Tag: George Osborne

Below is the text of the speech made by George Osborne, the former Chancellor of the Exchequer, in Chicago on 23 September 2016.

Thank you for inviting me here to Chicago to speak to you this evening.

I accepted the invitation not just because this Council is renowned around the world for its contribution to the debate about how we manage global challenges; I accepted because this lecture is in honour of Louis Susman, a quite exceptional US Ambassador to the United Kingdom.

I worked closely with Lou as the new British Government, led by David Cameron, sought to find its feet in the world six years ago. The bond we formed with the then still relatively new Obama administration was a strong one. On the fallout from the financial crisis, on the challenge of the Arab Spring, on the promotion of free trade, we worked together as close partners and allies.

And with Lou and his wonderful wife Marjorie, the serious business of politics was always mixed with the smart diplomacy of good hospitality. I remember the spectacular dinner they invited me and my wife Frances to at Winfield House, the palatial ambassador’s residence in Regents Park.

President Obama was there in his tux. Her Majesty the Queen was wearing her diamonds. I walked into a room full of the A-list, from Tom Hanks to David Beckham. Frankly, I was a little over-awed. Then Lou came up to me and said: the Queen and the President are having Martinis, you want to join them? After that, the evening slipped by beautifully.

That glamorous night with the Susmans was one of the many high points of the six years that I spent as Britain’s Chancellor of the Exchequer. There’s little doubt what one of the low points was.

The evening of 23rd June this year. When David Cameron and I watched the television in the first floor study of 10 Downing Street, as the results came in from the European Referendum and it became clear that the British people had voted to leave the EU.

That result has sent shock waves around the world. People here in the United States have been asking me whether it means the retreat of Britain as an outward facing global power; they have questioned what it means for the integrity of the western alliance; they worry about the consequences for European stability; and they wonder whether the deeply felt economic insecurity and anger at the established political order so evident in that referendum vote will have echoes here in the United States this fall.

I don’t pretend to have definitive answers to those questions tonight; and I would be skeptical of anyone who claims they do. That history is not yet written. But I do intend to spend this time ahead of me, out of government office but still in the House of Commons, trying to understand better the powerful forces that are driving the disruption of our democratic politics and widespread feelings of insecurity.

And I want to help devise what the best response should be from those of us who believe that free trade, open societies and international co-operation are the best guarantors of prosperity and a stable world order.

For if we don’t provide answers, then others will – those who want to erect barriers and sow division and exploit new technology to echo-back to people their anger and insecurity.

Politics, like nature, abhors a vacuum – and if the mainstream can’t find answers, then the extremes will. And their solutions will make the situation for those yearning for more economic security and control over their lives a whole lot worse.

Let me start by examining that European referendum result. You cannot say that the British public were not engaged in the choice they were being offered. More Britons went to the polls on 23rd June than in any general election in British history.

More voters voted to Remain in the European Union than have ever voted to elect a party of government; and of course, even more – 52% of the total – voted to Leave. Among that 52% were close to 3 million voters who had not voted in our general election a year ago.

In short, this was a huge exercise in direct democracy. And so, frankly, ignoring the result or thinking that we can simply have a re-run to get a different result is – I believe – fanciful. We can’t behave like the East German government who, when faced with an election result they didn’t like, said it was time to elect a new people.

Britain has taken a decision, and it’s difficult to imagine the circumstances in which that doesn’t lead to Britain leaving the European Union.

That, however, is just one decision – and it gives rise to many future decisions for which we don’t yet have answers.

Since July, work has been done to understand what people’s primary motivations were for voting to leave. Half of all Leave voters said the main reason was that they felt decisions about the UK should be taken in the UK. A third of Leave voters cited control over immigration. Just 6% of Leave voters – around one in twenty – said their main reason for voting was that ‘when it comes to trade and the economy, the UK would benefit more from being outside the EU’.

There are lessons to be learnt across the political spectrum. Those who, like me, frankly underestimated public concerns about sovereignty need to think hard about how we can give people a greater say about the decisions that affect them and their community.

My feeling is that the answers go deeper than simply repatriating decisions from Brussels to Westminster – that people sense there are forces beyond their control that are driving their lives, from remote government to technological change, and that makes them feel insecure.

Likewise, those who claim that voting to leave was a great rebellion against the economic status quo need to accept that precious few Leave voters thought the country would be more prosperous outside the EU.

This was not a popular mandate for less free trade or for a more closed economy.

We should bear that in mind as we approach the decisions that lie ahead.

We may be leaving the EU, but we are not clear about what we are joining. What is the new relationship we will have with our European allies? What will the trade arrangements look like? Not just for physical goods, but intangible services like financial services? What will our border controls with our neighbours be, including at our currently invisible land border with Ireland? What are the criminal justice, immigration and extradition agreements we will strike? There may be millions of continental Europeans living in Britain, but what about the millions of Britons living in continental Europe? How, if at all, will we participate in collective European policy towards the Mediterranean and Eastern Europe?

We don’t have answers to any of these questions – and nor should we rush to provide them. This is the most important set of decisions Britain has faced since the Second World War, and getting them right is more crucial than taking them early.

Get them wrong – consign Britain to a relationship with our neighbours that makes us permanently poorer and more insecure – and the people most likely to pay the price will be precisely those who already feel the most marginalised.

So David Cameron was correct, on the morning after the referendum result, not to trigger the exit procedures that Article 50 of the European Treaties provide.

I commend Theresa May for resisting the pressure, from some Brexiteers at home and from some European capitals abroad, to trigger Article 50 this autumn. She is right that we need time to decide what Britain’s approach to these negotiations will be before we enter into them.

In any case, it is highly unlikely that the rest of Europe will be in any position to conduct serious negotiations until the autumn of next year.

My experience of six years of European negotiations is that nothing serious happens until the French and, especially, the German governments take a view – and both countries will be preoccupied with their own domestic elections for much of next year.

That’s an opportunity for the British Government and the House of Commons to think hard about how we should approach the decisions we now face.

For me, the guiding principle should be this: we should aim for the closest possible economic and security relationship with our European partners while no longer being formal members of the EU.

That is most likely to deliver the prosperity and stability and control over events that people are clearly yearning for. For what are the alternatives?

I am all for strengthening Britain’s ties with the rest of the world.

Throughout my fifteen years in Parliament, I have championed the vital alliance we have with the United States – both when it was fashionable and when it has been unfashionable.

It is the cornerstone of western security and prosperity. But it is an alliance that all British Governments and US Administrations since the war believe is enhanced because of Britain’s engagement in Europe.

Likewise, in government, I did more than almost anyone to promote Britain’s ties with the fast growing emerging economies – risking controversy to form a new economic partnership with China and making more trips to India than any Chancellor before me.

But these are complements to our relationships with our European allies, not substitutes. Britain cannot choose the continent we exist in. We are – and have always been – a European power.

Our economy is completely intertwined with the European economy – and always has been. Close to half of all our exports go to our near neighbours, and no amount of extra trade with the likes of Australia or New Zealand – desirable as it is – can possibly replace those large, mature markets on our doorstep.

Our financial centre is a global one, but one of its huge strengths is that it services a continental economy. I made it a special mission of mine to make London a home to Indian masala bonds, Islamic finance and offshore renminbi trading – last year, more renminbi bonds were issued in London than the rest of the world outside of China put together.

But again, this is not a substitute for our role as Europe’s wholesale financial centre – it is a complement – and it is not just in our interests, but the interests of the whole of Europe that it remains so.

Indeed, it is in the whole of Europe’s interest that the voice of Britain as a force for economic reform, global competitiveness and free trade is not lost from the collective discussion about how we raise the productivity of the whole European economy – or else we will all be poorer for it.

And our security is also completely interdependent with the continent of Europe. Two thousand years of British history, from the Roman invasion to the Battle of Britain, have taught us that. Each and every time we have tried to disengage from Europe, and wipe our hands of its problems, it has been a disaster for Britain and a tragedy for our continent.

So, as I say, we should approach all the decisions we now face about trade, about finance, about security, looking to forge the closest possible relationship with the rest of Europe consistent with being outside the EU.

We shouldn’t assume that there is an off-the-shelf arrangement that works for the second largest economy in Europe – I can’t see us consenting to the current arrangements around free movement of people that clearly caused such concern in the referendum.

Equally, I find some of the take-or-leave it bravado we hear from those who assume Europe has no option but to give us everything we want more than a little naive.

We need to be realistic that this is a two-way relationship: that Britain cannot expect to maintain all the benefits that came from EU membership without incurring any of the costs or the obligations.

There will have to be compromise.

Above all, we need to resist the false logic that leads from exiting the EU to exiting all forms of European co-operation – and that values the dangerous purity of splendid isolation over the practical necessity of co-operation in the real world.

Brexit won a majority. Hard Brexit did not.

The mainstream majority in our country do not want to be governed from the extremes.

The same principles of co-operation and engagement that drives Britain’s relationship with Europe should guide our approach to the global challenges we all face.

We have to confront the false prophets who – as in previous generations – tell people that their concerns about security in the world can be addressed by retreating from it.

None of the huge issues confronting our generation – from terrorism to mass migration, from disease to climate change – can be tackled alone.

Indeed, if we fail to intervene and solve these problems together, then the insecurity people feel will only increase.

I was elected to the House of Commons in June 2001, a Conservative opposition MP in a Parliament where the Labour Party had just won re-election with a large majority.

As new MPs, we were told to expect a relentless focus on domestic priorities. Instead, those early years in Parliament were dominated by conflict abroad.

The savage attacks in New York and Washington on 9/11; the overthrow of the Taliban government in Afghanistan; the invasion of Iraq.

For my political generation, the high price of intervention became painfully clear.

The loss of life. The sacrifice of our armed forces. The budgetary cost.

The shock and awe of well-planned invasions giving way to the long, messy chaos of insurgencies.

And the deep divisions this brought to our society at home. The marches. The bitterness in our politics.

Long gone is the confidence that Tony Blair expressed here in Chicago as Prime Minister back in 1999, when he discarded the old Westphalian settlement of non-intervention – and confidently set out new principles that would govern the right of the international community to intervene in the affairs of a sovereign state.

In its place is a resignation that it is never worth getting involved – that the price of intervention is never worth paying.

That, sadly, is the conclusion our western democracies have come to after a decade or more of difficult, divisive, drawn-out conflict in Afghanistan, Iraq and more latterly, Libya.

Last week, the Foreign Affairs Committee of the House of Commons censured David Cameron for Britain’s involvement in Libya.

They tell a simplistic story. A rushed intervention. A failure to understand the complexity of the country. The removal of the strong leader who held the country together – however brutally. The chaos that ensues. The armed militias. The terrorism. Five years on, we’re still trying to bring stability to Libya.

But we forget: Libya wasn’t stable five years ago – that’s why we intervened.

And ask yourself the question; what if we hadn’t intervened?

I sat on the British National Security Council that saw the satellite imagery of Colonel Gaddafi’s forces advancing up the coast road from Tripoli to Benghazi to crush the uprising there.

There was no doubt that if British, French and American forces did not intervene right away then a massacre would take place in the following days. Many, many thousands of people would have died.

Benghazi would have been added to the list, alongside Srebrenica and Rwanda, of places where the west had shamefully stood aside – and where our failure to intervene still haunts us today.

And what confidence do we have that Libya would not still have descended further into civil war and chaos? After all, we chose not to intervene in strength in Syria.

We made a conscious decision not to intervene in 2011, when Britain, America and our allies could have tried to alter the outcome of the emerging civil war there by forcefully backing the more moderate elements of the opposition.

There was a plan put forward to do that. But collectively the West chose not to take it up – and we settled on something much weaker.

And we chose not to intervene again in 2013, when Assad crossed the red line we had drawn and used chemical weapons. The vote of the House of Commons against military action was the single most depressing moment of my time to date in Parliament.

I don’t know whether these interventions in Syria would have worked. I am sure they would have been very messy and difficult. Clinical interventions and text book nation building exist only in newspaper columns.

But I do know what has happened in Syria while we chose not to intervene decisively. Hundreds of thousands killed. Millions displaced. Neighbouring countries destabilised. The taboo on the use of chemical weapons broken. The emergence of a terrorist state. Russia back as a major player in the Middle East. And a refugee crisis that has fuelled the rise of extremism across Europe.

Yes, my political generation knows the cost of intervention – but we are also beginning to understand the cost of not intervening. It doesn’t make our countries more secure.

It doesn’t help address the fears of those who feel we invite the problems of the world on our shoulders – it makes those problems worse.

Those of us who are internationalists – who believe that co-operation is better than isolation – need to rediscover our self-confidence and make our case.

What is at stake is the kind of nations we want to be. Let me speak about my own.

In the last few years, with David Cameron, we took some deliberate and expensive decisions that were controversial and which required constraints on spending elsewhere in the budget.

I announced that we will continue to spend two percent of our national income on defence – meeting alongside US and unlike almost everyone else, our NATO obligation to do so.

That rising defence budget is being spent on the latest generation of military equipment, from aircraft carriers to submarines to fast jets, that will enable Britain to be one of the few countries to be able to project hard power abroad.

We have also decided to be one of the very few countries in the world to meet our UN obligation to spend 0.7% of our national income on international development – and that rising aid budget has put Britain not just at the forefront of the fight to eliminate diseases like malaria, but also central to the efforts to bring stability and support to Syria’s neighbours.

Indeed, Britain is unique among the major western nations in meeting both the NATO commitment on defence and our UN commitment on aid. Why did the government I was part of choose to do that at a time when resources are scarce?

It is more than just an expression of what we want our country to be – and it is a practical solution to the disorder that we see in the world, and the insecurity and the anger that is breeding at home.

That aid budget is not just meeting a moral obligation to the world’s poorest. It is a tool in responding to the refugee crisis that is destabilising Europe.

That defence budget is not just about protecting Britain’s own shores. It enables our new Prime Minister to deploy additional forces this week into Somalia to tackle terrorism there before it visits us here.

Together aid and defence add to Britain’s influence and reach, alongside our diplomatic network, our intelligence agencies, our prominent role in international bodies, our language, our culture, our science and – after this Olympic summer – our sporting prowess.

Mind you, I see the Chicago Cubs are on roll.

The Economist Magazine has ranked Britain number one in the world for the impact of its soft power. Our hard power makes us the only ally that can fight alongside the US in strength.

Together that concentration of power makes our country safer and makes our world more secure than it would otherwise be.

For if we, Britain, are not a nation prepared to intervene to secure free trade and international order and the rule of law, why should we expect anyone else to be?

If we don’t make that argument to our population than we cannot expect others to.

And what applies to Britain, applies to our European allies and to the United States as well. We were present at the creation of the post-war order. We must take care not to allow its destruction.

If we leave a vacuum of leadership in the world, then others who do not share our values will fill it.

If we don’t make an effort to co-opt new rising powers like China to the world order we created, and make them feel part of it, then we face the prospect of disintegration and confrontation.

If we, the countries that have championed world trade rules and open markets, do not continue to advance the case for trade across the Pacific and Atlantic, then who will?

If we don’t have a plan for global order, then we will fall mercy to other people’s plans.

This is a deeply unsettling time in so many western democracies.

Barriers are being erected.

Free trade is in retreat.

A voice is being given to the extremes.

That is not, in the end, going to help people who feel insecure and feel like they are losing control – it will make that insecurity and powerlessness very much worse.

We shouldn’t be afraid to say so.

We should fight fiercely for our values – for the co-operation, free markets and international institutions that have sustained our peace and prosperity, and can continue to do so.

As they say here in Wrigley Field, it’s time to step up to the plate.

Below is the text of the statement made by George Osborne, the Chancellor of the Exchequer, and co-signed by leaders of numerous banks on 5 July 2016.

While we are realistic about the economic challenge facing the country after the referendum result; we are reassured that collectively we can rise to it.

The last time Britain faced an economic shock the banks were at the heart of the problem.

Thanks to the hard work of rebuilding the banks, making them stronger and safer, and the arrival of new challenger banks – banks and building societies are now part of the solution.

The government gave the Bank of England new counter-cyclical capital buffer powers to support lending in the financial system in the good times and bad.

The independent FPC of the Bank of England have today used those powers.

Now the UK’s main lenders, meeting with the Chancellor this morning, have agreed to make the extra capital available to support lending to UK businesses and households in this challenging time.

The Chancellor called for a joint national effort to meet the economic challenge. Today we see that effort take place.

Signatories and attendees

Chancellor of the Exchequer, George Osborne
Economic Secretary to the Treasury, Harriett Baldwin
Ms Jayne-Anne Gadhia (CEO, Virgin Money)
Baroness Vadera (Chairman, Santander UK)
Mr Douglas Flint (Chairman, HSBC)
Mr Craig Donaldson (CEO, Metro Bank)
Sir Howard Davies (Chairman, The Royal Bank of Scotland Group)
Mr David Roberts (Chairman, Nationwide Building Society)
Mr John McFarlane (Chairman, Barclays)
Mr Alan Dickinson (Non-Executive Director, Lloyds Banking Group)

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 27 June 2016.

Today I want to reassure the British people, and the global community, that Britain is ready to confront what the future holds for us from a position of strength.

That is because in the last six years the government and the British people have worked hard to rebuild the British economy.

We have worked systematically through a plan that today means Britain has the strongest major advanced economy in the world.

Growth has been robust.

The employment rate is at a record high.

The capital requirements for banks are ten times what they were.

And the budget deficit has been brought down from 11% of national income, and was forecast to be below 3% this year.

I said we had to fix the roof so that we were prepared for whatever the future held.

Thank goodness we did.

As a result, our economy is about as strong as it could be to confront the challenge our country now faces.

That challenge is clear.

On Thursday, the people of the United Kingdom voted to leave the European Union.

That is not the outcome that I wanted or that I threw everything into campaigning for.

But Parliament agreed that there are issues of such constitutional significance that they cannot solely be left to politicians, and must be determined by the people in a referendum.

Now the people have spoken and we, in this democracy, must all accept that result and deliver on their instructions.

I don’t resile from any of the concerns I expressed during the campaign, but I fully accept the result of the referendum and will do everything I can to make it work for Britain.

It is inevitable, after Thursday’s vote, that Britain’s economy is going to have to adjust to the new situation we find ourselves in.

In the analysis that the Treasury and other independent organisations produced, three particular challenges were identified – and I want to say how we meet all three.

First, there is the volatility we have seen and are likely to continue to see in financial markets.

Those markets may not have been expecting the referendum result – but the Treasury, the Bank of England, and the Financial Conduct Authority have spent the last few months putting in place robust contingency plans for the immediate financial aftermath in the event of this result.

We and the PRA have worked systematically with each major financial institution in recent weeks to make sure they were ready to deal with the consequences of a vote to leave.

Swap lines were arranged in advance so the Bank of England is now able to lend in foreign currency if needed. As part of those plans, the Bank and we agreed that there would be an immediate statement on Friday morning from the Governor, Mark Carney.

As Mark made clear, the Bank of England stands ready to provide £250 billion of funds, through its normal facilities, to continue to support banks and the smooth functioning of markets.

And we discussed our co-ordinated response with other major economies in calls on Friday with the Finance Ministers and Central Bank Governors of the G7.

The Governor and I have been in regular touch with each other over the weekend – and I can say this this morning: we have further well-thought-through contingency plans if they are needed.

In the last 72 hours I have been in contact with fellow European finance ministers, central bank governors, the managing director of the IMF, the US Treasury Secretary and the Speaker of Congress, and the CEOs of some of our major financial institutions so that collectively we keep a close eye on developments.

It will not be plain sailing in the days ahead.

But let me be clear. You should not underestimate our resolve.

We were prepared for the unexpected.

We are equipped for whatever happens.

And we are determined that unlike eight years ago, Britain’s financial system will help our country deal with any shocks and dampen them – not contribute to those shocks or make them worse.

The second challenge our analysis identified in advance was the uncertainty that a vote to leave would bring in the coming months and beyond as Britain worked with its European allies to create a new relationship.

The Prime Minister has given us time as a country to decide what that relationship should be by delaying the decision to trigger the Article 50 procedure until there is a new Prime Minister in place for the autumn.

Only the UK can trigger Article 50, and in my judgement we should only do that when there is a clear view about what new arrangement we are seeking with our European neighbours.

In the meantime, and during the negotiations that will follow, there will be no change to people’s rights to travel and work, and to the way our goods and services are traded, or to the way our economy and financial system is regulated.

However, it is already evident that as a result of Thursday’s decision, some firms are continuing to pause their decisions to invest, or to hire people.

As I said before the referendum, this will have an impact on the economy and the public finances – and there will need to be action to address that.

Given the delay in triggering Article 50 and the Prime Minister’s decision to hand over to a successor, it is sensible that decisions on what that action should consist of should wait for the OBR to assess the economy in the autumn, and for the new Prime Minister to be in place.

But no one should doubt our resolve to maintain the fiscal stability we have delivered for this country. To all companies large and small I would say this: the British economy is fundamentally strong, we are highly competitive and we are open for business.

The third and final challenge I spoke of was that of ensuring that Britain was able to agree a long-term economic relationship with the rest of Europe that provided for the best possible terms of trade in goods and services.

Together, my colleagues in the government, the Conservative Party and in Parliament will have to determine what those terms should be – and we’ll have to negotiate with our European friends to agree them.

I intend to play an active part in that debate – for I want this great trading nation of ours to put in place the strongest possible economic links with our European neighbours, with our close friends in North America and the Commonwealth, and our important partners like China and India.

I do not want Britain to turn its back on Europe or the rest of the world.

We must bring unity of spirit and purpose and condemn hatred and division wherever we see it.

Britain is an open and tolerant country and I will fight with everything I have to keep it so.

Today I am completely focussed on the task in hand as Chancellor of the Exchequer to bring stability and reassurance.

In conclusion, the British people have given us their instructions.

There is much to do to make it work.

We start from a position of hard-won strength.

And whatever the undoubted challenges, my colleagues and I are determined to do the best for Britain.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at B&Q in Southampton on 23 May 2016.

Prime Minister, thank you very much.

The Treasury has already published detailed analysis of what a vote to leave would do to Britain’s economy over the long term.

And the results showed that Britain would be permanently poorer to the tune of £4,300 per household – £4,300 each and every year.

That’s the long term bill for leaving the EU.

But what about the immediate impact on our economy? What will it mean next month, next year? And what will it mean for you?

Today the Treasury is publishing its detailed and rigorous analysis of the immediate impact of leaving the EU on growth, jobs, prices, wages, house prices and our nation’s finances.

And the conclusion is that all would be hit.

Why is that?

Well, first households and businesses will know that Britain is going to be poorer in the future, so they’ll start cutting back on spending now, and avoiding big investments.

And that has an effect on the economy now.

Second, leaving the EU creates a huge amount of uncertainty.

We’d have just two years to work out how to leave the EU; two years to find a new working relationship with our neighbours; two years to do trade deals with over 50 other non EU countries; two years to introduce a load of new regulations here at home.

In other words, two years at the very least of complete uncertainty – and probably more.

And what will British businesses be doing during those two years?

They will be watching and waiting nervously.

They will delay purchasing new machinery, put on hold making plans for new premises.

They won’t take new people on; some will let existing people go.

And what about families – how are they likely to respond?

Families will also be uncertain about what is coming next.

If you don’t know what’s going to happen to your job, your partner’s job, your pay or the fortunes of the firm you work for – it would make sense to delay spending on things.

People will put off trying to buy a home, or starting their own business.

Put together millions of individual decisions like that and there is real damage to the economy.

And then there’s the impact on financial markets – and we’ve all learnt to our cost during the financial crash how that can affect us all.

Markets would be volatile, banks would be more cautious, the value of things like shares would likely fall.

So stack all these things together…

the fact we’d be heading towards a poorer Britain,

the fact we’d be surrounded by uncertainty,

the fact the financial system would be volatile,

and it builds up to a profound economic shock if Britain leaves the EU.

The Treasury asked one of the country’s leading economists and a former Deputy Governor of the Bank of England, Professor Sir Charles Bean to review the work, and he concludes that it “provides reasonable estimates of the likely size of the short term impact of a vote to leave on the UK economy”.

So what are the numbers from the Treasury analysis?

Economists looked at two scenarios – one where Britain experiences a shock, the second where it’s a severe shock. Under both scenarios here are the results.

This is what happens if Britain leaves: the economy shrinks,

the value of the pound falls,

inflation rises,

unemployment rises,

real wages are hit,

so too are house prices,

and as a result – government borrowing goes up.

The central conclusions of today’s Treasury analysis are clear – a vote to leave will push our economy into a recession.

Within two years the size of our economy – our GDP – would be at least 3% smaller as a result of leaving the EU – and it could be as much as 6% smaller.

We’d have a year of negative growth – that’s a recession.

The pound would fall in value – by between 12% and 15%.

That doesn’t just mean it’s more expensive when you have a holiday abroad.

It means everything we import becomes more expensive, which increases inflation and hits family budgets.

Within a year of the Referendum, inflation would be over 2% higher.

And let’s be clear who that would hit the most: the lower income families who spend the largest proportion of their income on things like food and energy bills.

In the financial markets, tougher conditions would lead to higher mortgage costs for families.

By 2018 house prices would be hit by at least 10% and as much as 18%.

So that’s what it means to vote to leave the EU.

Incomes fall.

Mortgage rates go up.

And the value of the family home falls too.

Behind all this – what people can afford to buy, where they can afford to live – are people’s jobs.

And so I want to talk to you about the impact on jobs too.

The Treasury’s analysis published today finds that a direct consequence of a vote to leave the EU would be significant job losses across the UK.

Within two years, at least half a million jobs would be lost.

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.

Youth unemployment would rise by over 10%.

And for those that stay in work, wages will be hit too as firms see their profits fall.

The Treasury’s analysis finds that real wages will fall by almost 3% in the first two years compared to where they’d be if we remain in the EU.

To put it in perspective – that’s a pay cut worth almost £800 a year to someone working full time on the average wage.

The analysis today is clear: the uncertainty that would be caused by a vote to leave would put the brakes on investment, would cost over half a million people in our country jobs, and would cut people’s wages too.

And of course, all of this would have a big impact on the nation’s finances and how much we have to spend on things we value like our NHS and schools.

If we vote to leave, evidence shows that the deficit would be higher than it would be if we remain.

The borrowing bill for leaving the EU would be between £24 billion to £39 billion a year.

Let me end by saying this: it’s only been 8 years since Britain entered the deepest recession our country has seen since the Second World War.

Every part of our country suffered.

The British people have worked so hard to get our country back on track.

Do we want to throw it all away?

With exactly one month to go to the referendum, the British people must ask themselves this question: can we knowingly vote for a recession?

Does Britain really want this DIY recession?

Because that’s what the evidence shows we’ll get if we vote to leave the EU.

And to those 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.

None of this needs to happen if we vote to remain.

Yes, we’ve got improvements to make to the EU – but we know what they are and we’re clear about what the future holds.

If we remain, major British car manufacturers will go on selling hundreds of thousands of cars to Europe tariff-free. If we remain, British farmers will go on selling their beef and lamb to Europe tariff-free.

If we remain, British building firms will go on building homes, and people will have the confidence to do-up their own homes and shop with companies like yours.

And if we remain, our economy won’t lose half a million jobs, but instead we’ll create more than a million jobs over the coming years.

That is the brighter future on offer for our country.

We’ve spent 6 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.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 13 May 2016.

I’m delighted to welcome Christine Lagarde and her team to the Treasury this morning, so they can outline the findings of the IMF’s annual Article 4 assessment of the British economy.

The Article 4 assessment plays an important role in providing independent scrutiny of the prospects for our economy, and today the IMF report on a British economy that is growing, with low unemployment and rising wages.

We’ve got that growing economy thanks to the hard work of the British people and because we’ve stuck to our long term plan.

But there are many challenges we need to address if we are going to go on raising living standards, and the IMF help us to identify them.

I can say that we accept the broad conclusions of their report today.

First, they urge us to go on repairing the public finances.

We’ve made huge progress in reducing the record deficit of more than 10% we inherited to around 3% this year, but it is still too high.

I welcome the IMF’s endorsement of our plan to continue to bring stability to our finances – and their acknowledgment that the pace of additional consolidation set out at the recent Budget was, in their words, “appropriate”.

Second, the IMF remind us of the big challenge we, like other advanced economies, face on productivity growth.

This is a challenge we acknowledge, and one we’ve already taken steps to tackle – with initiatives from the apprenticeship levy to the National Infrastructure Commission – and in next week’s Queen’s Speech there will be a number of major measures to do even more to make Britain’s economy fit for the modern age.

The third challenge is the current account.

A wide current account deficit leaves the UK reliant on financing from abroad, and more exposed to economic risks than we’d like.

We’re taking steps to reduce it, including mobilising the whole government behind our exports strategy, and as the IMF has said, our plan to repair the public finances will support a gradual narrowing of the current account.

This year’s Article IV mission comes alongside the IMF’s Financial Sector Assessment Program of the UK, which is conducted once every five years.

This is an innovation since the financial crisis that ensures major financial centres are subject to international scrutiny.

I’m glad the IMF acknowledge the enormous progress we’ve made under this government to make our financial sector stronger, to improve dramatically our financial supervision, and to ensure Britain is better prepared for any financial shocks.

So in the view of the IMF, the UK economy is set on a positive course: with rising incomes, more jobs and a sound financial system.

That is what is on offer if we remain in the EU.

For the IMF have been in town for this Article 4 as Britain prepares to take what the Fund describe as a “momentous decision” on whether to remain in the European Union, or leave.

The IMF are clear that even the prospect of a leave vote is already having an impact on investment and hiring decisions, and weighing on economic growth in the UK.

But the Fund are also clear that this could be a mere taste of things to come if we vote to leave.

The IMF today finds that a vote to leave would cause a “protracted period of heightened uncertainty”, “financial market volatility” and a “hit to output” – in other words, a hit to growth.

They say that the long term impact on incomes in Britain would “likely be negative and substantial,” and they note that the market reaction to these adverse economic effects could entail:

a “sudden stop of investment inflows into key sectors”
“sharp drops” in house prices
and “sharp drops” in equity or share prices too
and the costs of borrowing for households and businesses could rise
And the IMF also put to rest the fallacy that’s been peddled by those who say Britain will have more money for public services if we’re not paying into the EU budget.

The IMF are very clear today: the hit to growth we could expect from a vote to leave would cost our public finances more than the amount we’d gain from no longer contributing to the EU budget.

Put simply, the IMF says a vote to leave costs us money.

We’d have less to spend on public services like schools and the NHS if we leave the EU.

Ahead of this historic referendum the British people have been clear: they want facts, and they want credible independent opinion to help inform their decision.

Today the independent IMF reinforce the conclusions of the independent Bank of England.

These are the facts that the British people need to hear. If we vote to leave, British families will be poorer and Britain will be poorer. Incomes would be hit, businesses would suffer, and we’d have less money to spend.

That’s if we vote to leave. But there’s a positive future for Britain on offer if we stay in the EU. Our economy is expected to keep on growing, businesses will keep creating jobs and families will benefit from rising wages and living standards.

Let’s not put all that at risk with a leap in the dark.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, at Ryanair in Stansted Airport, on 16 May 2016.

Thank you Michael [O’Leary]. It’s good to be here at Ryanair today.

Ed Balls, Vince Cable and I are from different political parties.

We fought each other at the last general election with different economic arguments and we’ve clashed repeatedly in the House of Commons over the years.

But there’s one thing we all agree on.

And it’s that it would be a huge mistake for Britain to leave the EU and to leave the Single Market And we’ve come here today to Ryanair to make that point.

You are an Irish company, but you’ve got 3,000 thousand employees here in Britain, flying 41 million British passengers to over 200 destinations every year.

That would not be possible without the Single Market.

And it’s because you’re part of a growing British economy that you’re announcing today a plan to invest $1.4 billion this year – that’s almost £1 billion – and create 450 new jobs in the UK.

And you are very clear: those are jobs and investment that would be at risk if we left the EU.

It’s one, very practical example of what is at stake on June 23rd when we vote in this referendum.

In the past week we’ve seen two defining moments in the campaign.

The first was the 24 hour period when both the Monetary Policy Committee of the Bank of England, and the Managing Director of the International Monetary Fund told us that Britain’s economy would suffer if we left the EU.

Their message could not have been clearer: Britain will be poorer and the British people will be poorer.

A vote to leave could see family incomes fall, growth hit, and borrowing costs rise.

It is difficult to think of more credible observers of the British economy than the 9 members of the Monetary Policy Committee and the staff of the International Monetary Fund.

And they join a line of observers that range from the OECD, to the London School of Economics, to 8 former US Treasury secretaries, to the President of the United States of America, to the Prime Minister of Japan, to the leaders of Australia and New Zealand – indeed every member of the G20, every one of our major trading partners and every major international financial institution has been unequivocal: leaving the EU would come at an economic cost.

And what has been the response of the leave campaign?

They say it’s all a massive conspiracy.

So that’s everyone from Mark Carney to Christine Lagarde, to Barack Obama, to the entire editorial team at ITV, the staff at the IMF and the OECD, to hundreds of economists, a majority of leaders of small, medium and large firms – they think they’re all part of some global stitch up to give misinformation to the British people.

The next thing we know the Leave camp will be accusing us all of faking the moon landings, kidnapping Shergar, and covering up the existence of the Loch Ness monster.

The response to the sober economic warnings from around the world by those who want to leave the EU has not been credible or serious.

There is a reason the three of us are standing here today, putting aside our very obvious differences.

It’s not a conspiracy – it’s called a consensus.

The interventions of the last couple of weeks, from the IMF to the Bank of England make very clear that the economic argument is beyond doubt.

Britain will be worse off if we leave the EU. British families will be worse off – equivalent to £4,300 per household.

Leaving the EU is a one way ticket to a poorer country.

This emergence of this overwhelming consensus has been one of the defining moments of the last week. But there is now a second key development and it’s just as revealing.

And that is that the leading advocates for Britain leaving the EU have finally conceded – after weeks of evasive answers – that not only do they want Britain to leave the European Union, they want us to leave the Single Market too.

It’s a major admission from the leave campaign – and a major moment. For it means we can begin to quantify just what the economic costs of leaving are.

And it’s important for everyone in Britain to understand what the Single Market is.

This is the arrangement that Margaret Thatcher took us into in the 1980s.

The arrangement that the House of Commons, under Labour, Conservative and Coalition governments has endorsed.

The Single Market gives British companies and the people who work for them access to half a billion customers. It is the world’s largest trading area.

It means that when you sell something like a car, or an aeroplane engine, or a plane ticket or a food product, they can all be sold to consumers in other European countries without paying any tariffs or customs duties – in other words, there’s no extra costs to selling to our neighbours.

And it means we, as consumers, can buy those things from our European neighbours without us having to pay extra costs for doing so.

It also means we can offer services like insurance premiums and architectural designs and pensions and engineering plans direct to customers in Europe and vice versa.

The Single Market is more than just a free trade area. It’s a set of common standards.

And in an age when we’re buying and selling things on the internet, it’s more important than ever.

The Single Market means that when we buy things from companies, we know that they’re safe, that they don’t cause environmental damage, that the labelling is accurate and that you know you’re going to get what you pay for.

In the European Single Market instead of having 28 sets of rules, we have one agreed set of rules, that Britain helps shape and influence.

If we leave the EU Single Market we would lose all of that.

Ed Balls and Vince Cable are going to explain what this means in practice for British companies, British workforces and British consumers.

But I can tell you today what the overall impact on the British economy would be.

In recent weeks the leave campaign have made clear they would be prepared to see Britain leave the EU and fall back on default World Trade Organisation rules.

This is the worst case scenario and would be a disaster for the British economy.

New Treasury analysis shows that if we left the Single Market and relied on the rules of the World Trade Organisation, then after 15 years we’d be doing £200 billion less trade every year, in today’s terms.

And we’d miss out on over £200 billion of overseas investment into our country.

And let me tell you what £200 billion less trade every year and £200 billion less overseas investment means.

It means we don’t see the new jobs and facilities like we see here today at Ryanair.

It means less investment in offices, factories, car plants, shopping centres, high street shops and local industrial estates.

It means companies don’t sell as much, don’t make as much, don’t employ as much.

What does all that mean for you? It means fewer jobs, lower incomes and higher prices in the shops.

So let me end by saying this – the British people want to know the facts. In the last week we’ve learnt two key facts.

Fact: we now know the Leave campaign want to take us out of both European Union and the Single Market.

Fact: we know that the overwhelming consensus of the independent economic experts is that Britain would be poorer if we left.

And from those two facts, we can work this out:

Those who will pay the price if we leave the EU are the working people up and down this country, doing the right thing, providing for their families, worrying about their children’s future; these are the people that politicians from all parties should seek to represent.

These are the working people who will be stronger, safer and better off if we remain in the EU.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Bristol on 18 April 2016.

Good morning.

It’s great to be here at the brilliant National Composite Centre in Bristol, and good to be joined by my colleagues Liz, Stephen and Amber.

The engineers, scientists and designers who work here deliver world-leading research and innovation in composites for some of Britain’s most important industries.

One sector that particularly benefits from the work of the National Composite Centre is aerospace. The South West is a great showcase for Britain’s successful aerospace industry.

Half of everything our aerospace sector exports is sold to the European Union, and our aerospace industry relies on imports from Europe to make their finished products.

We’re here to talk about Europe today.

In a little over two months’ time the people of the United Kingdom will decide whether our country should remain in the European Union or leave it.

It’s the biggest decision for a generation – one that will have profound consequences for our economy, for living standards and for Britain’s role in the world.

But what many people are saying at the moment is that they don’t have enough facts and information to make an informed decision.

And so it’s up to all of us who fought so hard to give people this referendum, so they could take this momentous decision, to provide those facts and that information.

That’s why today the government is publishing a comprehensive Treasury analysis of the long-term economic impact of EU membership and the alternatives.

This is a sober and serious look at the costs and benefits of remaining in the EU, or leaving it.

Not just for Britain, but for the individual families of Britain.

To put it simply: are you better off or worse off if Britain leaves the EU?

Has your family got more money each year, or less?

And is there more or less money available to your government to spend on public services and lower taxes?

To find the answer to those questions, the Treasury has gone back to first principles and looked at the current costs and benefits of our membership of the European Union – essentially what we put in and what we get out.

We’ve also looked at how that would change if the EU were to reform along the lines it has committed itself to.

And we’ve looked at the costs and benefits of leaving the European Union.

Not the immediate shock – a future Treasury study will look in detail at that.

But rather the long term impact that our exit from the EU would have on family finances and the nation’s finances.

We’ve done that by examining in detail what the alternatives to EU membership look like for Britain’s economy. We know now pretty clearly what those alternatives might be, although we don’t know which one Britain would pick, or our European neighbours would accept.

There’s seeking membership of the European Economic Area, where you get access to part of the single market but you have to pay into the EU and accept free movement, without any say over either. That’s the Norway model.

There’s relying on our existing membership of the World Trade Organisation where, like Russia or Brazil, you put nothing into the EU but get nothing out in terms of preferential access. That’s the WTO model.

And then there’s the halfway house of trying to negotiate a bilateral trade deal with the EU, where you get some trade access but you’re not part of the Single Market. That’s the Canada model.

It’s a complete fantasy to claim we could negotiate some other deal, where we have access to the EU’s single market but don’t have to accept the costs and obligations of EU membership. Other member states have made it very clear in recent weeks that’s not on offer – and how could it be?

How could other European countries give us a better deal than they have given themselves? Never forget that while 44% of our exports go to the rest of the EU, less than 8% of their exports come to us.

So in today’s analysis we look at the costs and benefits of our existing membership of the EU, and test that against the three realistic alternative models – like that of Norway, the WTO and Canada.

Shortly I will ask my colleagues Liz, Stephen and Amber to go through each alternative in turn.

But first let me say something about the underlying economic assumptions that were made, and upon which the analysis rests.

We assume that the underlying objective of economic policy is to increase living standards through the creation of jobs, rising household incomes, and low and stable prices for consumers.

You may have other policy objectives that you think trump those objectives – but the purpose of economic policy is higher living standards.

It’s well established in economic literature that those higher living standards are ultimately driven by long term improvements in productivity: in other words, increasing the value of what British workers produce per hour. And it is also a well-established doctrine of British economic thinking over centuries that greater economic openness and interconnectedness helps raise productivity.

That’s because greater openness to trade and investment increases competition, enhances incentives for firms to innovate, and gives them access to finance – this enables them to invest and employ people, and it gives consumers access to more choice and lower prices.

Now I accept there are those who advocate a completely different economic approach – a closed, command economy, and no free trade or competition or private business.

But that’s never been the consensus in Britain, or the rest of the world these last few decades.

And those most prominent in advocating our withdrawal from the EU do so, in part, with the claim it will lead to freer trade and freer markets – so they share these basic assumptions about the advantages of economic openness too.

In this document the Treasury therefore assess the alternatives to EU membership, and see whether they enhance or diminish our economic openness and interconnectedness and by how much.

First, is market access increased or reduced? In other words, do British businesses and consumers face tariffs, quotas and unfair competition or other barriers?

Second, is Britain’s economic influence enhanced or curtailed? What say do we have over the rules and standards that apply to the goods and services we trade in?

Third, are the costs to Britain greater or less? What do we end up paying for a different trading relationship? We know the answer to these tests with Britain’s current membership of the EU.

When it comes to market access, there are no tariffs or quotas applied to British exports to the 500 million consumers who live in the European Union.

But a Single Market is about more than the absence of quotas and tariffs – it means common standards, so there aren’t invisible barriers and obstacles to trade.

So, for example, when a highly skilled car maker is building a car, they know it can be sold directly and without any hindrance into the continent of Europe.

It also means a British-based architect or engineer can get off the plane in Munich or Madrid and immediately start doing business.

And it means that any European airline can offer the best service at the best price to provide that journey.

That’s what the Single Market means – and the Treasury analysis shows EU membership has increased trade with EU members by around three quarters.

Greater openness leading to higher productivity and rising living standards.

We also know that our current EU membership gives us influence over the rules and standards of that Single Market – we have votes over what they are, our Commissioners can help design them, our Ministers and elected MEPs can shape them, and on key issues like common tax standards we have an absolute veto.

But we are not in the single currency and we are not in the Schengen free border area – so we have a special status in the EU.

That gives us the best of both worlds: influence over the single market without the obligations that membership of the euro and open borders would bring.

And we know what the costs and the financial rewards of being in the EU are.

We pay into the EU budget, but our citizens, businesses and universities also receive money from the EU budget.

The net direct cost is equivalent to a little over 1 pence for every £1 we raise in taxes.

But we have also received over £1 trillion of overseas investment into Britain, much of it driven by the fact we are in the EU and its Single Market.

Indeed, we have received more of this overseas investment than any other EU member state – and that drives better jobs and rising living standards too, bringing money into the exchequer to spend on public services.

So we know how our existing membership of the EU performs against these tests of openness and interconnectedness.

We also know the advantages that future reform of the EU can bring for Britain.

For the EU is not perfect. The Single Market can be expanded, the costs can be reduced, and the influence of Members States can be enhanced.

That’s what the new settlement, negotiated by the Prime Minister, supported by the Cabinet, delivers.

The Treasury analysis shows that achieving EU-wide reforms to deepen the Single Market and complete major ongoing trade deals offers a huge prize for Britain.

It could add up to 4% to our GDP over the coming 15 years – that’s thousands of pounds more for each British household.

So Britain’s membership of the European Union contributes to the openness of our economy – and that leads to higher quality jobs, rising living standards and lower prices.

And we know there will be better jobs, higher living standards and even lower prices if Europe reforms.

That’s the future on offer if Britain remains in a reformed EU – a future where we are stronger, safer and better off.

What does the Treasury’s rigorous economic analysis show about the alternatives?

Let me hand over to my colleagues Liz, Stephen and Amber. They will go through each of the alternative models – like that of Norway, the WTO and Canada – and look at what they would mean for British families.

Elizabeth Truss, Secretary of State for Environment, Food and Rural Affairs

The document published today shows how one of the big advantages of being in the European Union is the ability we have to shape the rules.

Our record shows that reforms are more likely with Britain around the EU table:

Throughout the 80s we drove trade liberalisation in Europe, with action to break down barriers to the free movement of goods, services, capital and people which meant the creation of the Single Market as we know it today.

In the early 90s it was Britain who pushed to dismantle national barriers to air travel and open Europe’s air transport up to competition, which led to the creation of low cost carriers, and helped cut the cost of air travel by 40% in just 8 years.

And in the last decade it’s been Britain pushing to deepen the Single Market in digital services – simplifying rules for cross-border online purchases, and supporting a package to end mobile roaming charges in the EU.

So we’ve proven we can influence the rules from the inside. The question is could we shape them from the outside? If we left the EU some say we could be like Norway.

Norway isn’t in the EU, but it is in another group called the European Economic Area

On paper it looks pretty similar to our relationship with the EU.

We would still be in a European club – albeit a different one.

We’d still pay contributions to support other EU member states.

We’d still implement EU legislation.

But there would be a crucial difference.

We’d have no say over the rules.

Our Prime Minister would no longer have a seat at the European Council, where EU leaders take decisions about the future direction of the continent.

No British Minister would be there when farming issues were decided – or indeed any other issue that impacts our country.

We would have no vote in the Council of Ministers – the body where the 28 EU Member States decide on legislation.

But we’d still have to implement their decisions on the internal market, and follow their rules on State Aid and competition.

The current EEA members take this on the chin.

For Norway, that means losing a vote share that inside the EU would be worth 1%.

That’s a pretty low price.

But what about Britain?

Our vote share would drop from one of the highest, alongside France and Germany, to zero.

Our strong, reforming voice would be silenced.

That’s what I call a loss of British sovereignty.

But it’s not just the lack of influence that worries me about the Norway model.

It’s the fact that the EEA tariff-free trade doesn’t cover key areas like the vast majority of agriculture and fisheries, so Britain’s farmers would be hit.

It’s the fact that EEA members aren’t part of the EU customs union, so British firms would face new customs checks and bureaucracy if they wanted to trade with Europe.

Every time Norway exports a product to an EU country, they have to fill in a form with 50 boxes and guidance that is 78 pages long.

This must be frustrating for Norway, even though many of their exports are raw materials, making these forms easier to comply with. But it would be a nightmare for Britain as many of our exports are complex finished products like cars or machinery.

All this new bureaucracy would significantly reduce our openness and interconnectedness – reducing the competitiveness of British firms and acting as a drag on our productivity.

And being part of the EEA means still accepting EU regulations, contributing to the EU, and permitting the free movement of people,

So if we decided to be like Norway, we’d have worse access to the Single Market. We’d keep paying into Brussels but we’d be a rule-taker instead of a rule-maker.

The Treasury has run the numbers and joining the EEA would significantly reduce our openness to trade, and as a result, productivity and investment would fall.

Let’s be clear on this – because we know that increasing productivity is the key to increasing living standards. If productivity falls we will see lower wages in Britain; consumption will fall and people will be permanently poorer.

The analysis published today shows that following this path would mean a long-term reduction in GDP of around 4% every year.

And this long-term reduction in GDP will hit our tax receipts as people and businesses earn less.

The impact on tax receipts of joining the EEA would be £20 billion a year within 15 years’ time. Not a one-off hit, but an ongoing painful reduction as our country raises less money, and has less money to spend on public services.

Those are the facts on the European Economic Area.

So the analysis shows if we want to minimise the significant damage to our economy from leaving, we would, effectively, have to re-join another European club on worse terms – no vote, no power, still paying into the EU, and with much less protection against the abuse of free movement.

For a country the size of Britain, with the strong voting clout we already have in the EU, this would represent shooting ourselves in the foot.

Stephen Crabb, Secretary of State for Work and Pensions

Next I want to talk to you about global trade. There are some who imply there’s a tension between trading with Europe and trading with the rest of the world.

That is simply wrong. Both are good and we need to do both.

And that’s exactly what we will do if we remain a member of the EU.

Yes, nearly half of our exports go to Europe, but our exports to the rest of the world have gone from £150 billion to £290 billion in just 10 years – that’s a 95% increase.

And to those who say that’s proof we don’t need the EU, just look at where they’ve increased the most.

We currently benefit from trade deals the EU has negotiated with over 50 other countries.

And as today’s document explains, those deals have been great for Britain.

Our exports to South Korea have grown by over 100% in just four years since the EU Free Trade Agreement was signed. Exports to Chile have grown almost 300% in a decade.

Those other countries will have given up a lot in negotiations to gain access to a bloc with 500 million customers and a quarter of the world’s GDP.

But if we vote to leave, we’ll only have two years before all the trade deals we have via the EU would fall away. The clock would be ticking, yet renegotiating trade deals with more than 50 countries as a single country would take many, many years.

And that’s if we can even get the talks off the ground: the US Trade Representative recently said the United States is “not particularly in the market for free trade agreements with individual countries”.

Some argue there’s no need to worry – we could just fall back on the existing World Trade Organisation rules. Now let me be absolutely clear. The WTO is a brilliant organisation and one that Britain is proud to be a member of.

But their rules are a sort of ‘minimum standard’ for global trade – and they fall way short of the Single Market and Free Trade Agreements we currently access through the EU. Under WTO rules we’d face common export tariffs.

The EU would charge an average tariff of 36% on dairy products. 12% on fish. 12% on clothes. 10% on cars.

Our services exporters would be hit too – as they’d lose their automatic right not to be discriminated against through being part of the Single Market.

And we’d have to decide where to set British import tariffs.

Would we choose to set high tariffs on food, to protect British farmers?

Or would we set low tariffs on food, to protect British consumers?

Regardless of what we decided on import tariffs – there’s a catch.

WTO rules would require us to offer the same tariff to all countries.

So if we wanted to offer low tariffs to our neighbours in Ireland, we’d have to do the same for all other 160 countries in the WTO.

So for example, we’d have to offer low tariffs to countries like Brazil and Argentina while they apply high tariffs on our key exports, like Scotch Whisky at 20% in Argentina, and cars at 35% in Brazil.

Trade deals are about give and take, but we’d have turned up to the table having already played all our cards. The analysis published today shows that the WTO scenario represents the most extreme break from the EU, and it is also the alternative that is the worst for the British economy.

The sharp reduction in trade would be accompanied by a reduction in foreign direct investment into the UK as we’d no longer have the same degree of unrestricted access to the EU Single Market of 500 million consumers. Think of all the global firms that have headquarters in the UK so they can sell into Europe – if we leave the EU, they could leave Britain.

The Treasury’s rigorous analysis of the trade and investment impact of the WTO option shows that after 15 years Britain’s economy would be around 7.5% smaller.

And the fiscal cost of the WTO option is the most painful of all – in the long term our country would have to cope with annual tax receipts that are £45 billion lower. Every year.

Conclusive proof that when it comes to trade, openness and economic growth, it’s better to go for the best deal available rather than the lowest common denominator.

Amber Rudd, Secretary of State for Energy and Climate Change

As the document today explains, one of the most valuable benefits of EU membership for Britain is the Single Market. And that Single Market is not just in goods, but in services too.

So what does a Single Market in services mean, and why does it matter?

It matters because 80% of our GDP comes from the services sector, and 80% of our workforce are employed in the services sector.

Britain is the country that designs the building, arranges the finance, insures the business, draws up the contract, produces the TV series, creates the advertising campaign and audits the accounts. High skilled service industries like these are vital for our future.

The Single Market means that all of our exports can be sold to Europe tariff-free.

And crucially it isn’t just tariff barriers that the EU has eliminated for Britain.

The Single Market seeks to eradicate non-tariff barriers too. So a British architect or a British lawyer can go and work in any other European country and have their professional qualifications recognised.

And the creation of passporting rights in the 90s means that financial services firms like banks, insurers and investment managers can establish themselves anywhere in the EU, and trade across the whole Single Market, with lower cost and lower complexity.

The figures speak for themselves.

Our service industries are growing at a rate of nearly 3% a year on average.

Our services exports have increased from £130 billion to £220 billion in the past decade alone – with Europe being by far our biggest market.

I accept the European Single Market for services is not yet complete – that’s why commitments to complete it formed such a key part of the Prime Minister’s recent negotiation.

But the results clearly show that the Single Market has benefitted our services sector.

Now I want to look at the final alternative scenario the Treasury has modelled: a negotiated bilateral agreement.

They’ve looked closely at countries like Switzerland and Canada who’ve negotiated bilateral trade deals with the EU.

The Canada free trade agreement seems to be the most popular with those who want to leave, so let’s look at its benefits and costs, and contrast it to EU membership.

It’s been held up as the most comprehensive Free Trade Agreement the EU has ever made.

It’s a vast, detailed agreement that runs to over 1500 pages – although 800 of those pages are exemptions and barriers to free trade.

And remember it’s not in place just yet.

Canada spent 7 years negotiating the deal, waiting outside the door as those on the inside decided whether to agree.

But when it comes into force it may work well for Canada and for the EU.

However, I’m not so sure it would work well for us.

Their deal does offer some liberalisation in services it’s true. But the Canadians export about a tenth of the value of services to Europe than we do.

And the Treasury analysis finds that around 50% of our service exporters would face materially less access to the EU market than they currently enjoy if we were to replicate the Canadian deal.

In addition, Canada doesn’t have access to the financial services passport.

This would be a real problem for Britain. If we left the EU and lost access to passporting rights the evidence suggests that financial services jobs would move out of Britain.

But it’s not just services where the Canadian deal wouldn’t work for us.

On agriculture, key sectors are excluded from the Canadian deal.

Take beef for example. We currently export over 90,000 tonnes of beef a year to Europe tariff-free, and if we wanted to sell more then we could.

The Canadian agreement allows them a quota of 50,000 tonnes, above which they would be subject to some tariffs equivalent to around 70%.

If we voted to leave then a reciprocal deal would badly hurt British beef farmers.

And how about another example – cars. Our car manufacturing sector is thriving, but as you’ve already heard from Stephen, the EU places a 10% tariff on cars from outside the EU.

This would cost our industry more than £1 billion a year, and the Canadian deal only eliminates them after 7 years.

So even though the Canadian Free Trade model is put forward as the best and most comprehensive option by those who want to leave, it’s clear there are some crucial gaps for a country like Britain.

The Treasury analysis published today shows that a Free Trade Arrangement like Canada’s would have a significantly negative impact on our trade, investment and productivity.

After 15 years Britain’s economy would be around 6% smaller, compared to 3.8% smaller were we to join the EEA.

So even the best bilateral trade deal the EU has agreed with an outside country is significantly worse than the access you’d get to the Single Market through the EEA.

George Osborne, Chancellor of the Exchequer

So you’ve heard today the serious and sober Treasury analysis, which sets out the costs and benefits of Britain’s membership of the European Union.

The costs of accepting common European standards; and the benefit that gives us of unique access to a Single Market of 500 million people.

The costs of being one voice among many when it comes to setting those standards; and the benefits of the influence that gives us to shape those rules to our advantage, and extend our trade access around the world, so that when it comes to our economic environment, Britain is a rule-maker not a rule-taker.

The costs of directly contributing a little over 1 penny in every 1 pound of taxes; and the direct benefits of the billions of pounds of foreign investment which flow more to Britain than any other European country and boosts our public finances.

Deliver the economic reform we’ve agreed in the European Union, and the benefits are even clearer.

The analysis shows that our economy could be 4% greater if we extend that Single Market and do more free trade.

These economic costs and benefits of EU membership, with or without this brighter, positive future need to be weighed against the economic costs and benefits of all the plausible alternatives for Britain.

The Norway model – where we gain partial access to the Single Market, but face customs barriers and have no influence over the rules we’re forced to abide by.

Where we lose trade and investment, but still have to pay into the EU and accept free movement of people. The WTO model, where barriers are erected by our nearest and most important markets, everything we make from food to cars to clothing and all the services we provide – with severe consequences for our industry and the size of our economy.

The Canadian model, where our services that make up 80% of our economy cannot do business freely with Europe, and the integrated supply chains that are a feature of our advanced manufacturing face customs barriers for the first time in half a century.

Under any of these alternative models of the kind of relationship Britain might have with its principal export markets our influence is diminished; we trade less; we receive less investment; our openness and interconnectedness to Europe is reduced.

And you’d have to believe that we could more than compensate for that loss of trade and investment with Europe, by increasing trade and investment with the rest of the world.

But the evidence shows that our trade deals with more than 50 other non-EU countries would be jeopardised, and our ability to influence global trade rules would be hugely reduced.

We’d do less trade with the rest of the world outside the EU, not more.

The Treasury has modelled the economic impact of alternatives to EU membership.

As you’ve heard from my colleagues, the biggest impact comes if we just rely on being a member of the WTO.

The least impact comes if we try to form a relationship like Norway, but then we have to pay into European budgets and accept free movement – the very things those who want to leave claim they want to be rid of.

That’s why those most prominent in advocating British exit from the EU say we’d try to form an arrangement like Canada.

But we’re not Canada – our comparative advantage is in services and advanced manufacturing. 50% of all our services exports go to the continent of Europe.

So the economic analysis shows that this Canada-style arrangement comes at a real economic cost for Britain.

The central estimate is that in the long run GDP would be over 6% smaller and Britain would be worse off by £4,300 per household.

The people of Britain want to know the facts before they vote on 23 June.

The Treasury’s analysis steps away from the rhetoric and sets out the facts.

Britain would be permanently poorer if it left the European Union. Under any alternative, we’d trade less, do less business and receive less investment.

And the price would be paid by British families. Wages would be lower and prices would be higher.

And that means that Britain would be poorer by £4,300 per household.

That is £4,300 worse off every year, a bill paid year after year by the working people of Britain.

And that is the long term cost – in the short term we’d face a profound economic shock and real instability. This Treasury analysis is serious and sober – and it’s conclusive.

British families will pay a heavy economic price if we leave the EU.

And don’t believe the flimsy claim that at least we would get some money back by not paying our 1 penny in every £1 we raise in taxes to the European budget.

If we left the EU, we’d lose tens of billions of pounds in money for our public services, because our economy would be smaller and our families poorer.

The most likely bill our public services would pay if we left the EU is £36 billion.

That’s the equivalent of 8 pence on the basic rate of income tax.

Higher taxes and a smaller economy is not a price worth paying.

Of course, I know there will be many attempts by those who advocate exit to dismiss this Treasury analysis.

But it’s rigorous, it’s rooted in the facts and its conclusions are similar to every other credible independent analysis done around the world – from the recent global outlook of the IMF to the academic research of the London School of Economics.

And I would conclude by saying this:

It is a perfectly honest position to say that Britain would be worse off but that is a price worth paying.

But don’t pretend to the British people that leaving the EU comes at no economic cost.

There is a price to be paid if we leave – a £4,300 price that families will pay year after year.

Don’t let’s leave the EU on a false prospectus.

Let’s have the facts and the figures in front of us as we all make this huge decision on 23 June.

For me, in the end, it’s not just about the economics. It’s about who we are as a country.

The Britain I love is open, confident in its values and ready to shape the future of our world.

I don’t want Britain to be like Norway or like Canada or anyone else.

I want us to be like the Great Britain we are.

Strong. Proud. Prosperous.

Stronger, safer and better off in the European Union.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, on 23 April 2013.

In seventeen months Scotland will decide whether or not to end over three hundred years of partnership with the other nations within the United Kingdom.

As decisions go, they don’t come much bigger.

This isn’t a decision for the UK Government or me to take.

It’s a choice for people living in Scotland.

The UK Government is today publishing an in depth economic paper; the first of a series about the economic implications of Scottish independence.

With this, and future Scotland analysis publications, the UK Government wants to inform the debate and help people to make up their own mind.

The paper deals with one of the most important decisions that would face a separate Scotland – how to arrange its currency and wider monetary and fiscal affairs.

This analysis has been prepared by Treasury civil servants, which is why I’m speaking to you today.

Their analysis shows that the current arrangements of a full, monetary, fiscal and political union bring economic benefits to all parts of the UK.

Breaking up that union would represent a fundamental change, and confront an independent Scottish state with difficult choices about what to put in its place.

The paper provides evidence of how the United Kingdom benefits from being a deeply integrated single domestic market.

We trade together – Scotland exports to the rest of the UK nearly a third of everything it produces.

We do business together – nearly one in five private sector jobs in Scotland is for business based elsewhere in the UK.

We work together – each year over forty thousand people move across the border in each direction to live and work.

It’s not surprising then that Scotland’s economy is so closely aligned with the rest of the UK and its interests so inextricably linked.

So the analysis makes clear the value of being able to fully co-ordinate our monetary, fiscal, and financial stability policies.

Such co-ordination allows us to:

our central bank, the Bank of England, to set interest rates to suit conditions throughout the UK and to have the ability to step in rapidly to stabilize our financial system when the need arises;
take advantage of the UK’s ability to borrow in its own currency and credibility and track record with the international financial markets – built up over many, many years – to access cheaper financing;
leverage the UK’s large and diverse tax base of thirty million individual taxpayers and nearly two million registered businesses to ensure when times are tough there is the fiscal firepower to ensure resources go to wherever in the UK they are needed most.
As the Scottish Government’s own Fiscal Commission puts it:

Retaining a common currency would promote the single market and help facilitate trade and investment to and from the rest of the UK and elsewhere.

And the Commission is right on this point.

Who would conclude the answer to today’s economic and financial challenges is to:

– erect barriers between you and your most important trading partner;

– accept a premium on the cost of borrowing when money is tight;

– and conduct your business in two different currencies, across fluctuating exchange rates, when currently you don’t have to – with all the additional costs involved?

The Treasury paper identifies four potential alternative models from which a separate Scottish state could pick its currency and monetary arrangements.

All are a profound change from the pound we have today.

An independent Scotland could:

– adopt the pound unilaterally, just as Panama uses the US dollar;

– seek a formal agreement, like the Eurozone have with each other, to form a sterling currency zone with England, Wales and Northern Ireland in the continuing UK;

– agree to adopt the euro itself;

– or introduce a new Scottish currency.

And the analysis is clear: all of these alternative currency arrangements are less suitable economically than what we have now – for both Scotland and for the rest of the UK.

Scottish Government Ministers have made it clear they want an independent Scotland to keep the pound, the Bank of England and to enter a formal currency union with the rest of the UK.

The Treasury paper cautions that a formal currency union between two completely separate countries is not the same thing as keeping the pound we have now.

First, financial markets would need to be convinced such a union was built to last.

A durable currency union between two separate countries requires very strong and credible political commitment. The very opposite of what the SNP is proposing with its determination to break the political ties with the rest of the UK.

But the lesson from the Euro is stark – they want to weaken the political ties in a dramatic way.

Monetary union without close fiscal and political integration is extremely hard to sustain.

That’s why the Euro area is having to reform its institutions, as the original measures to maintain budgetary discipline of its member states proved inadequate.

Countries with the euro now have to:

– submit their budget plans to Brussels alongside their own national parliaments;

– commit by the Fiscal Compact to keep budgets balanced or in surplus;

– and face the prospect of sanctions if they run excessive deficits and fail to take effective action to cope with them.

And that’s not all.

You only have to look at the problems facing smaller members of the euro area such as Portugal, Ireland and Greece. The most recent reminder of how difficult things can become are the events in Cyprus.

Cypriot authorities have had to put in place temporary capital controls.

This wouldn’t happen within the US or within the UK.

And the Treasury paper cites the example of the last two nations to try to form a currency union following separation – Slovakia and the Czech Republic.

Their union fell apart after only thirty-three days as capital flowed from one to the other as investors and savers sought what they saw as a safer haven for their funds.

So the challenges for establishing a formal currency union between Scotland and the remaining UK are not hard to imagine.

The political commitment to maintaining the currency union would be tested daily in the financial markets; particularly if there was any hint of that currency union being a temporary arrangement – a real possibility if an independent Scotland was committed as a condition of EU membership to join the Euro at some point.

Indeed the Scottish Government’s own Fiscal Commission talks only of retaining sterling “immediately post-independence” and of how its proposed framework was “designed to be flexible” should Scotland’s economic conditions change post-independence.

Instead of talking up the strength and permanence of currency union, they are talking up the flexibility and short-lived nature of it.

Second, the Treasury analysis suggests that an independent Scottish state would have to accept significant policy constraints, even if the financial markets could be convinced of both countries’ commitment to maintain for the long-term a formal currency union.

Monetary policy set by the Bank of England in such a union would over time become less and less suitable for both countries, as tax and spending policies diverge.

Tax and spending would therefore need to take more of the strain to stabilize the Scottish economy in the face of economic shocks.

And the paper suggests that an independent Scotland would be more exposed than the UK to volatile revenues from oil and gas, and a large banking sector relative to the size of the Scottish economy.

Today in the UK we pool our tax resources – a common insurance policy where all pay their share of the premium.

We are able to transfer funds to help areas of the country adjust to economic shocks.

A co-ordinated UK response is automatic.

Such arrangements couldn’t simply be translated into a currency union of two separate countries.

An independent Scotland would have to agree its tax and spending plans with what would become a foreign government.

So the big contradiction is that those proposing separation are campaigning to “bring powers home” with one hand, while planning to give them away with the other.

Third, there is no guarantee that the terms of a formal currency union could be agreed between an independent Scotland and the rest of the UK.

There are no modern examples of a successful formal currency union between two countries of such unequal size.

There are currently seventeen members of the euro area.

The largest member – Germany – represents just less than thirty per cent of the GDP of the euro area as a whole, a sterling currency union would be much more imbalanced.

The continuing UK would comprise around ninety per cent of the total GDP in a sterling currency union with an independent Scotland.

Some have quoted the example of the Belgium-Luxembourg economic union, two countries with a similar difference in size.

But both countries kept separate currencies.

Luxembourg effectively ceded all control of monetary policy to the Belgian central bank.

And the monetary association nearly failed in the early 1980s when Luxembourg made plans to make the Luxembourg franc independent.

So let’s be clear: abandoning current arrangements would represent a very deep dive indeed into uncharted waters.

Would a newly independent Scottish state be prepared to accept significant limits to its economic sovereignty?

To submitting its budgetary plans to Westminster before Holyrood.

To constrain the degree of tax competition between Scotland and the rest of the UK.

To accept some continuing oversight by UK authorities of its public finances.

And what is the economic case for the remaining UK?

The Treasury analysis suggests that the answers are not clear.

Of course there could be some benefits for the rest of the UK in keeping the same currency as an independent Scotland using the pound, but it would also create significant economic risks.

However, the imperative to agree to a formal currency union would not be as strong for the rest of the UK as for Scotland.

While around 30 per cent of total Scottish output is exported to the rest of the UK, the rest of the UK relies on exports to Scotland for less than 5 per cent of its total output.

The benefits of this trade would need to be judged against the imbalance within the sterling currency union of exposure to economic and financial risk.

The rest of the UK – as the larger economy – would be much more exposed to the risk of an independent Scotland running into fiscal and financial difficulties.

As Professor John Kay – formerly a member of the Scottish Government’s Council of Economic Advisers – has put it:

It is easy to see why the rest of the UK, representing 91.5% of a monetary union, might seek oversight of the economic affairs of Scotland, representing 8.5% of the same union. It is more difficult to see why the rest of the UK representing 91.5% of a monetary union should concede oversight of its policies to Scotland, representing 8.5% of the union.

The fundamental political question this analysis provokes is this.

Why would fifty-eight million citizens give away some of their sovereignty over monetary and potentially other economic policies to five million people in another state?

Before the rest of the UK could ever agree to enter a formal currency union, any future UK Chancellor of the Exchequer at the time of independence would have to provide the British people with a clear and compelling answer to this question of sovereignty.

The SNP asserts that it would be in everyone’s interests for an independent Scotland to keep the pound as part of a Eurozone-style sterling zone.

But the Treasury analysis we are publishing today shows that this is not the case.

Let’s stop speculating – and look at the evidence: would the rest of the UK family agree to take that risk?

Could a situation where an independent Scotland and the rest of the UK share the pound and the Bank of England be made to work?

Frankly, it’s unlikely, because there is real doubt around the answers to these questions.

In other words, the only way to be sure of keeping the pound as Scotland’s currency is to stay in the UK.

The Treasury paper also discusses other alternatives open to an independent Scottish state if it proves impossible to agree a formal currency union with the rest of the UK.

It could continue to use the pound without the rest of the UK’s agreement.

However, to do so would leave an independent Scotland with no control over its own monetary policy.

The Bank of England would continue to set interest rates – but without any regard for conditions in Scotland.

And with no ability to print money, a Scottish monetary authority could only play a very limited role as a ‘lender of last resort’ to Scottish commercial banks.

In this scenario an independent Scotland would be faced with severe monetary and fiscal constraints.

Some small countries have adopted this approach.

Montenegro uses the euro.

Panama the US dollar.

But, both the Scottish Government’s Fiscal Commission and the Treasury’s analysis conclude that this option would not be appropriate for a country of Scotland’s economic size and complexity.

Another option is that Scotland could apply to join the euro area.

Indeed, it may well have to as part of conditions for EU membership.

But this would mean losing the pound, imposing new transaction costs on Scottish businesses’ trade with their largest market – the rest of the UK.

And the Scottish economy differs significantly from the euro area.

It is certainly less well integrated with the EU than with the UK as a whole.

The policies of the European Central Bank would therefore be less well suited to conditions in Scotland than those currently pursued by the Bank of England.

And an independent Scotland would face the same constraints designed to ensure the eurozone’s stability as its other smaller members.

Finally it could introduce a new independent Scottish currency.

An attractive option for many as it’s the only one where an independent Scotland would not have to give up control over some or all of the economic levers at its disposal.

However, the Treasury analysis shows that this freedom would come at a cost.

The transition costs of establishing a new central bank and to replace the pound coins and notes currently in circulation;

The risk that capital could flow out of Scotland if Scottish residents preferred to hold their assets in an established currency, with the need as a result for capital controls in the transition period;

The higher transaction costs of doing business with all of Scotland’s trading partners – particularly the UK;

And the risks of a volatile exchange rate deterring long-term transactions and investment.

So the analysis concludes that in comparison to current arrangements the benefits of an independent monetary policy are unlikely to outweigh these costs.

The conclusion is clear.

The pound we share works well.

The saying goes,

If it ain’t broke why fix it?

But I say –

if it ain’t broke don’t break it.

The alternatives to the way Scotland now uses the pound are second best.

Is second best really good enough for Scotland?

I want the best for Scotland and for all our United Kingdom.

We’re better together.

Below is the text of the speech made by George Osborne, the Chancellor of the Exchequer, in Aberdeen on 3 September 2013.

Good morning.

I’m delighted to be here in Aberdeen at such an illustrious gathering of the oil and gas industry – an industry that is of vital importance to Britain’s economy.

But let us first remember Duncan Munro, Sarah Darnley, Gary McCrossan and George Allison.

Four brave professionals who ten days ago, tragically lost their lives in a helicopter crash off Shetland.

Our thoughts are with their families, friends and colleagues at this difficult time – and the book of condolences here today shows the depth of feeling for those four brave professionals.

And we should also remember that 25 years ago, 167 people lost their lives in the Piper Alpha disaster.

A tragedy that leaves an indelible mark here in Aberdeen on the industry, and the whole community.

Let us pay our respects.

To the brave professionals who lost their lives last month, and on that terrible night 25 years ago.

To their families and friends in whose memories they live on.

To those who survived and the rescue teams who helped them do so.

The whole of the UK owes a massive debt to the thousands of men and women who work in what is an inherently dangerous environment – delivering enormous benefits to every family in the country.

I know that as an industry you sometimes feel taken for granted.

Well, I want you to know this: you are not taken for granted.

You are very much appreciated.

And my personal message to you is this.

First, I recognize the vital role the oil and gas industry plays in the UK economy – and will continue to play for many many years to come.

Second, I also recognize that the oil and gas remaining in the UK Continental Shelf will be increasingly difficult and more expensive to extract – but that this Government commits to play our part in delivering the investment that’s needed.

And third, I believe that the best way to support this industry and maximize the returns from this great national asset is:

– by working together across the UK;

– through mobilizing all the UK’s resources; and
by pooling our risks to provide stability across the whole UK.

On Sunday, I was on the Andrew Marr TV show.

In his book, the History of Modern Britain, he says that the oil and gas industry’s story is one of the most remarkable and under-discussed in the entire history of our country.

It’s a tale of pioneering geologists, seismologists, roustabouts and rough-necks.

He said that: “The discovery and exploitation of huge oil and gas fields far out under cold, stormy and turbulent waters … is a modern epic of technical skill, bold finance, endurance and individual courage”.

And he is right to compare the feats of North Sea civil engineering with the building of the railways by the Victorians.

I’ll never forget my first visit to a North Sea platform, the Elgin Franklin platform, six years ago.

The long helicopter flight across the bleak, open sea – and then, the pinprick in the distance of the platform looming ever larger – until you land on the enormous construction.

I remember that first, powerful emotion you get when you step out onto a North Sea platform: what an extraordinary achievement of the human spirit and ingenuity.

Later today I will travel out to Talisman Sinopec’s Montrose platform and I know I will feel the same pride in what our country can achieve when we work together.

For from the day 38 years ago, when the first oil was piped ashore in Cruden Bay, the oil and gas industry has brought huge benefits to the whole of the UK.

And it continues to do so today.

Oil and gas still meets around 70 per cent of the UK’s primary energy needs – with more than half of UK demand for oil and gas met by UK production.

The heat and light for our homes;

power for our businesses;

and fuel for the transport for our people and goods.

Directly and indirectly, the industry employs nearly half a million people – almost half of them here in Scotland.

It’s the largest industrial investor in the UK – and it’s investing more than ever before.

And while the expertise for the initial development of the North Sea was largely imported, a world class home-grown industry has sprung up on the back of it.

Over 1,000 companies in and around Aberdeen alone.

Businesses which are now leading an export charge from Azerbaijan and Russia, to Brazil and the Middle East – with international sales of nearly £8 billion from Scotland alone.

As all of you know, subsea technology is a sector where the UK is a global leader – and it’s one of our fastest growing industries.

And I’ve spoken to the subsea’s industry conference here before in Aberdeen to celebrate its success.

Today we capture more than a third of a global market – a market that’s set to double over the next five years.

Growth at home and abroad.

Growth that I want to help you deliver.

Of course, I understand that your industry has changed hugely since the early days of North Sea extraction.

Then, the North Sea was dominated by a handful of ‘majors’ – the BPs and Shells, the Occidentals and Exxons.

Now, there are over 50 oil companies operating in the North Sea – with smaller independents and national state-owned oil companies rubbing shoulders with the original ‘majors’.

New names to conjure with: Apache, KNOC, Petrofac, Talisman, Sinopec, JX Nippon.

While the pattern of ownership today has changed from 30 years ago, the nature of the development opportunities is different too.

Companies are operating in a mature basin.

And that brings me to my second point.

The fact is that the oil and gas remaining in the UK Continental Shelf will be increasingly difficult and more expensive to extract.

You know well that the ‘big’ strikes are fewer and farther between.

The opportunities are often smaller, technically challenging or both – with the oil either in deeper waters or just harder to reach and extract.

In the central North Sea, companies are drilling at water depths of 100 metres.

In the planned Rosebank field West of Shetland, Chevron will be operating at 1,100 metres in waters more than ten times deeper.

New entrants are bringing fresh thinking and impetus, making viable even the most marginal fields.

Normally when politicians visit platforms, they visit the newest field.

But the Montrose field I’ll be visiting is one of the oldest in the North Sea.

I’ve deliberately chosen to go there because I want to see how Talisman Sinopec and Marubeni Oil and Gas’s £1.6 billion investment is extending the life of five fields by 14 years – which means that these fields will be producing the equivalent of an additional 100 million barrels of oil until 2030.

This project alone will be creating and securing 2,000 jobs throughout the UK supply chain. But there are also challenges.

We need to develop a North Sea regime that keeps pace with the changing structure of the basin.

The Montrose project is a case in point.

Its economic viability depends on a complex mix of factors: targeted tax breaks, and bundling a number of older fields with two undeveloped ones.

So, as we think about the future of the North Sea, what can we be certain about?

We can be certain that:

– our reserves aren’t infinite;

– the costs of extraction are rising;

– and North Sea tax revenues are in long-term decline.

But we can also be certain that the ingenuity of the industry will secure its long-term future and that we’ll still be recovering oil from the North Sea and West of Shetland in the 2050s.

We can’t know the precise level of recoverable reserves.

The future is about volume and value.

So nothing can – or should – be taken for granted – and we know that.

The British government’s objective is simple: we want to work with you to maximise the North Sea’s recoverable reserves.

So we’ve put in the place the first ever national Oil and Gas strategy.

The PILOT programme is identifying ways to remove barriers to development.

And, working through the Fiscal Forum, we’re putting in place tax reliefs to support the industry as extraction becomes more difficult.

In my Budgets, I’ve doubled the value and extended the scope of the small field allowance.

I’ve put in place a £3 billion allowance to support investment in and exploration of large and deep fields like those West of Shetland.

And I’ve introduced a £500 million allowance for large shallow-water gas fields and a brownfield allowance to encourage incremental investment in older fields.

Perhaps most important of all, I’ve provided the industry with long-term stability, by providing certainty on tax reliefs – worth upwards of £20 billion over a 30-year period – on future decommissioning costs.

Funded by the whole of the UK, that’s equivalent to £3000 pounds for every man woman and child in Scotland – being used to support investment in the North Sea.

The UK government will enter into contracts with industry setting out what relief companies can expect to receive in future when decommissioning assets.

And if the actual amount turns out to be less, the government will make up the short-fall.

This means assets will be easier to transfer and the climate for investment improved.

I can tell this Conference today I’m unveiling the final decommissioning deed.

A concrete example of the tax certainty this government is providing.

Never before has any government entered into legally binding contracts with individual companies to guarantee the tax relief they can expect decades into the future.

No other place in the world provides such a guarantee.

And your industry – not the Treasury – estimates that this decommissioning certainty will drive at least £17 billion of increased investment, extending the life of the North Sea basin with an additional 1.7 billion barrels extracted.

It’s the culmination of 18 months of hard work and close collaboration between you and government.

Thank you for that.

Now let’s get the deeds signed and get the investment.

And we’re already seeing results from this new tax regime.

Oil & Gas UK are forecasting record levels of investment of £13.5 billion for 2013, helping to stem the decline in production of recent years.

And look at the projects already announced.

Statoil are investing £4.3 billion in the Mariner heavy oil project, creating 700 jobs.

EnQuest, the UK’s largest independent oil producer are investing £170 million in the Thistle field, safeguarding 500 jobs and creating nearly 1,000 more in the supply chain.

CNR International are investing £300 million to extend the life of Ninian field and produce 5 million additional barrels.

And following the introduction of the large shallow water gas field allowance, GDF Suez, Centrica and BayernGas UK are investing £1.4bn in the Cygnus gas field, creating 1,200 jobs.

We want to build on this success.

Sir Ian Wood is currently reviewing how we can improve future economic recovery of oil and gas from the UK Continental Shelf.

He is looking at what further powers the government should have to ensure the North Sea remains a prime location for new investment and that government ensures companies are operating their licences effectively.

Government and industry have a shared interest in maximizing the economic production of the UK’s oil and gas reserves.

I want to see far greater collaboration from industry on production and exploration.

Because the fact is, production efficiency is down.

When ownership of North Sea assets is more widely spread than ever before, collaboration is often the only way to improve the economic viability through economies of scale.

Like:

Access to critical infrastructure.

Keeping in play older infrastructure hubs, so that recoverable reserves aren’t lost forever.

Sharing the benefits of new technologies and extraction methods.

Above all, deploying the best talent to the North Sea so the basin can flourish.

Government and industry pulling together to maximise both of our returns from the North Sea – volume and value.

Let me turn to the bigger picture on energy.

Your message, which we’ve heard and listened to, is the need for predictability so you can plan for the long-term.

That’s what our decommissioning tax certainty is all about.

But this is just one part of our support to the energy market.

We are seeking, from companies like yours and others, tens of billions of pounds of investment to secure Britain’s energy in the decades to come.

And we want a mix – oil and gas are vital, but so too are renewables and nuclear.

My ambition is that when you look across the western world, you see the UK as the best and most stable place to invest – and we’re creating the tax and regulatory regime to achieve it.

Last year, we published our Gas Strategy which set out our expectation that gas generation will be an essential part of our energy supply.

In June, we published draft strike prices for renewable energy generation – providing the certainty needed to make investing in new technologies less risky and more attractive.

We’re introducing ambitious and radical reforms to the electricity market – a new way of paying for generation will bring forward up to £110 billion of private sector energy investment.

We’ve set up a Green Investment Bank to invest in green energy projects and leverage further investment from the private sector.

We’ve already committed to invest up to £3.8 billion through the Bank.

On Shale, let me say this, because I know it’s an issue that has been in the news a lot recently.

Of course, we want exploration of our shale resources to be safe, to avoid environmental damage, and be done in a way where communities get the benefit of what’s happening in their backyard.

That’s why we got the industry to commit to generous community benefits.

But let me also say this.

Britain led the way in finding new sources of energy – coal in the 18th and 19th centuries, oil in the 20th century, and renewables at the turn of the 21st century.

If we turn our back on new sources of energy which countries like China and the US are exploiting, then:

– we’re saying to British families: you pay energy bills that are higher than those paid by families elsewhere;

– we’re saying to British companies: you’ll face costs higher than companies face elsewhere;

– and we’re saying to our country: we’ll have fewer jobs, less investment and higher costs of living – and I’m not prepared to say that to the British people.

Britain is not going to turn its back on the energy sources of the future.

So we’ve set out a generous new tax regime for shale gas and removed the bureaucratic obstacles to its use onshore and offshore.

And when I talk about Britain I mean a United Kingdom.

I’ve talked about predictability in this speech, but I know that one issue that has created uncertainty is the possibility of Scottish independence.

We determined to end that uncertainty by holding a referendum that will reach a decisive outcome next year.

The question of whether Scotland’s future lies within the UK or without needs to be answered.

As an Englishman, I passionately hope people in Scotland vote to stay within the UK in just over a year’s time.

This hope is, I know, shared by the great majority of people living in England, Wales and Northern Ireland.

The reason is simple: we’re better together.

For those tempted to think that the rest of the UK would be better off without Scotland, let me be clear.

Separation would bring consequences for not just Scotland.

We would all suffer.

The rest of the UK is by far the most important market for Scottish goods and services.

Scotland’s trade with the rest of the UK is almost double its entire trade with the rest of the world – and it’s a share that’s growing.

This trade benefits companies and employees the length and breadth of Scotland.

And it’s a two-way street: Scotland benefits from being a strong part of the UK, and the UK also benefits from Scotland’s place within it.

As our economy recovers, I want Scotland to lead the way.

All achieved within the UK, not outside.

So let’s lay to rest some myths once and for all.

Independent European countries of similar size don’t out-perform Scotland.

In fact, Scotland performs well against comparable European States.

Introducing an international border between Scotland and the rest of the UK would reduce business and trade across the border.

You don’t need passport controls and customs officers for there to be a negative effect.

It’s the gradual growing apart of institutions, policies and regulations;

It’s the slow unpicking of the unified labour market, an integrated infrastructure and a single tax system – the possibility of different currencies.

Today, we’re publishing clear analysis that shows the value of Scotland being part of the UK, in terms of extra trade and economic activity over the coming generation.

As the paper says: Scottish GDP could be 4 per cent higher in 30 years if it is part of the UK. £2000 for every family in Scotland.

Put it another way: separate from the UK, create an international border, and the loss to every Scottish household will be £2000.

So, we should think very hard before Scotland exchanges a UK domestic market that works well for a new foreign export market that won’t work as well.

If it ain’t broke, don’t break it.

Your industry is a great example of how we’re better together when we work together, when we are together.

Oil & Gas UK talk about the “need for fiscal predictability and long-term planning to optimize recovery of the country’s offshore oil and gas resource”.

Today all of the major tax revenues, whether it’s from oil, or retail, or consumption, or income or duties are pooled across the UK.

This provides Scotland with secure and stable funding; the Scottish government with budgetary predictability and Scotland’s public services with the stability to plan for the long-term.

As part of the UK, Scotland doesn’t have to cope with the challenge of managing volatile oil revenues.

This is no small challenge – Scottish tax revenues from oil can fluctuate from year to year from £2 billion to £12 billion.

They are the most volatile tax revenues that exist.

Finance ministries are always at risk of being over optimistic about how much revenue they’re going to get in.

That’s why we created the Office for Budget Responsibility.

It is totally independent.

And it now provides for us independent estimates of tax revenues – including from oil and gas.

So when you hear big numbers bandied about that aren’t impartial, and it sounds too good to be true – it probably is.

The UK government can provide the oil and gas industry with a long-term commitment to decommissioning relief.

This commitment represents around 1 per cent of UK GDP.

It would represent around 12 per cent of Scottish GDP.

It’s for the Scottish government to explain how they would pay for that.

The UK’s approach looks at the wider economic contribution of oil and gas, not just at tax revenues.

We’ve been prepared to take the long-term decisions needed to unlock investment.

We accept that’s cost us in lower tax receipts in the short term – but its worth it for the benefits over the long haul.

We’ve been able to pursue this course because the UK has broad shoulders – a big domestic market, a diverse economy, a wide tax base and a broad energy mix.

Look at the facts.

Oil and gas is an important national asset, but revenues from oil and gas are just 2 per cent of our total tax receipts.

Renewable energy is an increasingly important part of the energy mix.

Many of the companies represented here today are also leaders in renewable energy.

Last year over £1.5 billion was invested to develop Scotland’s abundant sources of renewable energy, which now supports over 11,000 jobs and generates nearly 40 per cent of Scotland’s electricity.

This is made possible by over £500 million a year of UK support, with the costs spread amongst 26 million households across the UK, keeping average electricity bills in Scotland lower than they would be if funded by Scottish consumers alone.

How likely is it that this kind of subsidy would be provided to the energy market of a foreign country?

As I’ve said many times before, Scotland could go it alone.

But to suggest that spending can be increased; tax bills cut; an oil fund established; household energy bills kept down and investment in renewables increased simply doesn’t add up.

Texans played an important part in the early exploration of the North Sea.

So you’ll recognise the well-known Texan phrase – “all hat and no cattle”.

I hope those who advocate Scottish independence will offer a little less hat and a bit more cattle.

Let me end by saying this.

How we manage our country’s natural resources goes to the heart of the solidarity between the peoples and nations of these islands.

Whether we are realising the assets from the dark waters of the North Sea or West of Shetland, or shale gas reserves in Lancashire, or coal in Yorkshire or renewable energy in the Thames Estuary and the Firth of Forth.

You have my total commitment to your remarkable industry.

I will work with you to get the tax regime right, to support more investment, to create the climate for more production and more jobs.

My door is always open to hear what you have to say and to help you.

Volume and value.

Valuable and valued.

We know that when we:

– pool our resources

– share our advantages

– and join forces to tackle future challenges

– we achieve far more by working together

Industry and government.

Scotland and Britain.

The whole is so much greater than the sum of the parts.

Thank you.