GlaxoSmithKline, said it could mean drugs take around 150 days longer to be approved for patient use. He said:
If you look at those countries that aren’t part of the EU, on average it takes longer to get new drugs approved. On average it is 157 days longer for Switzerland and on average it takes Canada 140 days longer. It takes longer, it is more complicated and it adds an uncertainty to the whole process which is uncertain enough as it is.
In a related development the UK’s Medicines and Healthcare Products Regulatory Agency (MHRA) said it was “certainly not” prepared to take responsibility for many roles currently provided by its Europe-wide counterpart the European Medicines Agency (EMA) in the event of Brexit.
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Dr Jim Yong Ki, president of the World Bank, has said Brexit could have a “negative impact” on developing countries. He told the World at One:
The issue of Brexit is up to the voters of the UK, but we have been watching very carefully and we are very concerned about the potential impact of an exit vote on developing countries. We have been downgrading our expectation of economic growth pretty consistently over time, and while there are some bright spots there is no question that for us the threat of Brexit is one of the biggest risks that we face.
That’s all from me for today.
Thanks for the comments.
My colleague Katie Allen has produced her verdict on the Treasury Brexit document, and it’s harsh. She describes it as fantasy.
And here’s an excerpt.
In this particular exercise two key assumptions change everything. The Treasury’s team of economists have told voters that inflation could shoot up, the pound drop 15% and the recession-hit economy might end up 6% smaller as a result of Brexit. But all of that is based on the assumption that fiscal and monetary policy remain unchanged.
Seriously? The Bank of England would just stand back and let inflation shoot up? Policymakers, with the power to cut or raise interest rates, would just watch as growth slammed to a halt? It conjures up the image of an exhausted parent, looking on, arms folded and scolding the people of Britain: “You made your bed, you lie in it.”
In reality, the Bank has already said it could hold an emergency meeting if it needed to cut or raise rates. It has repeatedly emphasised that whatever action is needed to safeguard financial stability will be taken.
Tory MP Bernard Jenkins accuses Treasury of 'contributing to cynicism about politics'
In the Commons Bernard Jenkins, the Conservative MP and Brexit campaigner, used an urgent question to attack the Treasury’s Brexit document. He told MPs:
We all know that these forecasts are just rubbish being produced by a government that is now obsessed with producing propaganda to try and get its way in this vote rather than to enlighten the public. Has this report been signed off by the same Professor Sir Charles Bean who has said previously that models of economic shocks are based on ‘gross simplifications’?
Does not the government’s entire campaign just reinforce the unfortunate impression that today’s political leaders will say anything they think will help them get what they want, whether it is true or not? Do you not realise that the chancellor and the prime minister are contributing to cynicism about politics, in the sense that voters should not trust their rulers but should make their own choice and their own judgment? Which is why they will vote Leave on June 23.
Responding on behalf of the government David Gauke, the Treasury minister, said that the report was an attempt “to assist the British people in making an informed decision based on the likely consequences of the UK leaving the EU” and that it was in line with predictions made by bodies like the IMF and the OECD.
Patrick Minford, professor of applied economics at Cardiff Univesity and co-chair of Economists for Britain, the pro-Brexit group, has produced a withering assessment of the Treasury’s document. Here is an extract.
At the heart of the Treasury calculations lies a serious attempt to deceive the British people. The key to any calculation lies in the assumptions made: garbage in, garbage out. The Treasury has put garbage in for the long-term effects of Brexit. These in turn underpin its forecasts of short term recession.
It assumes that under Brexit we continue with the hated common agricultural policy and the retention of EU trade barriers: between them these currently raise the UK cost of living by up to 16%. The Treasury also assumes that we get rid of no EU regulations on our economy. Meanwhile we face barriers to the single market where we currently trade freely. So under Treasury assumptions Brexit means we actually reduce the extent of free trade and do not use the opportunity to cut back Brussels regulation. Why would anyone suggest doing that unless they were deliberately trying to manipulate the results?
Sadiq Khan, the new mayor of London, has said he is flying the EU flag outside City Hall to show his support for Britain staying in the EU.
I am flying the EU flag & Union flag with pride to symbolise my position on Europe #Incrowd https://t.co/inqzuwbrby pic.twitter.com/Yx3L6W7JnJ
— Mayor of London (@MayorofLondon) May 23, 2016
Vote Leave has welcomed Nicola Sturgeon’s comments about the Treasury’s Brexit report. (See 2.34pm.) This is from Tom Harris, the former Labour MP who is director of Scottish Vote Leave.
Scottish Vote Leave welcomes Nicola’s comments. David Cameron calls remain a ‘positive campaign’ but we in Scotland know it’s just Protect Fear. Even supporters of a Remain vote are saying it.
As Nicola mentioned, the Treasury claims are overblown and are an attempt to scare the voters. Yet I, like Nicola, have complete faith that the voters will see through this blatant attempt at scaremongering.
It’s time for David Cameron to listen to supporters on his own side and stop insulting the electorate’s intelligence with false reports.
Costas Milas, professor of finance at the University of Liverpool, has written an assessment of the Treasury Brexit document for the Conversation. Here’s an extract.
A possible criticism of the methodology is that it implicitly assumes that the impact of the Brexit shock is independent of the “state” of the economy. It does not allow for any intervention by the Bank of England, for instance. It assumes that the bank remains a passive spectator, conveniently hiding behind the excuse that the Treasury should not “pre-suppose how monetary policymakers would balance higher inflation from the fall in sterling with the reduction in demand and supply”.
Ignoring the possibility of the Bank of England attempting to stave off the recession by cutting the base rate below zero and/or authorising additional quantitative easing arguably leads the Treasury to a more negative view of Brexit than would otherwise have been the case.
Oxford Economics, an Oxford-based firm that specialises in economic forecasting and modelling, says the Treasury’s claim that growth could be 3.6% lower over two years after Brexit looks “excessive”. Oxford Economics says a fall of 1.3% from the baseline looks more likely.
We view HMT #Brexit study as being a worst-case scenario rather than most likely outcome: https://t.co/yMRX6rMcGT pic.twitter.com/wir06ZWwKo
— Oxford Economics (@OxfordEconomics) May 23, 2016
The Spectator’s Tom Goodenough has been fact-checking Boris Johnson’s latest EU bananas claim. (See 12.40pm.) Goodenough has discovered that, as well as being committed to the free movement of labour, Brussels is also committed to the free movement of bananas.
SNP, Plaid and Greens issue joint statement with positive case for the EU
Nicola Sturgeon, the SNP leader and Scottish first minister, Caroline Lucas, the Green MP and Leanne Wood, the Plaid Cymru leader, have issued a joint statement making a positive case for the EU.
In it, they make a point of saying that, unlike some other politicians, they are in favour of protecting the principle of free movement within the EU
Here’s an extract.
The European Union is not perfect and we would each propose changes, but we believe that the benefits of the EU are significant.
The EU is good for working people across Scotland, Wales and England - with rules limiting the amount of hours we have to work, providing equal treatment for part-time and agency workers and guaranteeing health and safety at work.
Being a part of the European Union is good for women. From maternity and paternity leave for parents, work place rights during pregnancy, to rules protecting against harassment and unequal treatment, women in Britain benefit from the EU. Crucially, these rules – which span the continent – help halt a race to the bottom of firms trying to find the least protected workforce where workers enjoy the fewest rights.
The EU also gives us all the freedom to live, work, study and retire in any one of 28 countries.
That freedom of movement – which has been so beneficial to our economy here in the UK – is often the focus of attack by other parties, but we celebrate it and call on the government to do more to ensure that it works for everyone.
Boris Johnson has just visited Ginetta, a racing car manufacturers near Leeds. Touring the production line, Johnson confessed that he knew nothing about cars, despite serving as GQ’s car reviewer for a time. He said:
Do you know, I just always used to make it all up? I had to write this motoring column for GQ magazine and I always used to go on about ‘crabbing pins’ and the ‘corn thruster’. I never had the faintest idea.
Johnson then had a go in one of the cars and slid over into the passenger seat as the firm’s chairman did doughnuts in the factory carpark.
Updated
Raoul Ruparel, co-director of the Open Europe thinktank, has published a useful analysis of the Treasury’s Brexit report. He says that the Treasury is right to say that there would be an economic shock, but that beyond that what would happen is largely speculation.
Here is an excerpt.
The first thing to note is that there is actually quite a wide consensus – including many economists from the Leave side and a majority of the British public – that there would be a short term shock from Brexit to the UK economy. Any transition of this size will involve uncertainty, even more so when there is no clear succession plan in place (at least publicly) – this means market volatility and uncertainty over investment/spending decisions. So the overall premise of the Treasury report is hard to question.
That said it is nigh on impossible to make any credible predictions about how this uncertainty will manifest itself in the short term – especially for such an unprecedented event. So while, the direction of the moves in some prices/economic indicators might be correct, I don’t think the actual size of the moves can be credibly estimated ...
There are also a number of particularly pessimistic assumptions in the Treasury report which do not seem entirely realistic, especially around the policy response and the impact of the transitional effect which means buying into the Treasury’s longer term predictions and basing business decisions on them.
Another Boris U-turn?
Meanwhile Boris Johnson has been test driving (or test passengering) a Ginetta racing car.
These are from my colleague Helen Pidd.
Boris almost avoiding posing in front of a racing car called "Randy #2" (zoom in) at Ginetta nr Leeds pic.twitter.com/ZzOzaeN8dV
— Helen Pidd (@helenpidd) May 23, 2016
Boris is about to drive this Ginetta racing car. What could possibly go wrong? Props to my model, @michaelsavage pic.twitter.com/D76SUAfo8u
— Helen Pidd (@helenpidd) May 23, 2016
And this is from the Yorkshire Post’s Kate Proctor.
Boris Johnson in a spin #yplive pic.twitter.com/29EF6aIX80
— Kate Proctor (@KateProctorYP) May 23, 2016
You could see that as another Boris U-turn, I suppose.
Both Boris - & the car - survived. "When I did Top Gear I came last to everyone, including Tara Palmer Tompkinson" pic.twitter.com/yKoUXNfwjH
— Helen Pidd (@helenpidd) May 23, 2016
Frances O’Grady, the TUC general secretary, has backed the Treasury report. In a statement she said:
The forecast from the Treasury gives us half a million good reasons to stay in the EU. Job loss can be devastating, especially if you have to look for work in the middle of a recession. Brexit is too big a risk for working people to take.
And here is a Guardian video of Nicola Sturgeon explaining why she wants to make a positive case for staying in the EU.
Sturgeon says Treasury "overstating' its case with 'overblown' claims
The SNP is strongly in favour of the UK staying in the EU but Nicola Sturgeon, Scotland’s first minister, could not bring herself to wholly endorse today’s Treasury report. In a BBC interview a few minutes ago she said the Treasury was “overstating” its case with “overblown” claims.
I would much rather we were campaigning positively, that’s what I’m trying to do. In Scotland, certainly, we’ve got lots of experience of Treasury reports during referendum campaigns and I think people have got savvy to see through some of the overblown claims.
Of course there would be an economic impact, short, medium and long term, if there was a vote to leave the European Union. But I’m much more interested in the reasons to stay in the European Union, the positive reasons.
Asked what she thought of the Treasury claim that 820,000 jobs could be lost if the UK left the EU, she replied:
I think the Treasury, like they did in the Scottish referendum, are likely to be overstating their case. But I’m not here to criticise the Treasury. I’m here to make a positive case.
Sturgeon is doing a pro-EU event later with Caroline Lucas, the Green MP, and Leanne Wood, the leader of Plaid Cymru.
Vote Leave has published a lengthy briefing rebutting the Treasury’s Brexit report. It includes many points, but its key argument is that Treasury forecasts have in the past often turned out to be very wrong.
Lunchtime summary
- David Cameron has claimed that voting to leave the EU would amount to choosing “the self-destruct option” in the light of new figures from the Treasury suggesting Brexit could trigger a recession, an increase in unemployment of at least 500,000, higher inflation, higher government borrowing and lower wages. The Treasury analysis, “The immediate economic impact of leaving the EU”, makes variable questionable assumptions, including assuming that Bank of England would not cut interest rates to revive the economy, that the UK would leave the single market and that the government would trigger the two-year withdrawal process immediately. But it did receive a broad stamp of approval from Professor Sir Charles Bean, a former deputy governor of the Bank of England, who reviewed it in a personal capacity and declared that provides “reasonable estimates of the likely size of the short-term impact of a vote to leave on the UK economy.”
- Leave campaigners have dismissed the Treasury’s warnings, claiming that George Osborne himself has questioned the value of Treasury forecasts in the past, that the Treasury gets many predictions wrong and that, even if it is right, under its “shock” scenario the economy would remain the same size as it was in December 2015.
- Sajid Javid, the business secretary, has rejected a claim from Iain Duncan Smith, the former work and pensions secretary, that he privately backs Brexit. A source close to Javid, who is backing the government’s pro-Remain stance, said that Javid had never called for the UK to leave the EU, in public or in private, contrary to what Duncan Smith claimed in an interview on Today.
- Duncan Smith has claimed that Turkey will join the European Union because it has the EU “over a barrel”. Leave campaigners are increasingly highlighting the prospect of Turkish membership as a reason for voting Brexit. Cameron has backed the idea of Turkey joining in the past, but has recently started arguing that there is no prospect of this happening for many years. He also says all EU member states have a veto. But Duncan Smith claimed that Turkish accession was inevitable. He told the Today programme:
The European Union, once it makes its mind up bureaucratically that something will happen, then they make these things happen. Once you start the ratchet, then it begins and it has just started.
He also said the ability of EU member states to veto Turkish accession would count for little.
They have the European Union now over a barrel because all of the migrancy that was pouring across their borders into Greece in the course of the last 12 months. They are holding that in check, they are taking money from the European Union. If any day they feel the European Union is not going to have them, all they have to say (to the migrants) is ‘On your way, you can carry on going over’.
- Shirley Williams, the former Lib Dem leader in the Lords, has given a speech complaining about the conduct of the EU referendum and called for more women to be given a say. She said:
The debate can sometimes seem more like a contest between Boris Johnson and George Osborne to see who will be next leader of the Conservative party.
The EU debate has turned into a conversation between two white middle aged gentlemen on one side and two white middle aged gentlemen on the other. It is a very private debate. I find it very depressing that there are so few women, or people from minorities engaged in the current debate. This will not enthuse Liberal Democrat, Labour or Green voters who will all be crucial if we as a country are to vote ‘In’?
- Steven Woolfe, Ukip’s finance spokesman, has said the City will be “under seige” from new regulations if the UK votes to stay in the EU. He said:
If we stay in the EU, the City will be under siege. It will have to deal with wave after wave of attacks from Brussels, but will be powerless to fight back.
The Square Mile will be like a Medieval castle trying to repel attacks - but with its loopholes filled in, its moat drained of water and its drawbridge down and free for the foreign invader to cross at will.
The City of London will be defenceless in the face of more and more regulation and a determination from the Eurozone to integrate using the frameworks and institutions of the entire European Union.
Updated
Leave.EU says Treasury's 'rubbish' forecast could become self-fulfilling
Arron Banks, the co-chair of Leave.EU, has said that the Treasury’s forecasts are “rubbish”, and that their negative predictions could become self-fulfilling.
The Osborne Treasury will pump out whatever rubbish its master asks for. Remember when Mystic Gideon was forecasting a budget surplus by 2014/15? One year on and the deficit is about £69 billion, with the national debt up to £1.5 trillion and rising fast.
The man has all the predictive capability of a Magic 8-Ball. I’ve no idea why anyone in the media wastes their time indulging him.
If the economy hits the skids and the pound falls it will be because the recovery was built on sand and Mark Carney – a long-time hireling for the American mega-banks funding the In campaign and a member of the general council of the European Central Bank – has spent the last several years printing hundreds of billions in dodgy QE money.
Loose talk of a Brexit of Mass Destruction is a painfully transparent exercise is buck-passing, but if it spooks the markets it may just become self-fulfilling – yet another example of the gross irresponsibility and clueless ineptitude which characterises our self-appointed expert caste, whose members would sink without a trace if they had to survive in the business world.
McDonnell says Cameron is now admitting Labour did not cause the last recession
John McDonnell, the shadow chancellor, says today’s Treasury report shows how weak the economy is under the Tories. Brexit would make it worse, he says.
The report out today from the Treasury further underlies the weakness of the UK’s economy thanks to six years of George Osborne’s failed policies leaving us with a recovery built on sand, as well as the fragile state of the global economy and the serious risks a Tory Brexit poses.
This is yet more evidence that a Tory Brexit would only make matters worse for working people already struggling under a Tory government.
I welcome the admission by David Cameron and George Osborne that the last recession was not caused by the then Labour government and that a recession post Brexit would be a Tory recession.
However, the Treasury report worryingly suggests that the chancellor would respond to a possible recession as a result of Tory Brexit by doing nothing. Something UK households simply cannot afford.
McDonnell’s line about Cameron admitting Labour did not cause the last recession is an inference from what Cameron said about a Brexit recession being the country’s first “DIY recession”. (See 11.16am.)
Two Conservative former chancellors, Lord Lawson and Lord Lamont, had dismissed the Treasury Brexit forecasts.
This is from Lord Lawson.
The Treasury has enough trouble with forecasts even when they are trying to get them right. This time they have simply assumed a disaster in order to scare the pants off the British people.
And this is from Lord Lamont.
A lot of the government’s so-called forecast depends on business confidence, which the government is doing its best to undermine. Economists are no better than anyone else in predicting shifts in confidence.
The link between house prices and the economy is extremely difficult to forecast. The chancellor claims that house prices will fall by 10% by 2018 if the UK votes to leave, but the independent OBR forecasts that by 2018 house prices will be 10% higher than now - so the chancellor is claiming that a vote to leave the EU would mean stable house prices.
The Single Market is not some secret garden to which members have some hidden key. Statistics show conclusively that many non-EU members export just as successfully to the EU as EU members do.
We have nothing to fear but fear itself - which the government is doing its best to stir up.
Boris Johnson has chastised a student in York for bringing eggs to target him as his Brexit roadshow arrived in the Viking city. Sam Grigg, a 22-year-old York university student from Swansea, appeared to chicken out of throwing the eggs, cracking under pressure after being caught slipping one into the pocket of a Vote Leave campaigner.
Grigg had heckled Johnson, after he claimed that immigration had a catastrophic effect on hospital waiting lists and GP’s surgeries, shouting: “Fund the NHS properly then, you scum.” He had earlier being shouting that Johnson represented “everything that’s wrong with politics in this country.”
Johnson responded by saying: “There’s a young man here who had eggs he was going to throw at me, can you believe it? There are people hungry in this country, my friend. Don’t waste those eggs.”
In a brief speech in front of Marks & Spencer, Johnson said the establishment was producing the most propaganda since 1992 “when they said that we couldn’t leave the European exchange rate mechanism”.
He praised Steve Hilton’s article in today’s Daily Mail, saying he was “one of the most important advisors in Downing Street” who had “given the game away” in his “brilliant article”.
Johnson corrected a claim he made the other day that there was an EU directive on bananas. “The Leave campaign got very angry and said I was wrong. And I was wrong. There isn’t one directive, there are four directives on bananas, including on the curvature of bananas.”
Even Rupert Harrison, who was George Osborne’s chief of staff until the 2015 election, seems to think the Treasury is not being very subtle about its message today.
Hmm. Not quite getting what message the Treasury website is trying to communicate today... pic.twitter.com/wMQsJ4rf78
— Rupert Harrison (@rbrharrison) May 23, 2016
Sky’s Ed Conway has written a very good quick analysis of the Treasury Brexit report. He says, when you look at the details, the figures are not quite as scary as George Osborne implies.
When the Treasury says growth will be “hit” by 3.6% over two years, that means a relative fall compared with how things would otherwise have been.
In practice, this means a very mild recession, with the economy contracting by 0.1% for four quarters in a row, compared to the current official forecast for 0.5% growth in the first two quarters and then 0.6% growth in the third.
When the Treasury says house prices might be “hit” by 10% over two years, this has to be compared with an OBR forecast for house price growth of 10% over that period.
In other words, house prices would simply be flat. Similar thing for earnings: that “hit” cited in the document would really just mean earnings would be flat.
In other words, delve into the small print of the Treasury document and it’s actually far less terrifying than you might have thought.
He also says some of the assumptions in the report at a bit “fishy”.
The Treasury has simply chosen to ignore what many see as the most likely outcome: that Britain leaves the EU and remains in the European Economic Area (the EEA, or single market), a little like Norway.
This is odd given that in its long-term impact analysis last month it mapped out the consequences of three paths: the EEA option, the bilateral agreement option (a bit like Canada) and simply following World Trade Organisation rules.
This time around, the “shock” and “severe shock” scenarios correlate directly with the Canada and WTO paths, but that EEA option is ignored.
According to Treasury insiders, this is because many in the Leave camp have implied that in the event of departure they would also leave the single market.
For a great economic institution like the Treasury, this is oddly inconsistent, and leaves one wondering whether the short-term impact of leaving the EU and becoming a bit like Norway might actually have been very small indeed.
As the Times’s Michael Savage reports, Boris Johnson used his short speech to reassert his opposition to EU banana regulations.
Boris doubles down on the banana row - says there are four EU directives governing bananas, including curvature. #bananaman
— Michael Savage (@michaelsavage) May 23, 2016
Last week, after Johnson said the EU was stopping people sell bananas in bunches of more than two or three, I pointed out that he was talking nonsense. Vote Leave got in touch to send me a link to the EU regulations that do cover bananas. To be fair, they do cover bunch size, although they say the opposite of what Johnson was claiming.
.@AndrewSparrow Check out the facts - the EU literally sets out how many bananas shops can 'present' in a bunch https://t.co/jGU66rOJPl
— Vote Leave Media (@Vote_LeaveMedia) May 17, 2016
Boris Johnson says Treasury 'propaganda' is wrong
Here is Boris Johnson on the Treasury document.
They are putting out more propaganda than we have seen at any time since 1992, when they said that we couldn’t leave the European exchange rate mechanism (ERM). They said it would be a disaster. They said that interest rates would go up. They said there would be an economic catastrophe for this country if we left the exchange rate mechanism. And what happened? It was a liberation for this economy. We did better than ever before. They were wrong then, my friends, and they are wrong now.
Boris Johnson's speech
Boris Johnson is speaking in York.
He says the Treasury document is “propaganda”.
The Treasury said in 1992 that leaving the ERM would be a disaster. But it was not, he says.
They were wrong then, and they are wrong now.
He says Steve Hilton, the former Number 10 adviser, has given the game away in his brilliant article today. (See 9.35am.)
He says he said the other day there was an EU directive on bananas. They said he was wrong, he says. And he was wrong. There is not just one directive. There are four, including one about the curvature of bananas.
He urges people to vote Leave, and show we can stand on our own two feet.
Let’s fight against the great, glutinous army that is the establishment, he says.
He ends by saying he was told someone wanted to throw an egg at him. Don’t throw it, he tells the man. There are people hungry in this county, and the egg should not go to waste, he says.
Boris Johnson is shortly due to give a Vote Leave speech in York. As usual, he is running late.
This is from the Spectator’s Isabel Hardman.
Overheard at York station: "he looks like a womble, doesn't he, that Mayor of London." Boris due in York shortly.
— Isabel Hardman (@IsabelHardman) May 23, 2016
And this is from Vote Leave’s Matthew Elliott.
In York with @BorisJohnson for a speech, business visit and rally. The bus looks great! @vote_leave #TakeControl pic.twitter.com/xxRugZkxPz
— Matthew Elliott (@matthew_elliott) May 23, 2016
Sajid Javid denies backing Brexit in private
Iain Duncan Smith was wrong to claim that Sajid Javid used to say in private that he was strongly in favour of leaving the EU (see 9.52am), a source close to the business secretary has told the BBC.
Source lose to Sajid Javid denies telling IDS he backs Brexit
— norman smith (@BBCNormanS) May 23, 2016
"This is simply not true. Sajid has said no such thing either in private or public." source close to Sajid Javid
— norman smith (@BBCNormanS) May 23, 2016
Treasury Brexit forecasts - Reaction from Economists for Britain
And here is some Twitter commentary on the Treasury report from Andrew Lilco, chair of the pro-Brexit Economists for Britain.
1) The "shock" scenario assumes the central case of the Treasury's long-term impact assessment. If that's rubbish (HINT:yes) this overstates
— Andrew Lilico (@andrew_lilico) May 23, 2016
2) The "recession" claim consists of 4 qrtrs of -0.1% growth. If that went -0.2%, 0, -0.2%, 0 instead, there'd be no recession. Tenuous.
— Andrew Lilico (@andrew_lilico) May 23, 2016
3) I think there'd be 2-3% loss in short-term. OECD said 3% with overly pessimistic assumptions. HMT's 3.6% is a bit high but not riduculous
— Andrew Lilico (@andrew_lilico) May 23, 2016
4) Treasury assumes shocks wld begin in 2016Q3. There cld be some impact then, but I'd guess most wld be the yr before & after a 2020 Brexit
— Andrew Lilico (@andrew_lilico) May 23, 2016
5) The UK economy is about due a slowdown or recession anyway, from the natural economic cycle. Some of this is surely Brexit as a scapegoat
— Andrew Lilico (@andrew_lilico) May 23, 2016
6) Treasury analysis attributes much of recent slowdown & £ drop to Brexit. But global slowdown & UK exposure via global trade matters more
— Andrew Lilico (@andrew_lilico) May 23, 2016
7) Treasury doc says an instant triggering of Article 50 post-referendum wld be a driver of uncertainty. In which case, don't do that?
— Andrew Lilico (@andrew_lilico) May 23, 2016
10) Interestingly, the HMT analysis assumes that fiscal policy wld relax to accommodate the shock, but monetary policy wld be unaffected.
— Andrew Lilico (@andrew_lilico) May 23, 2016
Treasury Brexit forecasts - Reaction from commentators
Here is some snap reaction to the Treasury report from journalists and commentators.
From the BBC’s Kamal Ahmed
PM and George Osborne have dropped "coulds" and "maybes". "This is what happens." Reminder - this is a forecast. #EUref
— Kamal Ahmed (@bbckamal) May 23, 2016
From Jonathan Portes, a former government economist
Yes. HMT document is sensible about uncertainties - what PM & Chancellor say publicly isn't. https://t.co/tQXtthQDNg
— Jonathan Portes (@jdportes) May 23, 2016
From Sarah O’Connor, the Financial Times’s employment correspondent
Treasury's Brexit predictions assume BoE doesn't cut rates even as UK falls into recession & unemployment rises ... pic.twitter.com/SxfuedUoNT
— Sarah O'Connor (@sarahoconnor_) May 23, 2016
From Alberto Nardelli, BuzzFeed’s Europe editor
It is also slightly misleading, as @George_Osborne himself has admitted there is a @bankofengland contingency plan for immediate term
— Alberto Nardelli (@AlbertoNardelli) May 23, 2016
From Sky’s Faisal Islam
major coup for the Treasury to get Professor Bean to sign up to what seem like quite toppish estimates of Brexit unemployment at 500-820k
— Faisal Islam (@faisalislam) May 23, 2016
Updated
Here is Arron Banks, the co-founder of Leave.EU, on the Treasury document.
Osborne doubled the national debt as chancellor - why should we listen to his economic advice. Shame VL don't attack his credentials.
— Arron Banks (@Arron_banks) May 23, 2016
VL is Vote Leave.
British people would be voting to “self-destruct” if they choose to leave the EU because it would cause either a shock or severe shock to the economy, David Cameron has said.
The prime minister said voting to stay in the EU was the “moral” thing to do because the financial consequences of leaving could be so bad for UK families.
He said it would not make sense to have undergone “pain and sacrifice” after the 2008 financial crisis just to throw the progress away.
“Where is the morality for putting that at risk for some unknown end? It would be like surviving a fall then running straight back to the cliff edge... The self-destruct option,” Cameron said.
The prime minister delivered the warning alongside George Osborne as they released a Treasury analysis forecast a fall in GDP of 3.6% to 6%, a plunge in the value of sterling, lower house prices, a reduction in wages of 2.8% to 4%, more than half a million job losses, more borrowing and higher inflation.
Here are the key quotes from David Cameron’s opening statement.
As the Bank of England has said and the IMF has underlined, and the Treasury has now confirmed, the shock to our economy after leaving Europe would tip the country into recession. This could be, for the first time in history, a recession brought on ourselves. As I stand here in B&Q, it would be a DIY recession ...
After all the pain, all the sacrifice by the British people, why would we want to put it at risk again? It would be like surviving a fall and then running straight back to the cliff-edge. It is the self-destruct option.
Here is the Treasury news release about its report.
Here is the 90-page Treasury report (pdf).
And here is George Osborne’s speech this morning.
Treasury's Brexit forecasts - the 'shock scenario' and 'severe shock' scenario
Here are the key Treasury figures from the report.
Q: You created the Office for Budget Responsibility because Treasury forecasts were not respected. So why did the Treasury do this one?
Cameron says this report stands. Charles Bean has said that it’s findings are reasonable. It “goes with the run of argument”, he says.
Osborne says the OBR is only allowed to model government policies. It cannot model other scenarios.
And that’s it. The Q&A is over.
Q: What would you say about young people having a say?
Cameron says there are only a few days left to register to vote. You can go to the gov.uk website and do it. It only takes three minutes, he says.
Q: [From the BBC’s Kamal Ahmed] Aren’t you just trying to scare people? And can you think of any benefits from leaving the EU?
Cameron says this is not the most pessimistic forecast. It assumes that it would only take two years to negotiate withdrawal, he says. It took Greenland longer.
He says this is an argument for a brighter future. He is making “a hugely optimistic case”, he says. But he makes no apology for spelling out the downsides of leaving.
If you have got privileged access to a market, and you give that up, you will be poorer.
As for the advantages of leaving, he says it is up to those backing leaving to spell those out. So far they have made a dismal case making an economic case for leaving.
They say the UK could negotiate trade deals. But countries around the world make it clear they would rather negotiate with the EU.
He says Leave have also failed to say what regulations they want to abandon.
Q: [From Sky’s Faisal Islam] It is unprecedented to have a chancellor and prime minister talking about sterling like this? Isn’t this a DIY forecast?
Cameron says the Treasury is not saying anything unusual. Its predictions are in line with what the IMF and the Bank of England say. People want to know what the government thinks.
He says originally it was not clear what Leave wanted. But now it is; they want to leave the single market. That has sharpened the economic choice, he says.
Osborne says this report covers the two years after Brexit. It uses standard modelling techniques. Charlie Bean, one of the best economists in the country, was asked to peer review it. He said it was reasonable.
Osborne says the government would be remiss if it did not tell people what it thought.
Q: Is there enough unbiased information available to people?
Yes, says Cameron. We are seeing a big, democratic debate, he says. He says people want to hear not just from the government, but from big organisations.
The more people feel free to say what they think, the better, he says.
Q: Steve Hilton says we should leave an “arrogant” EU. What do you think of his comments?
Cameron says the point about a referendum is that everyone gets a vote.
People want to know the facts. He says the evidence from the Treasury is more important than the views of one person.
Cameron and Osborne's Q&A
Q: [From ITV Meridian] If the threat is so bad, wasn’t holding the referendum one of the most irresponsible things a government has ever done? Or don’t you believe this?
Cameron says he is holding a referendum because he made a promise. People of this generation have not had the chance to have a say. But he wants people to know what the government’s view is.
Some people say there would be a hit to the economy from leaving, but it would be worth it, he says. Nigel Farage has said that many time. But Cameron says he does not agree.
Osborne is now summing up.
We’ve spent six years dealing with what happens when recession hits this country – we’ve got one month to make sure we don’t do it to ourselves all over again.
One month to avoid a DIY recession.
The Treasury analysis shows Britain will be stronger, safer and better off if we vote to remain in the EU on 23 June.
Osborne says ordinary people would suffer from Brexit, not the Vote Leave leaders.
And to those fellow politicians who say we should vote to leave I’d say this: you might think the economic shock is a price worth paying.
But it’s not your wages that will be hit, it’s not your livelihoods that will go, it’s not you who’ll struggle to pay the bills.
It’s the working people of Britain who will pay the price if we leave the EU.
Osborne says the report says the deficit would be higher, and borrowing would go up, if Britain left the EU.
Osborne is now talking about jobs. Within two years, at least 500,000 jobs would be lost, he says.
That’s 80,000 jobs in the Midlands.
Over 100,000 jobs across the North.
Over 40,000 in Scotland; over 20,000 in Wales; almost 15,000 in Northern Ireland.
In London over 70,000 jobs would be lost.
Here across the South, almost 120,000 jobs would go.
And that’s the lower end of the estimates – across Britain as many as 820,000 jobs could be lost.
As always, it would be young people leaving school and college, and those already in insecure work who would be hit hardest.
Osborne is now running through the figures in the report. (See 10.18am.)
Osborne says the Treasury asked Professor Charles Bean, a former deputy governor of the Bank of England, to review its conclusions. Bean said they were reasonable, he says.
George Osborne, the chancellor, is speaking now.
He says Brexit would generate uncertainty, which which halt business investment.
Individuals would also put off spending. That would cause real damage to the economy, he says.
Cameron says leaving the EU would be 'the self-destruct option'
Cameron says the UK has a “special status” in the EU. Leaving that would be a leap in the dark.
He says today’s report shows the short-term impact of leaving.
As the Bank of England and the IMF have said, the shock to the economy would tip the country into recession. For the first time, it would be a home-made recession, or a DIY recession.
Someone asked recently about the moral case for the EU. But the economic case is the moral case. Where is the morality in causing a recession, he asks.
Cameron says leaving the EU would be like surviving a fall and running straight back to the cliff edge. It would be “the self-destruction option”, he says.
- Cameron says leaving the EU would be “the self-destruct option”.
Cameron and Osborne launch Treasury report
David Cameron and George Osborne are publishing the Treasury report.
Camerons says Britain has worked hard to recover from the recession. He does not want to do anything that would put us on the wrong track. Avoiding the wrong track is the job description for the prime minister, he says. But leaving the EU would be a big mistake.
And my colleague John Crace has found the calculation in the document that he says prove the Treasury predictions must be right.
This is the killer stat in today's Treasury document that will settle the referendum #EUref pic.twitter.com/nv0trmIDr3
— John Crace (@JohnJCrace) May 23, 2016
This is from the Telegraph’s Christopher Hope.
Is this scaremongering? David Cameron and George Osborne publish report saying 1,123 jobs to go every day in the two years after Brexit.
— Christopher Hope (@christopherhope) May 23, 2016
And here is more about the “severe shock scenario”.
Breaking: Treasury document says under "severe shock scenario" of Brexit 820,000 jobs could be lost and real wages could fall by 4%
— Kamal Ahmed (@bbckamal) May 23, 2016
Treasury warns unemployment cld rise by 820k over 2yrs, wages wld be hit by 4%, house prices by 18% if UK leaves EU, in short-term analysis
— Ed Conway (@EdConwaySky) May 23, 2016
HMT's Brexit table doom is out: by June 2018, 820k jobs lost, wages down 4%, Pound down 15%, Govt borrowing up £39bn pic.twitter.com/PRZueKDtsQ
— Tom Newton Dunn (@tnewtondunn) May 23, 2016
Here is the key table from the report, setting out two forecasts for the short-term impact of Brexit: a “shock scenario”, and a “severe shock scenario”>
This is all you need to know from Cameron and Osborne's latest apocalyptic warnings about Brexit #severeshock pic.twitter.com/GsH9CiEP0O
— Matt Chorley (@MattChorley) May 23, 2016
Journalists at the event have been handed the report. This is from Sky’s Faisal Islam.
Here it is: pic.twitter.com/tM5PlMqsBK
— Faisal Islam (@faisalislam) May 23, 2016
George Osborne is publishing the Treasury report into the short-term impact of Brexit at an event at the B&Q HQ with David Cameron. This is from the BBCs Mark Broad.
Staff at B&Q head office eagerly await the PM and Chancellor. 'DIY recession' - get it? pic.twitter.com/hxUk1PiZqi
— Mark Broad (@markabroad) May 23, 2016
Ruth Davidson announces her engagement
Ruth Davidson, the Scottish Conservative leader, has got engaged to her long-term partner, Jen Wilson. She popped the question during a trip to Paris and, unsurprisingly (Davidson is very adept at social media), she announced it to the world on Twitter.
So, I've been away for a few days as I had an important question to ask. Delighted Jen said yes. Very happy. X pic.twitter.com/IND22nVRa5
— Ruth Davidson (@RuthDavidsonMSP) May 23, 2016
Kezia Dugdale, the Labour leader in Scotland, who like Davidson is also gay, has offered her congratulations.
Massive congratulations to you both from Louise and I ! 👭🎉🍾 https://t.co/XZATv9cy0C
— Kezia Dugdale (@kezdugdale) May 23, 2016
As has George Osborne, the chancellor, and Nicola Sturgeon, Scotland’s first minister.
Javid used to say in private he was strongly in favour of Brexit, says Duncan Smith
Here is the exchange from the Today programme when Iain Duncan Smith said that Sajid Javid, the business secretary, used to be privately strongly in favour of leaving the EU. After David Cameron’s EU renegotiation Javid said he was in favour of remaining, and he was on the Today programme earlier defending the Treasury assessment that Brexit would trigger a recession. Duncan Smith suggested Javid was betraying his private beliefs.
Duncan Smith was being interviewed by Nick Robinson.
IDS: On this programme today Sarah [Montague] got an incredible admission from Sajid Javid, who I’m deeply disappointed in, by the way, having privately said how much he wanted the UK to leave the European Union, he is now on defending this terrible report.
NR: Let me just be clear about that, he said to you ...
IDS: He has.
NR: In your hearing?
IDS: Absolutely.
NR: That he wanted out?
IDS: He has, yup.
NR: So, he’s lying in public?
IDS: Well, he’s written it in an article.
NR: He said he wasn’t sure.
IDS: That’s not the admission ...
When he referred to Javid saying publicly in the past that he favoured Brexit, Duncan Smith may have been thinking of this interview with the Daily Mail, in which Javid said he was “not afraid” of leaving the EU because it would “open up opportunities”. At that stage he was culture secretary, not business secretary.
Updated
I’ve already quoted the claim from Steve Hilton, David Cameron’s former head of strategy, that being in the UK “makes Britain literally ungovernable”. Here are some other lines from Hilton’s Daily Mail article.
- Hilton says that the claim that Britain needs to be in the EU to ensure national security is “frankly astonishing”.
Then we’re told that the EU is vital for our security. Really? I was pretty amazed when I first heard this point being made. The idea that a British Prime Minister can’t protect Britain properly without the EU is frankly astonishing and, if true, rather alarming.
But, of course, it’s not true. Yes, in a complex world of global threats, we need security co-operation with other countries — like what happens in NATO. Forgive me if I’ve missed something, but I wasn’t aware that this referendum is about leaving NATO.
- He says the EU’s response to Cameron’s renegotiation demands was “arrogant and dismissive”.
- He says, if Britain votes to stay in the EU, the problems with the organisation will get worse.
And so one way of thinking about this referendum is that the choice is actually not between staying and leaving — but between leaving, and joining a new EU.
Because the EU after a British vote to stay would be a very different creature from the one we have today. It would be the EU unleashed, freed from the constraints of having to placate the pesky British with their endless complaining and threats to leave.
Once they know we will never leave, all our leverage will be gone. Look how they treated a British Prime Minister armed with the threat of Brexit. Can you imagine how they would treat a future PM without such a powerful card to play?
- He says the EU epitomises everything that is wrong with bureaucracies.
[In my book More Human] I set out my view that the systems and structures we have designed to run the modern world have become too big, bureaucratic and distant from the human scale. And I make the case for what is in many ways a classical liberal reform agenda: I am pro-market, pro-enterprise, pro-trade, pro-putting power in people’s hands.
The EU does the opposite. It is anti-market, stifling innovation and competition with its statism, corporatism and bureaucracy.
- He says Britain would not need a relationship with the EU like Norway’s or Switzerland’s if it left because it is much bigger.
People ask: what about the economy, and access to Europe’s Single Market? Would we end up like Norway? Or Switzerland?
No. We’re bigger than that; better than that. Our independent relationship with the EU would be like that of our peers — the U.S. is not a member of the EU, but the last time I checked, General Motors had no problem selling cars there. Or Heinz, ketchup. Or Starbucks, coffee.
The EU referendum takes place a month today and campaigning is in full swing. Here are the key developments this morning.
- George Osborne, the chancellor, is due to publish the Treasury’s report saying leaving the EU would trigger a recession within the next hour or so. Here is the Guardian’s preview story.
[The system has] become so complicated, so secretive, so impenetrable that it’s way beyond the ability of any British government to make it work to our advantage — even though I have no doubt that things have improved since the Coalition Government’s early days.
In this debate on the EU referendum, it’s easy to throw around terms like ‘sovereignty’ and ‘democracy’; ‘freedom’ and ‘bureaucracy’. But in the end, we’re debating not some abstract concept, but a very specific question about how our country should be run.
And my view, based on a pragmatic, non-ideological assessment of how the EU operates, is that as long as we are members, our country cannot be ‘run’. Membership of the EU makes Britain literally un-governable, in the sense that no administration elected by the people can govern the country.
A democracy is based on the notion that the people — or their directly-elected representatives — are able to decide issues for themselves. And yet membership of the EU brings with it constraints on everything from employment law to family policy, all determined through distant, centralised processes we hardly understand, let alone control.
You may say: Well, that’s government for you — it always involves compromise. Indeed it does, but at least in a democracy, the compromises are clear and transparent and can be argued over and influenced by the people who are affected by them. Yet no such possibility exists in the grotesquely unaccountable EU.
- Iain Duncan Smith, the former work and pensions secretary, has told the Today programme that today’s Treasury report is “unfair and biased” because it does not include potential advantages to leaving the EU. In the interview he also claimed Sajid Javid, the business secretary, used to favour leaving the EU. And he sought to explain what Penny Mordaunt, the pro-Brexit defence minister, meant when she said wrongly yesterday that the UK would not have a veto on Turkey joining the EU. She meant the British public would not get to vote on this in a referendum, Duncan Smith said. I will post more from this interview soon.
Here is the agenda for the day.
Around 10am: George Osborne, the chancellor, publishes the Treasury report saying leaving the EU would trigger a recession.
11am: Nigel Farage, the Ukip leader, campaigns for Brexit in Dagenham.
11am: Steven Woolfe, Ukip’s finance spokesman, gives a speech on why leaving the EU would benefit at a Grassroots Out event. John Redwood, the Conservative former cabinet minister, is also speaking.
11am: Shirley Williams, the former Lib Dem leader in the Lords, gives a speech on the case for the EU.
Late morning: Boris Johnson campaigns for Vote Leave in York.
1pm: Lord Hall, director general of the BBC, gives evidence to the Commons public accounts committee.
2pm: Nicola Sturgeon, Scotland’s first minister, Caroline Lucas, the Green MP, and Leanne Wood, the Plaid Cyrmu leader, hold a joint pro-EU photocall.
I will be focusing in particular on the publication of the Treasury report but, 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 @AndrewSparrow.
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