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Bank to probe 'Brexit' economy risk

Published 22/05/2015

David Cameron says his talks on Britain's future in the EU will not be easy
David Cameron says his talks on Britain's future in the EU will not be easy

The Bank of England has launched a project to assess the economic risks to Britain if the country votes to leave the European Union in the referendum promised by David Cameron.

The existence of the Bank's project emerged as the Prime Minister insisted he was "confident" of securing reforms in Brussels and indicated he remains open to staging the in/out vote next year.

The work done at Threadneedle Street was supposed to remain confidential, but was accidentally revealed when details were sent to a journalist in an email blunder.

According to the email inadvertently sent to the Guardian, the press and most staff were supposed to be kept in the dark about the work, which has been codenamed Project Bookend.

The newspaper said the email indicates that a small group of senior staff are to examine the effect of "Brexit" - a British exit from the EU - under the authority of Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash.

The email, from Sir Jon's private secretary to four senior executives, was written on 21 May and forwarded by mistake to a Guardian editor by the Bank's head of press, Jeremy Harrison.

In a statement, the Bank said: " Today, information related to planned confidential Bank work on the potential implications of a renegotiation and national referendum on the UK's membership of the European Union made its way into the public domain, due to an internal email sent inadvertently to an external party.

"It should not come as a surprise that the Bank is undertaking such work about a stated government policy. There are a range of economic and financial issues that arise in the context of the renegotiation and national referendum. It is one of the Bank's responsibilities to assess those that relate to its objectives.

"It is not sensible to talk about this work publicly, in advance. But as with work done prior to the Scottish referendum, we will disclose the details of such work at the appropriate time.

"While it is unfortunate that this information has entered the public domain in this way, the Bank will maintain this approach."

Mr Cameron, who met European counterparts for the first time since his general election victory, admitted he was "not met with a wall of love" as he begins an intensive round of diplomatic negotiations aimed at securing changes to the UK's relationship with Brussels.

At a summit in the Latvian capital Riga he conceded that securing a deal would take "patience and tenacity" and refused to ruled out campaigning for Britain to leave the EU if his renegotiation efforts failed.

He said it would be "good" if the popular vote could be staged earlier than his 2017 deadline.

Asked whether he could campaign for the UK to leave the EU, Mr Cameron said: "I'm confident, I've set out a series of changes which I think address the main concerns which the British people have, that I have about Europe and the way it works and I'm confident of getting those changes.

"I've tried to aim at things that are deliverable and doable rather than things that are impossible.

"But I've always said that if I don't get what I think I need, I rule nothing out."

Mr Cameron will carry out a whirlwind tour of European capitals, including Berlin and Paris, to explain his thinking in greater depth, and has invited European Commission president Jean-Claude Juncker - whose appointment the Prime Minister publicly opposed - for talks at his official country residence at Chequers on Monday.

The Prime Minister admitted his presence at the Riga summit had been met with a less-than enthusiastic reception in some quarters.

He said: "On the irritation factor, I'm not going to say I was met with a wall of love when I arrived but there were lots of people who were very excited about our election result and congratulated me and we all said how much we are looking forward to working together."

Britons are " not happy with the status quo" but he believes " we can transform our relationship with Europe for the better".

As well as potentially difficult talks with European counterparts, Mr Cameron will also face a tough task in holding his party together when some of his MPs will settle for nothing less than Brexit.

Tory peer Lord Patten of Barnes, a former European commissioner said: "I think he will satisfy the electorate, I think he will satisfy most of the Conservative Party, though I think Conservatives delude themselves if they think that any conceivable deal - even if we got an agreement that Brussels was moving to London and every commissioner from now on was going to be a Conservative MP, there are some Conservatives who wouldn't accept it.

"One of my worries is that I think there are a few who won't accept the verdict of a referendum even if it goes, and I think it will, in favour of Britain remaining in the EU."

Speaking on BBC Radio 4's Any Questions he played down the prospects of Mr Cameron securing any changes to the EU's treaties, the foundations of the union.

"I don't think anybody suggests that he can get treaty change by 2017, since it involves 28 countries, since it involves referendums in a number of those countries, that's simply not on.

"He may be able to get guarantees that, when necessary, there will be treaty change and he may be able to get agreements in the Council to some of the changes we would like to make."

Lord Patten said Mr Cameron should allow his ministers to campaign for a No vote. "Unless you allow them to do it, they will do it and make you look a bit of an ass," he said.

Tory former chancellor Lord Lawson said it was "highly unlikely" that Mr Cameron would achieve fundamental change in Europe.

He told LBC Radio: "I myself think it's highly unlikely that he will, at the end of the day, come back with anything fundamental or substantial.

"I wish him the very best of luck. I hope he can change, fundamentally, the nature of the European Union, get it to disavow the objective of having a political union, disavow the objective of ever closer union - which means a political union; and i deally, of course, the eurozone coming to an end.

"These things would not be good for Britain, they would be good for Europe as a whole. So I wish him the very of luck, but, from my own knowledge of the European Union, I don't think it's very likely."

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