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George Osborne defends Mark Carney speech after Lord Lawson criticisms

Published 22/10/2015

Chancellor George Osborne gives evidence to the Treasury Select Committee at Portcullis House, London
Chancellor George Osborne gives evidence to the Treasury Select Committee at Portcullis House, London
Mark Carney addressed the vexed topic of the European Union in his speech

George Osborne has defended Mark Carney's intervention in the debate on Britain's EU membership, after the Bank of England governor came under fire from one of his predecessors as chancellor.

Lord (Nigel) Lawson - who heads the Conservatives For Britain group campaigning for exit from the EU - said Mr Carney was wrong to "wade in" to a political debate and accused the governor of straying beyond his brief and ignoring negative aspects.

Speaking as the Bank published its assessment of the consequences for it of voters backing a so-called Brexit in the referendum due by 2017, Mr Carney said that being in the EU had increased the "openness and dynamism" of the UK economy but left it more vulnerable to external shocks.

Britain had "in some respects" been the "leading beneficiary" of the freedom of goods, services, capital and labour that underpinned the economics of the transnational political organisation, he said.

But, in a speech in Oxford, the governor also warned that its openness "provides potential for both greater growth and shocks" and could act as "a dragging anchor when things go awry across borders".

Lord Lawson, who served as chancellor for six years in Margaret Thatcher's administration, described the speech as "regrettable".

"I have known many governors over the years and I can't think of any previous governor who would wade in in a political way on an issue such as this," the former chancellor told BBC Radio 4's Today programme.

"If membership had been beneficial it would have been to all members of the European Union and it is well know that the countries in the European Union - particularly those in the eurozone - are among the worst-performing countries in recent years anywhere around the world.

"And what is more, he didn't address once what everybody knows in business and industry is the real problem of European Union membership and that is the growing mass of regulation coming from Brussels which is a real burden."

But Mr Osborne described the governor's intervention as "very welcome", telling the House of Commons Treasury Committee: "The governor of the Bank of England, who is independent, who is not a British citizen but has come from Canada, has made an assessment of our membership of the EU. His assessment is that it is contributing to our open and dynamic economy, but there are real challenges as the eurozone continues to integrate and Britain needs safeguards.

"That is precisely why we are undertaking this renegotiation and I think it is therefore a very welcome addition to the debate we are having in this country on our membership of the EU and the merits of the renegotiation we are undertaking."

Mr Osborne added: "Nigel clearly has a very strong view on our membership of the EU and I think was probably a bit disappointed that Mark Carney didn't agree with him."

Mr Osborne told the committee that a key factor in the current renegotiation was Britain's demand for safeguards for non-eurozone members of the EU as the single currency zone becomes more closely integrated.

But he insisted: "We are not looking for special deals or carve-outs for the City of London. We are looking for a fair deal for non-euro members, including the UK."

Mr Osborne defended the way the renegotiation talks had been handled, following complaints from other member states that the UK has not so far set out a clear shopping list of changes it is seeking.

"My approach to a negotiation is start the conversation, rather than turning up with your final list of demands on day one. That is not a sensible approach," said the Chancellor.

"If we disagree, we will be prepared to fight very hard for our point of view and, absolutely, up the temperature. But that's not the way to start a negotiation with what, after all, are your allies and colleagues in the European Union.

"That might be where you end up, but it's not where you want to start."

He denied that there had been an attempt by the Government to ask business leaders to back off from intervening in the debate until the renegotiation was finished.

"I know there was a story in the newspapers a while ago that somehow we were telling businesses 'don't pick sides'. We're not. Certainly I'm not saying that and I'm not aware that anyone else has said that."

Mr Osborne said there would be "more and more detail" of the Government's negotiating position available over the course of the autumn, after Prime Minister David Cameron sets it out in a letter to European Council president Donald Tusk next month.

"We are going to set out in more detail, as the Prime Minister said, in a letter to the president of the Council, what we are seeking in this area and in other areas. All of that will be done in public, making sure that the British public and the British Parliament can see what is being asked," he said.

It was "a remarkable success" that the other 27 EU member states had agreed to enter into talks, he said.

The Bank's report found that "overall, the openness of the UK economy has almost certainly increased as a result of EU membership".

It added: "This is likely to have increased dynamism and the ability of the economy to grow without generating risks to the Bank of England's primary objectives of monetary or financial stability.

"Dynamism will also have contributed to the achievement of the Bank of England's secondary objectives of strong sustainable and balanced growth and facilitating effective competition.

"Greater openness to the EU, however, like openness more generally, has probably increased the external challenges to UK monetary and financial stability, as seen in the recent euro-area crisis.

"The future direction of EU financial reform should recognise that the EU comprises multiple currencies with multiple risks."

Mr Osborne told the committee that Mr Carney had set out both the pros and cons of EU membership, making clear that the single market in financial services was "not an unalloyed good" and that there were "pluses and minuses" to immigration, including its effect on depressing wages.

Labour committee member Wes Streeting challenged Mr Osborne over internal disagreements within the Conservative Party over Europe, which he said were reflected in the recruitment of Theresa May's special adviser Stephen Parkinson to work for Brexit campaign group Vote Leave.

Mr Osborne responded: "Not everyone in every political party agrees on these issues. That is true in the Conservative Party, dare I say it I expect your views are not the same as the leader of the Labour Party's views."

He added: "That is, in part, why we are having a referendum. These things do not fall into classic political buckets that are then decided at general elections, this is a big issue that affects our country going forward and people have strong views, for and against, within political parties."

Ukip leader Nigel Farage said he did not believe Mr Carney had overstepped his role and welcomed his "balanced" speech.

"What Mark Carney meant was that the common market had been a good thing. That getting rid of tariffs, which had plagued the Western world post-World War Two, had made our economy more open. Of course," he told BBC2's Daily Politics.

"But that is not the same thing as a political union with a flag and an anthem or that wants an army and everything else.

"He also did say there are potential threats coming down the line to this country.

"I take the view that was a very balanced speech. People from both sides of the debate will take from it what they want and in a week's time we will have forgotten about it."

He said it was to be expected that an establishment figure should "say things that were broadly in support of the status quo".

"I wouldn't expect him to speak on this again," he added.

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