Oral evidence: The economic and financial costs and benefits of UK membership of the EU, HC 499Wednesday 27 April 2016
Oral evidence, 27 April 2016.
Witnesses
Arron Banks, Co‑Founder, Leave.EU, and Richard Tice, Co‑Founder, Leave.EU, gave evidence.
Chair
Thank you very much for coming to give evidence to us this afternoon. It is a particular thanks. I perhaps should explain for those who are not fully familiar with the arrangements that we attempted to put in place prior to this hearing. We had originally intended to see both the Leave groups together on 25 February, but it has been a struggle persuading everybody to attend, to put it mildly, and in particular one group has a deep reluctance to attend with the other groups. I am pleased to say the witnesses we have here today have never expressed any unwillingness to attend the Committee nor sought to attach conditions to their attendance. I am grateful to you for accommodating the changes in the arrangements for this hearing and the postponements, and I am looking forward to hearing the evidence this afternoon, as are colleagues. There is not much value in spending a great deal of the hearing on what appears to have been the acrimonious history between the two principal campaign groups for leaving, but we need a bit of clarification on a number of the allegations that you in particular, Mr Banks, have made about Vote Leave. Perhaps I should read a few of those out and then ask you to comment on them. You said that their submission to the Electoral Commission was, I quote, “full of lies and misrepresentations”. You said Vote Leave are lying and misrepresenting the situation; that “these people are jokes”; that “he” in particular—that is Matthew Elliott—“wants to be Lord Elliott of Loserville”; and that “he”—Dominic Cummings—“has become a liability and a danger to both Leave campaigns.”
Arron Banks
You saw his evidence last week, didn’t you? You do not need to ask that question.
Chair
To put it mildly, most of those—I will not comment on the comment you have just made—require a bit of substantiation, and I would be grateful if you provide it now.
Arron Banks
Which one would you like me to start with?
Chair
You go ahead with whatever you like.
Arron Banks
In terms of the Electoral Commission—
Chair
Could you speak up? I am sorry.
Arron Banks
Yes, sorry. Do I need to lean forward?
Chair
That is fine.
Arron Banks
In terms of the Electoral Commission, our view of life was always that the Vote Leave bid was the establishment bid, if you like. When we looked at the bid we put forward, which had the full backing of UKIP, Leave.EU had something like nearly 1 million public supporters signed up into it. It had all sorts of different groups represented—a very large range of opinion in the Eurosceptic world. Vote Leave was a Tory campaign with a few little additions to it, so it did not really represent the wider Eurosceptic view. That is how we saw it.
Chair
Okay, but that does not take us to “full of lies and misrepresentations”.
Arron Banks
Their submission had things like—
Chair
What were the lies?
Arron Banks
As a good example, we funded Brexit the Movie, which we put nearly £45,000 into. They quoted it in their submission. They had one conversation where they basically said, “If Mr Farage or UKIP are even involved in the project, we will not be involved in it.” That was put in their submission as a fact that they had helped to commission Brexit the Movie and do those sorts of things, while we had pretty well funded 50% of it. That is one example. I can give you lots of different examples.
Chair
Rather than delay the Committee now, it might be helpful if you could set those out in writing and provide them to the Committee—
Arron Banks
Absolutely. No problem at all.
Chair
—with any substantiating documentary evidence.
Arron Banks
For instance, we do not necessarily agree with Richard North, but he violently objected to the Vote Leave position, and it was quoted in the document that they had communicated with him and worked with him. We know that not to be the case.
Chair
I have not quoted all the points I have in front of me by any means, so I will supply one more. You have said of the Electoral Commission’s decision, I quote, “We have decided to show the public how this process was stitched up.” That seems to be an allegation not about lies or misrepresentation by Vote Leave but about the conduct of the Electoral Commission. We would be grateful if you could substantiate that.
Arron Banks
We contemplated a judicial review based on a number of facts, one of which was there are eight commissioners on the Electoral Commission, three of whom excused themselves because they were conflicted. We do not know the reasons why they were conflicted. One of the commissioners voted on the decision that had a conflict relating to Vote Leave, but because they did not have enough commissioners to form a quorum, they allowed someone to vote who was conflicted. In the business world, that would be out of the question and pretty reprehensible.
Chair
We may decide to take, subject to parliamentary privilege, evidence on that point as well. You are making a very serious allegation about the Electoral Commission, whose task is to ensure the highest standards in our elections. I have their documentation in front of me here.
Arron Banks
Can I make a second point?
Chair
Yes, of course.
Arron Banks
The second point was that a couple of the prominent Vote Leave supporters communicated via the internet that they had won the designation two days before the Commission were due to announce the result. I think one of the very senior members tweeted out, “Congratulations Vote Leave. You have won the designation.”
Chair
Sorry, a very senior member of—
Arron Banks
Of Vote Leave.
Chair
So, not a senior member of the Electoral Commission.
Arron Banks
No, no—of the Vote Leave campaign. We then wrote to the Electoral Commission by email and said, “What the hell is going on? You are meant to be announcing this on Thursday.” They then brought forward their decision by a day because they realised that the news was out there. It was clear that the Electoral Commission had either communicated the result prematurely to Vote Leave or otherwise. It does not give one much confidence when you have a date when you announce it and then the news is out two days beforehand. Call it a stitch up—call it what you like—but, in my book, if there is a process, you stick to it.
Chair
There does seem to have been an extraordinary fratricidal war or tension here between these two groups, bearing in mind you agree on so much.
Arron Banks
We agree on quite a lot. There are some things we do not agree on, but if you look at the competition, I would say it is a good Thatcherite principle—sorry to the Labour members of this Committee—that competition is good. We raised nearly £9 million for the campaign. We wrote to over 10 million people individually. We sent out leaflets to a balance of another 11 million. When you talk about the Government’s In leaflet, our campaign has nearly communicated with the whole country. We raised £9 million. The competition has spurred both sides on. That does not leave aside the feeling that it was an establishment group that felt entitled to run the race and had just became a Tory party cartel, effectively, with a couple of add‑on players.
Chair
Correct me if I am wrong, but you are saying that your group was unable to form an alliance and a unified group to make the bid. Is that right?
Arron Banks
We wrote five times to Vote Leave to suggest we should come together and it was benefitting nobody to have this continuing row. There are strong personalities involved in it, but I believe that particularly Mr Elliott and Mr Cummings believed it was their God-given right to run this campaign and no‑one else could be involved. If you take Vote Leave back to its roots, it was formed out of Business for Britain, and the original concept was this was a group that was going to be led by businessmen. Now it is led by politicians, mainly Conservative politicians, as I say, who are trying to marginalise other people in the Eurosceptic world, particularly UKIP and others. You can understand that we are slightly aggrieved at the process.
Chair
Yes, although right at the heart of it is this allegation of a stitch‑up by the Electoral Commission, and it is extremely important that you supply us with everything that is based on.
Arron Banks
I am very happy to do so. The two points that lead to a stitch‑up are announcing to the other side two days before the—
Chair
You have made two points to us today.
Arron Banks
We are happy to substantiate it.
Chair
I do not want to persist with this in any great detail now. As I said at the beginning, we do not want a half-hour hearing on this point.
Arron Banks
You have asked the question. In the document, for instance, they quoted the support of Labour Leave, who had specifically written to the Electoral Commission saying that they were not involved with Vote Leave anymore because of their practices. They did not like them. We have a whole list of people that were quoted in the document that were not happy or willing to be involved.
Chair
That is very helpful clarification, but in any case we are getting something in writing, and on that basis we may or may not decide to take this further in one way or another. I would like to turn to a number of the statements you have been making about the cost of membership. I would like to turn, first of all, to the cost in terms of contributions to the EU budget—Exchequer cost. I notice that your website contains various figures for the amount that the UK would save. You have a figure for £12 billion, and you have two very close figures of a little over £14 billion on your website. Which of those is the correct figure?
Arron Banks
For which year?
Chair
It is not marked on your website, which is why we are asking you.
Arron Banks
For clarification, the £12 billion is an estimate of the current year, and if you go back to the previous year, it was £8.5 billion and then £9.8 billion. I cannot really dispute the Vote Leave—
Chair
We will come on to that in just a moment. You have also provided a figure of £14 billion.
Arron Banks
I would have to see the individual thing. I am not au fait with everything we put up.
Chair
It is on your website.
Arron Banks
It may well be. I do not read every single line of the website. I am not trying to obscure it; I just do not know the answer to the question.
Chair
It is important that somebody in your organisation should be checking extremely carefully numbers as important as this—
Arron Banks
We have a research department.
Chair
—and making sure they are correct and making sure they are sourced well enough. As you have just pointed out, you yourself have been asking me questions that I might have asked you, such as: which year do these numbers pertain to?
Arron Banks
It is a good point. I am not going to deny that.
Chair
In the interest of trying to get clarity in this campaign, so we can all work off the same figures, it would be extremely helpful if your organisation documented carefully in future all these numbers so that everybody can trace exactly what they refer to.
Arron Banks
We have a research department. Per se the number will not be wrong, but I do agree with you that the clarity over which year it pertains to is quite important. If you look at the breakdown for 2014, you start with a gross number of £19 billion.
Chair
We do not need to go through it in detail now, but I know the points you are going to make, which are it depends what you want to strip out.
Arron Banks
I thought you were all about detail.
Chair
Again, only in the interests of time, it would be helpful were you to supply that in writing to us, and I note the undertaking you have given this afternoon that you are going to desist from putting figures out without having made sure that they are very accurately sourced. Make sure that existing figures on your website are correctly sourced. Mr Tice, you wanted to add something.
Richard Tice
I did. One of the challenges with the figures is that they do ebb and flow a bit, and indeed the ONS figures differ from the HM Treasury figures for the net contributions by a matter of over £1 billion in 2014. It is a bit of a moving feast, and then there is how they treated things like the extra money that we had to send over.
Chair
Merely using a consistent figure and sourcing it will already take this a way down the road of everyone knowing what we are talking about.
Richard Tice
Clearly. Absolutely right. I accept that.
Chair
You, Mr Banks, a moment ago wanted to compare this to Vote Leave’s estimate of £19 billion. What did you want to say there?
Arron Banks
It is just disingenuous, and it does not help either side, In or Out, to have numbers that are clearly—
Chair
Why is it disingenuous?
Arron Banks
In a sense you have the £19 billion but, off the top of my head, £4 billion to £5 billion never leaves the UK. To quote a figure that is technically correct but is not—
Chair
That is the point that we made in an earlier hearing. It is the same. We can move on from that, but it is helpful clarification.
Chris Philp
Just to continue briefly on this point about the budget contributions. Does the figure of £14 billion, roughly speaking, that you are quoting include or exclude payments made by the European Union back to UK businesses and, for example, farmers?
Arron Banks
I will revert back to what I said: it depends on the year you are talking about, but no; that is the gross contribution.
Chris Philp
When you say there will be a saving to the UK Treasury of approximately £12 billion or £14 billion, you are assuming that all of those payments currently being made, for example to farmers, just stop.
Arron Banks
No.
Chris Philp
Then how is it a saving?
Arron Banks
That is up to the Treasury to decide how to deploy the funds it now has, isn’t it?
Chris Philp
For the £14 billion to be realised as a saving to the UK Exchequer, those current payments to, for example, UK farmers, which add up to some approximately £4 billion to £5 billion, would have to just cease, wouldn’t they? If they continued, the saving would not be £14 billion.
Arron Banks
But—
Chris Philp
Hang on—I have not finished the question. If those payments continued, the saving would not be circa £14 billion; it would be circa £8 billion.
Arron Banks
That is correct.
Chris Philp
For your £14 billion to be accurate, you are having to assume that all of those payments currently made by the EU in science research grants and farm subsidies would cease?
Arron Banks
It is up to the Treasury to deploy the cash it has available into the areas it wants to, isn’t it?
Chair
You are saying they are not going to deploy it at all.
Richard Tice
No, not at all.
Chris Philp
Implicitly you are.
Chair
Even explicitly that is what you are saying.
Richard Tice
No, that is not right. You are putting words into our mouth. That is not what we are saying. The £14 billion figure net of the rebate is the gross saving to the country, and then the Government of the day can choose how to deploy it. It is a perfectly legitimate statement.
Chair
Provided that you explain clearly in your rubric that is what the figure means, I suppose that might be correct. Sorry.
Chris Philp
Clearly for your £14 billion figure to be correct—for that to be a saving to the Exchequer—you must be assuming all of those payments cease, otherwise the figure is not £14 billion.
Richard Tice
I repeat what I just said: you are putting words into our mouths.
Chris Philp
I am not. The £14 billion is your figure.
Richard Tice
No, it is then what you do with it. The £14 billion is then open to the Government of the day to invest and spend as it sees fit. That is a completely different thing from what you are suggesting.
Chris Philp
As an elector, as a member of British society, would you wish to see the payments to, for example, farmers and to fund science work continue or discontinue?
Richard Tice
Not only continue, but they could indeed increase, because we would be able to make those payments more directly without the huge bureaucracy and unnecessary cost and waste that goes on in the European Union. People could benefit by more rather than less.
Chris Philp
Then were we to withdraw and were those payments to continue, as you are saying they should, the saving to the Exchequer would not be £14 billion; it would be £7 billion, wouldn’t it?
Arron Banks
That is a slightly nonsensical argument. You could choose to reduce the foreign aid budget by £5 billion to pay the farmers if you wanted. It is a Treasury decision. To the link the two is irrelevant. It is a saving. You decide what to do with that. You are the parliamentarians.
Chris Philp
You say you would do what is currently being done with it.
Arron Banks
First of all, farming was not invented in 1975. It was there beforehand.
Chris Philp
No, but the subsidies were invented in 1975.
Arron Banks
Parliament chooses to subsidise certain industries. The steel industry is a good example. You have chosen not to subsidise it. You have chosen to subsidise farming. You have subsidised different things. You work out your own priorities.
Richard Tice
Let’s be clear: we subsidised farming before 1975 and we will continue to subsidise farming after we leave the European Union. The great thing is it is within our gift, it is within our choice and we can spend the money wisely.
Chris Philp
That point is correct. We need to move on, but the fiscal saving to the Exchequer, given what you have said—that you would continue with farm subsidies—would not be £14 billion. It would be £8 billion, albeit that we control that money.
Richard Tice
The implication from what was said is that it is a saving of what we send to Brussels. We can then determine and take control of how we spend it ourselves. That is the point.
Chris Philp
That is a distinction you might wish to draw more clearly when you mention figures like £14 billion.
Chair
That goes back to the point that I made in my initial exchanges with you. I am grateful to you for your commitment that you are now going to sort this out on your website and in your literature. If I may add, just in parenthesis, we did ask you to supply us with all your literature but we have not yet had it.
Richard Tice
That is an interesting point, because I am not aware of any request for any information. I specifically asked if there was any information required and was told there was not.
Chair
We will check that out at our end. It was received by other campaigns. If it was not received by you, we would be grateful if you could respond to it immediately.
Arron Banks
But taking on your point, the membership is only one component part of what we might potentially save from leaving the European Union. For instance, the regulatory burden and various other items do not come into that. You cannot just take one item and say, “Aha.”
Chris Philp
I am glad you mentioned that, because you have alighted on my very next topic. You must possess some kind of psychic powers or maybe somebody sent you our questions—who knows. You mentioned the regulatory costs of membership of the European Union, which is my next question. What would you estimate the regulatory cost to British business of membership of the EU to be?
Arron Banks
It is unknown, but what I do know is if you attempt to harmonise all products and services across the EU and legislate for that, it will be a very large number.
Chris Philp
It is not unknown according to your website.
Arron Banks
Let me finish.
Chris Philp
Hang on.
Arron Banks
Am I going to finish?
Chris Philp
Go on then.
Arron Banks
For instance, we export to the United States of America. We have to follow their rules. We have to follow the guidelines they lay down. It is the same with Japan. With European regulation, it is an added burden that is put on us, because it affects all businesses, not just the businesses that export into Europe, which is not that many.
Richard Tice
To give you a figure, Open Europe—a think tank that you probably all know—estimates that the cost of the top 100 regulations is of the order of £33 billion a year. Clearly there are many more than 100. Their view was that was the largest 100.
Chris Philp
Yes, indeed. When Mr Banks said a moment ago, “Nobody knows,” your website does purport to know. Your website posts exactly the figure that Mr Tice just mentioned. It quotes Open Europe’s figure of £33 billion. Your website is a little bit less nuanced in its estimation.
Richard Tice
Let’s be clear: that is the top 100 regulations, as I just said. There are clearly thousands of regulations that have an additional cost; there is a tail.
Chris Philp
I understand that. You are basing your public comments on the Open Europe estimate of £33 billion. It is what you quote on your website. It is what you quoted just now. Open Europe themselves—the source of your figure—produced a note very recently, by which I mean in the last few days, and they make clear that they have gone through these 100 regulations and they say that, although the current cost is estimated at £33 billion, many of these costs would continue to apply even if we left. Are you aware of what Open Europe says is the feasible annual saving?
Arron Banks
I am sure that is true, by the way. I am not disputing that. That will be the case. That is why I said the figure is unknown, but it is a number that is positive.
Richard Tice
Again, the great thing is it is within the gift of the Government of the day to strip away unnecessary regulations from the businesses that do not need to suffer the burden.
Arron Banks
This is probably the point: harmonisation of everything across 500 million people by definition needs an empire of bureaucrats and politicians to administer it. The straight cucumber may be apocryphal, but it is right in the sense that you are trying to harmonise and produce a standardised approach to everything. By definition the regulations around that must be onerous.
Chris Philp
I understand the point about where decision-making lies and I understand the point about bureaucracy, but that was not the question I asked. The question I asked was: what did Open Europe say was the feasible annual saving?
Arron Banks
I am sure you are going to tell us.
Chris Philp
I can. Since you are quoting Open Europe, I am asking if you know.
Arron Banks
I do not know.
Chris Philp
You do not know. It is £12.8 billion. Open Europe think that, of the £33 billion cost, only £12.8 billion is a feasible saving, and they estimate that the maximum conceivable saving is £24 billion. Again, I would suggest that, in your public pronouncements and your website, you amend or at the very least clarify that £33 billion, because Open Europe, the source of it, says that figure will not be realised.
Arron Banks
That is still a very big number, by the way.
Chris Philp
That depends on the benefit you think accrues from single market membership, which I am sure we will discuss later. In fact, the estimates of single market membership benefit are materially higher than the numbers we are discussing here. They are at the £30 billion or £40 billion level. Colleagues are going to come on to that later. To take an example illustrating why this £33 billion figure is not realistic, you mention the—
Richard Tice
Sorry, can I just interrupt?
Chris Philp
Yes.
Richard Tice
You said Open Europe have just come up with something in the last few days. I do not know if you have the date there. Clearly we have made representations on the basis of the information that we had at the time. A think tank can change its figures at any point. The real point is there are tens of billions of pounds, and that just represents the top 100 regulations. You should not underestimate there are tens of billions of pounds that can be saved every single year for the 95% of UK businesses that do not export to the EU and probably have no intention of exporting to the EU.
Chris Philp
You are pleading ignorance on this point.
Richard Tice
I am not pleading ignorance at all.
Arron Banks
I am pleading ignorance because I have not read the report, so yes, I am.
Chris Philp
Okay. We have someone pleading ignorance and someone not pleading ignorance. When you have sorted out that divergence of view, you can perhaps amend your website.
Arron Banks
I started off by saying the cost of regulation was unknown. I did not say that.
Chris Philp
You did, but that is not what your website says. Your website says £33 billion, and now I have pointed out what Open Europe now says, perhaps you can amend that.
Richard Tice
That is for the top 100 regulations.
Chris Philp
Yes. To take some examples, one of the regulations that has a cost is the EU’s capital requirements directive, which is counted as a cost in the £33 billion. For example, the UK Government have voluntarily chosen to impose higher capital requirements on banks than is required under EU regulation. Unless the UK Government took a different view in the future, withdrawing from the European Union would make, again, no difference to the burden of capital requirement regulations on UK banks, would it? We are already choosing to go further than Europe require us to.
Arron Banks
You are saying that is a cost of the regulation.
Chris Philp
I am saying it would not be a saving. If we left, it would not be a saving.
Arron Banks
It is not a saving. A bank’s capital is not either a saving or an addition.
Chris Philp
It is counted as a cost in Open Europe’s estimate.
Arron Banks
As someone who owns a bank, I would probably dispute that. That is extra capital you have to put into the bank. It is not the cost of business.
Chris Philp
It is counted as a cost of business in Open Europe’s calculation.
Arron Banks
It is wrong.
Chair
It scored as a cost of business in standard bank accounts.
Arron Banks
I would say it is wrong.
Chair
That is something you might want to take up with the Bank of England and probably the Basel Committee and a good number of other people.
Arron Banks
I have a whole sheet on the Bank of England when we get to that.
Richard Tice
The point is it is back within our control to decide what the level should be.
Arron Banks
The amount of capital a bank holds is not a cost of doing business. It really is not.
Chris Philp
It is a cost according to Open Europe, and you are quoting its figures, so you should take it up with Open Europe as well. Clearly it makes the bank less efficient in terms of a return on equity analysis, but anyway Open Europe says it is; I am going to move on. Open Europe says it is a cost and they are the people you are quoting, so take it up with them. To take another example, when it comes to environmental and climate change regulation, which is the biggest single item in Open Europe’s £33 billion total, again, the UK Government rightly or wrongly—some might say wrongly—have chosen to go beyond what Europe requires. We signed up to this Paris Agreement, which is not an EU agreement. It is a multinational global agreement. Were we to leave the European Union, we are still bound by this Paris accord, so again there would not be any environmental saving because we are still signed up to standards that are higher than Europe’s.
Arron Banks
You put your finger on a very interesting point. A lot of the regulation that is coming now is on a world basis, not on a European basis. In fact, the European Union is a wholly unnecessary middle man in the whole process, because what you are talking about there are regulations for banking made pretty much on an international, global basis and implemented by the European Union or the Bank of England. In fact, the European Union is just a middleman in the implementation of a lot of global rules.
Chris Philp
If that view is correct, and I think it is to a large extent, pulling out of the EU—looking simply at the cost of these regulations rather than the decision-making process and who decides, so laying to one side the sovereignty question—would not deliver these amazing cost savings because we would be signed up to these regulations anyway.
Arron Banks
You are talking about very high-level things: banking, climate change and the like.
Chris Philp
I am not talking about them; you are. It is your figure. It is on your website.
Arron Banks
You are talking to me about them. I am saying these are very high-level things that are discussed on an international basis, but we are talking about regulations imposed on small and medium-sized businesses from Europe. That has nothing to do with any of the stuff you have just mentioned. It really has not. The cost of regulation, as I say, is an unknown quantity. What I do know is it is a positive benefit not to have 100% of these EU regulations imposed on everybody. That is pretty much the nut of it.
Chris Philp
What we have established is that the £33 billion figure that you have quoted on your website has been disowned by its own author, Open Europe, and I look forward to you clarifying that on your website now I have drawn it to your attention. Secondly, a lot of these savings would not be realised because we are signed up to the regulation anyway. I have made that point. You made a separate point about sovereignty and who takes decisions, which no doubt will get explored later, but I have established the point I wanted to, Chairman.
Richard Tice
Can I just clarify that? The £33 billion was a cost, right? What you have referred to is their recent report, which I accept I have not seen, and you refer to what could be saved. There is clearly a difference between a cost and a saving, so we are absolutely clear that we are comparing apples with apples.
Chris Philp
You are implying on your website that the £33 billion cost would be saved in its entirety if we left. They are saying only part of that would be saved.
Richard Tice
We are very happy to check the implication. If the implication is wrong, that is one thing. If we have referred to it as a cost, that is another thing, so we will check that out.
Chair
Just to clarify, you are not alone in using this figure. Boris Johnson has used this figure.
Richard Tice
We are in good company then.
Chair
Vote Leave has been using this figure. It is in response to cross‑examination of those that Open Europe has felt the need to clarify what it has been doing in those hearings. You did make another point, though, Mr Banks, that is significant and may have substance but requires work to substantiate, which is whatever the view may be about these big mega regulations—the top 100—the fact is that the small man out there is being hit by hundreds of little regulations, and those all add up and they carry a cost. It seems to me that, if your campaign wants to have maximum impact, it might consider trying to work out and substantiate a figure in that area, because a gap between the £13 billion and the £33 billion appears to have opened up in Open Europe’s work since we started examining it carefully. Do you feel it should be filled by that calculation? Is that something that you might consider?
Arron Banks
As someone said, it is better to be roughly right than precisely wrong. If Open Europe cannot calculate the numbers, and it spends all day long doing it—
Chair
It is not easy to do, and to be fair to Open Europe, as I pointed out last time, if you look carefully enough, even in its original use of these figures, though perhaps it is not quite as prominent as it might have been, the qualifications are there to be read and to be found.
Arron Banks
For the last 15 years, much maligned Norway has only implemented 8% of EU regulation, so they presumably implement stuff that is higher level and big and choose to discard stuff they do not like.
Chair
Furthermore, a number of people have suggested, including Mr Johnson, that Open Europe was saying that 95% of these benefits to regulation, offsetting this gross cost figure—if everyone is agreed it was a gross cost figure of £33 billion—may not materialise. In fact, as Open Europe has clarified and indeed did clarify in its original document, if you look carefully enough, that was a reference only to the energy and climate change package of regulation. That is substantial but nonetheless a relatively small part of the total figure.
Rachel Reeves
Thank you very much, Mr Banks and Mr Tice, for coming to our Committee this afternoon. The Treasury has estimated that the economic impact of leaving the EU would be £4,300 per household. Mr Banks, you said that this was a “bargain basement” price. Do you think that £4,300 is a price worth paying?
Arron Banks
What I said was that, even if it was correct, it would be a price worth paying to get back our own democracy. In that sense that is correct, but I said “if it is correct”. If you look at what the Treasury report produced, it estimated over five years that growth would be 29% instead of 37%. Any Treasury forecast fails almost at the first hurdle, because you just cannot forecast these kinds of things. It is almost impossible. They then quote the GDP as the household income, further complicating the numbers. The whole spin of it is ridiculous.
Rachel Reeves
What I am interested in getting at, though, Mr Banks, if it is a correct figure, is do you think that would be a price worth paying for leaving the European Union? If it was—if we take that as given—do you think that would be a price worth paying for leaving the European Union?
Arron Banks
The number quoted is the most optimistic Treasury forecast I have ever seen.
Rachel Reeves
Mr Banks—
Arron Banks
I opened up by saying yes.
Rachel Reeves
So, yes, you think that is a price worth paying.
Arron Banks
I could not be more clear than that. This is not about pounds and pence. It is about our democracy.
Rachel Reeves
Let’s go into what it is in terms of pounds and pence. It is 21p an hour, which is about £5 a day, £150 a month. Many of our constituents would regard £150 a month as quite a substantial amount of money—money that they could not afford to be without. You would say to those people that £150 a month is a price worth paying for leaving the European Union.
Arron Banks
This is a 15-year estimate that clearly is wrong before it evens starts.
Rachel Reeves
But, Mr Banks, if this is correct, you believe—and it is a perfectly valid view—that £150 a month is a price worth paying for leaving the European Union. That is right, isn’t it?
Arron Banks
I would say the figure is massively incorrect.
Rachel Reeves
But you would say that was a price worth paying.
Arron Banks
I am trying to answer that. I believe it is massively incorrect, but if it was to be the case, I would still advocate leaving. I cannot be any clearer than that.
Rachel Reeves
Thank you. That is very clear. Thank you very much, Mr Banks. The case for Brexit for you is more about an ideological principle than an economic cost-benefit analysis?
Arron Banks
It is both. If you look at the formation of the economic crisis in Europe, it has broadly been brought about because the euro was introduced as a political experiment rather than an economic experiment. Germany has a currency rate that is 35% too cheap for its economy. The south and the east have it roughly 35% too expensive and the thing is ripping itself to pieces.
Rachel Reeves
I would agree with you on that, Mr Banks. Keeping us out of the euro was one of the best decisions of the last Labour Government, but we are not in the euro. This referendum is not on the euro; it is on our membership of the EU.
Arron Banks
If I could finish what I was going to say, you have an economic situation that can only be resolved one way, and that must be by total integration of the remaining countries and it must be with a massive transfer of surplus from north to south and east. That is the only way it can be resolved. This concept that we can sit on the edge of it and avoid the worst of it is wrong. When the crisis comes, it will invariably suck us in. We paid for the Irish crisis; we paid for the Greek crisis. We will invariably be drawn into this. My supposition is that economically it is a disaster, and I would pay almost any price to be away from it.
Rachel Reeves
One could argue that, even if we were not in the EU, we would be affected by a crisis on our doorstep, but also it is the case that the Prime Minister has got us an opt-out of paying for crises relating to the euro, the single currency. Let’s go back to my point, though, because my question was: even if there is an economic cost for you, Mr Banks, it is the ideological principle, which again is totally valid—I am just trying to get at where you are coming from on this—that is more important than the cost-benefit analysis.
Arron Banks
There is no economic cost of leaving. The basic bottom line is, even if you took the worst-case scenario, which is World Trade Organisation rules and paying the tariff, that is two-thirds of our membership fee. The fact of the matter is that this assessment is based on a load of falsehoods. It assumes that there is a full single market in financial services. The EU trade deal we do is no better than Canada and there are no productivity gains from any of the regulations. If you had to put together a work of fiction, that Treasury report is it.
Rachel Reeves
Let’s look beyond the Treasury report. The IMF, the World Bank, the OECD, the London School of Economics, Oxford Economics and all of the economists in the major investment banks have all given opinions indicating that Brexit could be economically damaging. Why would all of them be making the same argument, Mr Banks?
Arron Banks
As a bank that had no mortgage debt on its books in 2008, we think every single one of those institutions missed what was spectacularly the biggest financial bubble the world has ever seen. They are just wrong. The Treasury recommended ERM and the peg. They destroyed more British industry than the Luftwaffe.
Rachel Reeves
The Treasury also recommended that we do not go into the euro, something that you would have agreed with, Mr Banks.
Richard Tice
Hang on, hang on. In 2003 the Treasury suggested that if we join the euro it would increase our exports trade by 50%. The Treasury’s track record is not good, nor is the IMF’s. The IMF suggested we should join the euro. The IMF also criticised George Osborne and his austerity package, saying that it would lead to massive unemployment four years ago. They have a woeful track record. They are led by a massively Europhile person. Thank heavens George Osborne did not listen to them four or five years ago. You cannot pick and choose. You talk about economists; probably four of our best City economists—Roger Bootle, Ruth Lea, Tim Congdon and the Mayor of London’s economist, Gerard Lyons—all have written papers and recommend Brexit. They are some of the most highly respected economists in the City of London.
Rachel Reeves
Let us look at the most respected economists and institutions. The Governor of the Bank of England has said that Brexit—and said this to our Committee—was the biggest domestic risk to financial stability. Vote Leave thought that this was scaremongering. Do you think that the Governor of the Bank of England is scaremongering?
Richard Tice
I was on Newsnight that night after he spoke, and I made it very clear he was referring to a domestic risk. He also referred in the same hearing to the global risks, which were much bigger, of what is going on in China, what is going on with the commodities crisis and by implication what is going on in America. Businesses have uncertainty and risks every day of the working week. This is just another uncertainty that will be there for a period until we negotiate a new trade agreement. He made it very clear: it is a domestic risk.
Rachel Reeves
Yes, it is a domestic risk. It is the biggest—
Richard Tice
He also said—
Rachel Reeves
Sorry, Mr Tice. He said it was the biggest—
Arron Banks
Are you advocating we should not have general elections, because at a general election people start getting worried about what is going to happen? There is always risk. There is always uncertainty. Politicians have this idea that you live in this risk-free world that does not have risk pertaining to it; we control nothing.
Rachel Reeves
Yes, that is general elections, Mr Banks. It is up to the electorate to decide, and at this referendum it is up to the voters to decide whether we stay in the EU or leave the EU. When they are making that decision, they need to know what the risks are, and the Governor of the Bank of England said the biggest domestic risk to our financial stability was not the referendum but Brexit. It is not an argument against referendums or against elections; it is about telling people what the risks and implications of their decisions are.
Arron Banks
Agreed, but in general terms, the establishment—politicians and the Civil Service—do not like change. By definition, any change is a risk and is uncertainty.
Richard Tice
It is important to have the overall context; in the same hearing he referred to the global risks. It is not right to just cherry‑pick and infer that is all he was alluding to.
Rachel Reeves
I was not, Mr Tice, cherry‑picking. I recognise that there are many risks to financial stability, both global and domestic, but I would argue that at a time when our economic recovery is still fragile—you will have seen the GDP numbers today showing that GDP growth has fallen, as well as construction, investment and agricultural output—it would be dangerous to take on more risks. You have spoken about other economists’ views, but I would argue, and I think most people would agree, the Governor of the Bank of England is the most respected economist. He thinks it is the biggest domestic risk to financial stability. You do not share that view.
Arron Banks
By the way, I do not even believe it is the biggest domestic risk to stability. The Bank of England has printed £500 billion of quantitative easing. It has bought back its own bonds. It has collapsed interest rates to zero for eight years, and created asset bubbles all over the place, from property to stock markets alike. The biggest domestic risk this country faces is deflation of those asset bubbles.
Rachel Reeves
What do you think the implications of leaving the EU would be on interest rates, Mr Banks?
Arron Banks
In what sense?
Rachel Reeves
What do you think will happen to interest rates, Mr Banks?
Arron Banks
Interest rates in America are zero. Interest rates in Switzerland are negative. Interest rates in Japan are zero. Interest rates in the UK will remain zero because everything is buggered and that is why it is all at zero. You can say that interest rates will go up, but they will not.
Rachel Reeves
Mr Banks, I did not say anything about what would happen to interest rates. I was asking—
Arron Banks
Sorry.
Rachel Reeves
Mr Banks, the way these Committee work is we ask questions and you answer them.
Arron Banks
I am trying to answer them.
Rachel Reeves
You have not listened to the question. My question was what do you think, Mr Banks, will happen to interest rates in the event we leave the European Union?
Arron Banks
I was attempting to answer that. Interest rates worldwide are either zero or negative and they remain at zero or negative in this country, whether we Brexit, exit or Lexit or do anything else.
Rachel Reeves
You do not think there will be any implications.
Richard Tice
Absolutely not. There will not be any implication at all. Interest rates are not set by whether or not we are a member of a political union. For people on the remain camp, such as the Prime Minister, to suggest that mortgage rates would rise is complete and utter nonsense. Interest rates are set by totally different economic factors.
Arron Banks
By the way, interest rates should rise. Do you think it is normal to have 0% interest rates? It is telling you something, isn’t it?
Rachel Reeves
You think that interest rates should rise. If you were on the Bank of England’s Monetary Policy Committee, you would put up interest rates?
Arron Banks
You are putting words into my mouth.
Rachel Reeves
You just said they should rise, Mr Banks.
Arron Banks
I said in the normal course of events it is not normal to have 0% interest rates. It is telling you that something is very wrong, isn’t it?
Rachel Reeves
Yes. The fact is interest rates are 0.5%.
Arron Banks
You have negative interest rates in Switzerland and Japan.
Rachel Reeves
I am not asking about interest rates in those countries. What do you think will happen to sterling, Mr Banks, in the event of us leaving the European Union?
Arron Banks
Sterling is a very good question, because you talk about tariffs on world trade and stuff like that. In the last three months the pound‑euro rate has dropped 10%. That is worth double the tariffs on World Trade Organisation rules into Europe, so effectively a fall in sterling is not a bad thing at all. We are running a massive trade deficit. We are running a current account balance deficit. In fact, our currency deserves to be a hell of a lot lower than where it currently stands.
Rachel Reeves
Do you think then, Mr Banks, that if we leave the EU sterling will fall?
Arron Banks
It does not matter. It is not Brexit related. Sterling goes up or down and currencies go up or down depending on how the markets feel about the underlying factors in the economy. It is nothing to do with Brexit whatsoever.
Rachel Reeves
But it would have an impact, wouldn’t it, because the value of a currency depends on investors’ propensity to invest in gilts, equities etc. in the country? I am just asking what you think will happen to sterling in the event of Brexit.
Arron Banks
If you want my opinion I would say it would drop and then it would recover. That is the way of markets. In the last three months the pound has dropped nearly 10% against the euro. In the last week or so it has recovered 3% or 4%.
Rachel Reeves
This is very interesting. It is an important issue as well. You think the immediate impact of us leaving the European Union would be sterling falling against presumably the euro and against the dollar?
Arron Banks
In a world where economic orthodoxy has been suspended for the duration until it all hits us in the face, which is unfortunately where we have been for the last 40 years or last 20 years, everyone in the world is trying to reduce their currency rate. They are doing it by quantitative easing. The Japanese are printing money to try to reduce the value of the yen. They are printing money to reduce the value of the dollar. The Bank of England has printed money to reduce the value of the pound. They are all trying to reduce their currency rates and become more competitive. In the event that it did drop 10%, it would matter not and, in fact, would probably boost our export position.
Rachel Reeves
Two things: first of all, a main reason for quantitative easing and lower interest rates is to try to stimulate domestic demand through investment and consumption. The implications of sterling falling would be that the price of imports would go up, and we are a net importer, so that would have a positive effect on inflation. You would expect, at least in the short-run, the cost of goods and services to go up in the event of us leaving the European Union.
Arron Banks
Everyone worldwide is trying to fight deflation at the moment. That is the enemy rather than inflation.
Rachel Reeves
You agree that at least the short‑run impact would be higher prices?
Richard Tice
I—
Rachel Reeves
Mr Tice, I was asking Mr Banks.
Arron Banks
I do not want to dominate it.
Rachel Reeves
I am asking you the question, Mr Banks.
Arron Banks
The point is you have to have a balance between exports and imports. If you are asking whether prices domestically would go up because the pound drops, yes. Is that a bad thing? No.
Rachel Reeves
Okay. Thank you. That is very helpful.
Richard Tice
Can I just add to that?
Chair
If you have something you particularly want to add.
Richard Tice
Let’s be very clear: if sterling drops due to short‑term currency speculations by a few hundred traders in the City for a few weeks, that is not going to have an inflationary impact. The biggest risk that most developed economies around the world have is deflation, not inflation. That is very important. The reality is, on a medium- and long-term basis, currency rates are set by all sorts of things, and how well an economy is doing and the perception of the ability to repay debt. It is wrong to just draw the analogy and say Brexit would be hugely damaging for sterling.
Rachel Reeves
I would have the conversation with Mr Banks. Most people believe that sterling would fall. Mr Banks seemed to agree with that. That pushes up the price of imports, which pushes up domestic inflation. That may be a good or a bad thing, but it is just important that we have the facts.
Arron Banks
It makes it more competitive for us.
Richard Tice
It makes the exports more competitive and it depends how long it falls for, and whether it falls in the next week is a function of pure speculation.
Rachel Reeves
All those things are true, but it is important that people understand what the impact of Brexit will be. That has been a useful discussion. Thank you, Chairman.
Helen Goodman
Mr Banks, I want to bring you back to this issue of the “bargain basement” price for leaving the European Union. I am not sure whether you are aware of the median household income in this country.
Arron Banks
£45,000.
Helen Goodman
No, as a matter of fact it is £25,630.
Arron Banks
Not according to the Treasury’s reports.
Helen Goodman
Median earnings are £27,456. If people had to pay £4,300 for leaving the EU, their incomes would fall from £25,500 to £21,330 a year. Do you think those people would feel it was a bargain basement price?
Arron Banks
The figures that the Treasury have quoted are over 15 years, and they quote £45,000 as the household income when you get to the end of the 15 years. Maybe that is the difference between what it is now and what you get to. That is the cost over 15 years, so you are talking about apples and pears here.
Helen Goodman
These are in 2015 prices. If you look at the Treasury document—
Arron Banks
The £4,500 is calculated over the period of…
Helen Goodman
£4,500 “expressed in terms of 2015 GDP in 2015 prices”, is what they are saying.
Arron Banks
It is in 2030.
Helen Goodman
I know it is in 2020 or 2030, but the prices are on the basis of this year’s prices, so it is not that we have masses and masses of inflation. By 2030 that number of £4,300 will be much higher.
Arron Banks
What they have done in the report, as I understand it, is forecast growth will be 29% instead of 37%, based on a whole series of factors that I think are erroneous. I start from the position that the report is just a bunch of rubbish, which it is basically. You cannot forecast over 15 years. In a business you are lucky if you can forecast over six months and a year at the outset, and beyond that it is just a complete wild guess. The numbers you are quoting are fanciful.
Helen Goodman
I could contest what you are saying about long‑term forecasting, which in fact is easier than short‑term forecasting, but we will not go there. I am just trying to get you to focus on the fact that a drop of £4,300 for the average household would be some 17%, and to ask you: when you reflect on this carefully, do you really think that most people would regard a drop in their annual income of that sort of quantity as a bargain?
Arron Banks
I certainly regard our parliamentary democracy and the right to make our own rules as paramount. When people were hitting the beaches of Normandy, I do not think they were saying, “This is going to cost us £2,000.” They were fighting for democracy. I know it is an extreme example, but that is the way I feel about the European Union. I have to say, though, to forecast something over 15 years and to come up with a 37% growth rate or a 29% growth rate is just statistical nonsense.
Helen Goodman
The truth of the matter is they gave a range depending on which scenario one looked to.
Arron Banks
You can see their equation.
Helen Goodman
The range was from £2,600 to £5,200, with £4,300, depending on what the negotiation was. You think that it does not really make sense to do these sorts of calculations. Could I ask you why you have included similar calculations on your website? You have two numbers for the financial impact on households. You say staying in the European Union would cost the UK £9,625 per household in one place. In another place you say you would be better off to the tune of £933. You do in fact think these sorts of calculations are meaningful and you have put some numbers on your website.
Arron Banks
I will answer one part of that question. The £930 is a calculation based on cheaper food prices and a range of costs that are incurred under the EU, so that is not a forecast in the sense of 15 years out. If there is a forecast there that is a long-range forecast of more than a couple of years, I would agree with you. If it is on there, point us to where it is and we will correct that.
Helen Goodman
Could you tell me why you have two such wildly divergent numbers on your website: £9,625 and £933? Which number are you banking on? Which number do you have confidence in?
Arron Banks
I have to see the—
Helen Goodman
These are your numbers. They are not my numbers. They are your numbers.
Arron Banks
Can I just say, first of all, we have produced enough material to cut down a small rainforest? I am not familiar with every single last bit of it. The £933 I am. That is based on lower food costs and things like that. In fact, Patrick Minford from Cardiff University calculates it is upwards of £2,000, so there are lots of varying figures. Any long-range forecast is inappropriate. If there is one on there, I will take it down, but I am not familiar with that.
Richard Tice
It is very clear, just to reinforce what has just been said, the £933 number is an annual forecast. It is much easier clearly to forecast for an annual saving. There is a key difference from a 15-year forecast, which you have previously alluded to.
Helen Goodman
The £933 number is consistent with the £33 billion, which you were discussing…
Richard Tice
No, it is…
Arron Banks
It is do with food costs and other things.
Helen Goodman
Ah, it is different. What is the £933 then?
Richard Tice
That is based on data that came from the Change, or go report by Business for Britain in the middle of last year.
Helen Goodman
That is not the costs of regulation.
Richard Tice
That is the overall saving. No, it is not the cost of regulation. It includes all sorts of things.
Helen Goodman
What does it include?
Richard Tice
I have not got it in front of me, but it is a 1,000-page report that looked in great detail at all sorts of aspects, and that was its considered number and that, I believe, is the number that Vote Leave also used, because it was sourced from Business for Britain, their predecessor.
Helen Goodman
You are saying that number includes the costs of regulation, the contribution to the EU budget and the impact on the British economy.
Arron Banks
A lot of it is to do with food costs.
Helen Goodman
Or is it just to do with food costs?
Arron Banks
I would have to refer back to it.
Richard Tice
It is a long list of items.
Helen Goodman
Is it just to do with food costs? That would suggest it is about the CAP and agricultural tariffs.
Arron Banks
I did not say it was just to do with food costs. I said it is part of it. I would have to go back and look at that.
Richard Tice
It is a long list of items. For example, on the food costs it is lower because you do not have tariffs on non‑EU food products. It is a long list of items, very carefully considered.
Helen Goodman
It is very carefully considered, but you cannot tell us what it is.
Richard Tice
I have not got it in front of me. I have been through it previously.
Arron Banks
We are not walking encyclopaedias, carrying huge amounts of information in our heads.
Helen Goodman
That is evident.
Arron Banks
I am trying my best.
Richard Tice
I can tell. I can reiterate just for the record that I have been through it and I thought it was a very good working document.
Helen Goodman
Good. I am glad when you read it you felt that, but it is not very enlightening for us on the Committee or for the general public if you cannot explain it.
Richard Tice
It is a 1,000-page document that is on the Vote Leave website. You have obviously had a copy of it. Anybody can read it and review it, and they can either agree or disagree with my perception of it.
Helen Goodman
My understanding is that the £9,000 number comes from an analysis by Patrick Minford, of whom you were speaking earlier, and that that number works on the assumption that you are going to repeal all EU legislation on social matters, employment matters and the environment. Is that realistic?
Arron Banks
I have not seen the report and I am afraid you have got us on this one. I can go away and give you a written answer, but I have not seen Patrick Minford’s report and I do not think the £933 is based on his report.
Helen Goodman
No, but the £9,625 is and you have that number on your website as well.
Arron Banks
We have a research department that employs about six different people that is going through all this stuff. I think they are pretty accurate, but if you have a specific number that needs to be justified, I cannot justify it right now.
Chair
Coming back to the point that I made at the beginning, really we should not need to be having these exchanges—I am sorry, Helen. This core information to enable us to fully understand where these numbers are derived from and how they are put together should be available.
Arron Banks
Mr Chairman, they are often a matter of opinion.
Chair
It should be available on your website. If you have qualifications, because you have personal opinions about them as well, those are things that could be added. What we have out there from your organisation is a range of numbers, which is very difficult for us to understand and therefore virtually meaningless in the hands of the public. It is, after all, the public who are complaining noisily a lot that they are not able to get high-quality information from either side of this campaign and that they are having to rely on numbers that seem to flake a little when they are looked at carefully. That appears to be what is happening with the numbers that we are addressing that we have found on your website.
Arron Banks
It is a valid point, but when you have a situation where you have a Treasury report that is saying it is a downside of £4,500—
Chair
We are going to cross‑examine the Chancellor on his report. I would really rather concentrate on the numbers that are on your website.