CBI urges business to back euro, BBC News, (25 June 1998) < 2

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1 Carolyn Fairbairn Confederation of British Industry 78 Cannon St London EC4N 6AP 9 November 2015 Dear Ms Fairbairn, Re: CBI position on EU referendum I am writing to you as the incoming Director General of the CBI to ask you to rethink the position that the CBI adopted on the EU under your predecessor, John Cridland. The CBI has misled the public about businesses views on the UK s membership of the EU. The CBI has claimed that 8 out of 10 British businesses want to remain in the EU but the poll it commissioned to make this claim is being investigated by the British Polling Council, who have already called it pretty dodgy. This closely mirrors the behaviour of the CBI on the euro - which I am sure you remember led to the organisation withdrawing from the debate with considerable reputational damage. From 1998 to 1999, under the leadership of Adair Turner, the CBI campaigned strongly for early entry into the euro. In 1998, Adair Turner dismissed criticism of the euro as ill-informed scare stories and claimed that the euro would be a stimulus to competition and productivity growth across Europe. 1 While it was campaigning to join the euro, the CBI consistently claimed that four-fifths of British businesses supported the adoption of the single currency. The CBI advanced its claims by relying on deeply flawed surveys, which often excluded businesses with fewer than 10 employees, thus excluding 95% of all British businesses in The CBI even published pro-euro membership surveys that turned out to have been based on a mere show of hands at meetings where CBI leaders had spelled out their pro-euro stance. Leaked minutes from the CBI Economic Affairs Committee at the time revealed that the CBI had ruled out a completely random survey of businesses, which would be the ultimate gauge of firms attitudes to UK membership of EMU, because complication might arise if the outcome turned out to be less pro-emu than the CBI s own stance. 3 Nevertheless, the CBI still claimed to be the voice of British businesses. In 1999, a survey of the CBI s members by MORI for the CBI found support for euro membership at 52%, just two-thirds of the level reported in the CBI s own surveys. 4 This MORI survey was itself flawed. Nick Sparrow, Managing Director of ICM, was concerned about the survey as some 1 CBI urges business to back euro, BBC News, (25 June 1998) < 2 BIS, Enterprise Directorate: Small and Medium Enterprise Statistics for the UK and Regions, (13 October 2010) < 3 CBI, Minutes of the Economic Affairs Committee, 22 July CBI, CBI Members Reaffirm Support for EMU Membership in Principle, (20 July 1999), < 2567ae ?OpenDocument>.

2 respondents may be led to back the pro-euro line. 5 The CBI was later attacked by The Times for a misleading presentation of the results. 6 Other surveys in 1999 further demonstrated that the CBI had distorted the views of British business and of its own membership. ICM found that British businesses were opposed to euro entry by 63% to 32%. 7 The same poll also found that 64% of the CBI s own members were opposed to the single currency. 8 MORI subsequently found that 62% of businesses were against euro entry, with 37% in favour. 9 By the end of 1999, the CBI s position had become untenable and it withdrew from the campaign to join the euro in January Since then, the CBI has enthusiastically welcomed both the Nice and Lisbon Treaties. The CBI claimed that the need for the Nice Treaty was pressing. 10 In 2008, it stated that it welcome[d] the attempt to clarify the role and remit of the EU in the Lisbon Treaty. 11 Despite occasional complaints, the CBI has consistently and enthusiastically supported the transfer of power from the UK Parliament and courts to the institutions of the EU. It has also made many empirically false statements about the process of European integration. For example, in 2002, echoing Peter Mandelson, the CBI stated that the the Lisbon strategy should help Europe catch up with its main competitor, the US. The CBI argued that the UK s agenda of economic and social reform is increasingly becoming common currency amongst its European partners. 12 These predictions were as accurate as the CBI s predictions on the euro. In 2008, the CBI stated that the Blair-Brown governments had crucially obtained an opt-out on the Charter on Fundamental Rights. 13 It echoed Tony Blair s claim to the House of Commons that it is absolutely clear that we have an opt-out from the charter. 14 His government famously claimed that the Charter would have no more legal force than the Beano or the Sun. 15 Academics observed that the UK s supposed opt-out, Protocol 30, was not an opt-out at all, but an exercise in smoke and mirrors, introduced for presentational reasons to help convince the British public that the Lisbon Treaty was different to the Constitutional Treaty George Trefgarne, CBI runs into storm over euro survey, Daily Telegraph, (21 May 1999) < 6 The CBI's survey undermines its position on the euro, The Times, (21 July 1999), < 7 ICM/Business for Sterling, reported in Daily Telegraph, (31 March 1999, p UK poll bashes euro, BBC News, (31 March 1999), 9 K Brown, UK business divided over euro, Financial Times, (1 November 1999) < 10 CBI, Intergovernmental Conference 2000 (IGC), (16 August 2000) < d4f0a f0037d168?opendocument>. 11 CBI, The Treaty of Lisbon, (22 January 2008), < 2a/80256c d bfbb?OpenDocument>. 12 CBI, Lisbon Summit, March 2000, (15 July 2000) < c eb a?opendocument>. 13 CBI, The Treaty of Lisbon, (22 September 2008), < 2a/80256c d bfbb?OpenDocument>. 14 HC Deb 25 June 2007, col. 37 < 15 G Jones & A Evans-Pritchard, European summit Charter on rights no more binding than the Beano, Telegraph, (14 October 2000), < 16 C Barnard, The Opt-Out for the UK and Poland from the Charter of Fundamental Rights: Triumph of Rhetoric over Reality?, (2010), p. 19 < 2

3 The CBI s claims were shown to be completely wrong when, in 2011, the European Court of Justice held that Protocol 30: does not intend to exempt the United Kingdom from the obligation to comply with the provisions of the Charter or to prevent a [UK] court from ensuring compliance with those provisions. 17 The UK Supreme Court declared in 2012 that the Charter has direct effect in national law. 18 This will have big implications for British businesses as the Charter is being used by the Court of Justice to expand enormously the power of the EU s institutions. Despite the failure of the EU to change as predicted, the CBI has repeatedly claimed that change is just around the corner. As the Business Secretary, Sajid Javid has observed, the CBI continues to argue for British membership of the EU regardless of the terms. 19 By contrast, John Longworth, the Director General of the British Chambers of Commerce, has displayed a far more realistic attitude about the likelihood of meaningful reform of the EU. He has refused to rule out backing British withdrawal from the EU if reform does not occur. 20 Contrary to the CBI s claims, British businesses have overwhelmingly sceptical views about the EU. Polling by Perspective Research Services in August 2015 found that, by 2:1, SMEs think the EU is a hindrance rather than a help to their business, and that more than 70% of SMEs want the British Government rather than the EU in charge of employment law, health and safety, and trade negotiations. 69% of SMEs agree that the UK can trade and cooperate with Europe without giving away permanent control to the EU. Just 25% believe single EU rules make trade easier and that the single market is good for jobs and living standards. 21 That the overwhelming majority of British businesses reject the premise of the single market has been apparent for over a decade. ICM polling in April 2004 found that, by 73% to 22%, British businesses thought the EU was failing and that Britain would be more prosperous and secure if the UK took powers back from the EU, including the power to make our own trade agreements. Nonetheless, the CBI asserts that British business wants the UK to remain in the European Union, continuing to rely on deeply flawed surveys. 22 In October 2015, for example, the CBI issued a document claiming that the majority of firms believe that the pros of EU membership outweigh the cons on the basis of a survey of just 29 companies. 23 Under your predecessor the CBI supported EU membership regardless of the terms. Publicly, it claimed that it only supported membership of a reformed EU yet leaked minutes of the CBI s President s Committee of 6 July 2015 have revealed that the recent CBI President, Sir Mike Rake, urged Ministers not to overplay our hand in negotiations with Brussels. The minutes also revealed that the CBI lacks clear criteria for judging reforms, which would enable members to judge whether a deal is sufficient and supportable. 17 R. (NS (Afghanistan) v Secretary of State for the Home Department, Case C-411/10, [2013] QB 102, at [120]. 18 Rugby Football Union v Consolidated Information Services Ltd [2012] UKSC 55 at [28]. 19 S Javid, A European Union that works for British business, (29 June 2015) < 20 UK chambers of commerce head doubts Cameron can get EU reforms, Business Insider, (7 September 2015) < 21 Business for Britain, Britain and the European Union: What SMEs think, (September 2015) < 22 CBI, Our Global Future, (2013), p. 18 < 23 CBI, Choosing Our Future, (October 2015), p. 3 < 3

4 Publicly, the CBI claims that it is not affiliated with any of the in or out campaign groups but the leaked minutes reveal that the CBI is already stepping up our campaign to highlight the benefits of EU membership, and that Sir Mike Rake urged his successor Paul Drechsler to use [the] CBI s influence to keep us in. The EU referendum There are many questions about the process by which the CBI claims to speak for British businesses. Public debate during the EU referendum campaign will be much more accurate if we can clarify the following points: (1) How many direct members does the CBI have? During the controversy over the CBI s distorted surveys during the euro campaign in 1999, the CBI was forced to admit that it had just 2,037 direct members. 24 Given that the CBI declared its income from membership fees in 1999, an estimate can be made of the CBI s average membership fee for direct members in that year. Uprating this number for inflation, and comparing it to the income from membership fees that the CBI declared in 2014, an estimate can be arrived at of the CBI s current number of direct members. This estimate is that the CBI today has just 2,216 direct members. 25 This figure is barely in excess of the 1,887 members that the CBI s predecessor organisation, the Federation of British Industries, had when it was granted its Royal Charter in (2) How many indirect members does the CBI have? The CBI has previously admitted in evidence to a parliamentary committee that it has both a direct and an indirect membership. 27 YouGov were unable to confirm whether or not the respondents to the 2013 survey were direct or indirect members of the CBI, stating that this was a matter for the CBI. 28 The CBI claims to represent all the members of trade associations affiliated to the CBI. The National Farmers Union, which is a member of the CBI, has 55,000 members in England and Wales. This would suggest that 28.9% of the 190,000 companies the CBI claims to represent are farmers. Please confirm whether or not this is the case. (3) The CBI has made inconsistent claims about the number of businesses that it represents. In its 2012 annual report, it claimed it represented 240,000 businesses, receiving 20,041,000 in membership fees. 29 In its 2013, annual report, it claimed to represent 190,000 businesses, receiving 19,673,000 in membership fees. 30 Despite a 20.8% fall in the number of businesses that the CBI purported to represent, membership income fell by only 1.84%. In its 2014 annual report, the CBI reported a rise in income from membership fees due to higher recruitment, yet it still claimed to 24 CBI, Methodology, (July 1999), < b b4003feb9b?opendocument>. 25 CBI, Annual Report & Accounts 2000/2001, (20001), p. 16 < CBI income from membership in 1999: 13,258,000 / number of CBI direct members in 1999: 2037 = CBI average membership fee for direct members in 1999 prices: 6, Membership fee in 2014 prices: 9, (see HM Treasury, GDP deflators at market prices, and money GDP: July 2015 (Summer Budget 2015), (10 July 2015) < CBI income from membership in 2014: 20,332,000 / 9, = 2216 direct members in Privy Council Office, Federation of British Industries Royal Charter, (4 May 1923), preamble, paragraph (c). 27 Memorandum by Confederation of British Industry (CBI), Select Committee on Treasury: Minutes of Evidence, (12 March 2001) < 28 of Andrew Farmer to Oliver Lewis (1 September 2015). 29 CBI, Annual report & accounts 2012, (2013), pp. 17 & 22 < 30 CBI, Annual report & accounts 2013, (2014), pp. 19 & 26 < 4

5 represent the same number of businesses (190,000) as in The CBI s certified income from membership fees in its accounts thus bears no relation to the number of businesses it purports to represent. Furthermore, the CBI has made a number of contradictory statements about who it represents. For example, in a single document issued in October 2015, the CBI claimed that it was the Voice of Business ; that it represented just 190,000 firms; and that it will always represent the view of its members that pay their subscriptions. 32 These three claims cannot all be true. Please clarify, definitively, the basis on which the CBI calculates the number of businesses it represents. (4) How many CBI members are subsidiaries of companies whose headquarters are (a) in other EU member states or (b) other foreign countries? In 1999, 26% of respondents to the CBI s own surveys were subsidiaries of foreign companies. (5) In April 2014, the CBI registered with the Electoral Commission to campaign against Scottish independence. However, this had not been signed off by senior CBI executives and led to resignations from the CBI by Scottish universities, public bodies and broadcasters. According to leaked minutes of the meeting of the CBI s President s Committee on 6 July 2015, the CBI claims to have reflected on the lessons learned from the Scottish debate. Yet these minutes show the CBI is now making plans [for] its EU campaign, while the CBI s 2015 workplan states the CBI will be stepping up our campaign on the EU. Does the CBI intend to register with the Electoral Commission as a permitted participant during the EU referendum campaign, as it did during Scottish independence referendum campaign? 33 If it does intend to do so, what arrangements does the CBI have in place to reduce the figure of the number of businesses it represents in order to dissociate from the CBI s pro-eu stance those of its members who are prohibited from entering political controversy? The CBI s own 1969 bye-laws require that public sector members, by virtue of their special relationship with the Government, shall be at all times dissociated from pronouncements on questions that might be the subject of political controversy, meaning that the CBI cannot speak for them on the EU issue. 34 Moreover, if the CBI registers as a permitted participant in the referendum, membership fees paid to the CBI will be political donations within the meaning of electoral law if these monies are paid to the CBI to meet its referendum expenses. 35 Nearly 8 out of ten of the leading CBI members which sit on its President s Committee are forbidden by their own rules from donating to a CBI political campaign, will not be able to support the CBI s stance and might have to withdraw from the CBI if it registers as a permitted participant. (6) Connected to points (1)-(4), how, if at all, does the CBI weight its membership surveys? As has been explained above, the debate over British membership of the euro was distorted by the way in which the CBI ignored the majority of British businesses in favour of a select few. Today, the CBI continues to use the 2013 YouGov poll to claim that 8 out of 10 British firms are in favour of EU 31 CBI, Annual report & accounts 2014, (2015), pp. 10, 20 & 33 < 32 CBI, FAQs: Business and the EU Referendum, (October 2015) < 33 H Wilson, CBI registers to campaign against Scottish independence vote, Telegraph, (19 April 2014) < 34 Privy Council Office, CBI Bye-laws, (22 July 1969), bye-law Political Parties, Elections and Referendums Act 2000, schedule 15, para 2(1)(f). 5

6 membership. 36 YouGov has since confirmed that the CBI did not supply them with any business characteristics data or any population data for the 2013 survey. 37 This prevented the weighting of the data to reflect the characteristics of the CBI s membership or of British companies, contrary to the best practice of the British Polling Council. 38 The results were thus unreliable, since it is likely that they were skewed in favour of large companies. There is thus no reliable evidence that eight out of ten CBI members or British businesses agree with the CBI leadership s pro-eu position. In any event, the survey provides striking evidence that the CBI does not represent British businesses as it claims: (a) Just 39.5% of respondents to the survey were small or medium sized enterprises (SMEs). According to government figures for 2013, 99.9 per cent of private sector businesses are SMEs, which together accounted for more than half of employment (59.3 per cent) and almost half of turnover (48.1 per cent) in the UK private sector. 39 (b) Only 20.5% of respondents had fewer than 50 employees. According to government figures for 2013, 99.2% of British businesses had fewer than 50 employees, accounting for 47.0 per cent of private sector employment and 33.1 per cent of private sector turnover. 40 (c) Only 22% of the businesses surveyed had a turnover of less than 5 million per annum. According to 2014 ONS figures, the average turnover of private sector businesses was 673, Please confirm precisely how, if at all, the CBI weights its membership surveys and what justification it has for claiming it is representative of British business. During the euro debate, both Business for Sterling and the CBI ended up publishing weighted numbers according to (a) the respondents turnover and (b) number of employees. Will the CBI commit that future surveys, which it conducts on EU membership, are conducted on a similar basis? (7) Connected to points (1)-(4) above, how does the CBI decide which of its members should be surveyed? YouGov has confirmed that the CBI provided a list of members to YouGov, from which YouGov obtained 451 responses. YouGov refused to state if the CBI supplied it with a list of substantially more than 451 members and, if the CBI supplied it with a substantially greater number, how large that number was. YouGov claimed that questions about the CBI s membership were a matter for the CBI. 42 In November 2013, the CBI released a report, Our Global Future, which reaffirmed the CBI s longstanding position that the UK should remain subject to EU control. The results of the YouGov 36 CBI, FAQs: Business and the EU Referendum, (October 2015) < 37 of Andrew Farmer to Oliver Lewis (1 September 2015). 38 British Polling Council, Objects and Rules of the British Polling Council, (2015), rule 3.1 < 39 BIS, Business Population Estimates for the UK and Regions, (23 October 2013), pp. 1 & 3 < 40 BIS, Business Population Estimates for the UK and Regions, (23 October 2013), pp. 1 & 3 < 41 BIS, Business Population Estimates for the UK and Regions 2014, (26 November 2014), p. 3 < Total turnover = 3.5 trillion / total number of businesses = 5.2 million. 42 of Andrew Farmer to Oliver Lewis (2 September 2015); of Andrew Farmer to Oliver Lewis (3 September 2015). 6

7 survey formed an integral part of the report. As part of the production of the report, which was released in November 2013, over 450 CBI member companies and trade associations attended consultation events. 43 In the light of the CBI s record of misleading membership surveys, it is difficult to regard the almost identical size of those who attended these consultation events and the sample size of the YouGov poll as a coincidence. YouGov s answers and the circumstances in which Our Global Future was produced raise a number of serious questions for the CBI about how it selected the sample for its own 2013 poll: (a) What was the size of the membership list provided to YouGov? (b) Did the list contain direct members of the CBI or indirect members that the CBI claims to represent? (c) If the size of the list was less than the CBI s total membership, whether direct or indirect, what criteria did the CBI use to select which companies should be polled and which companies should be excluded from the poll? (d) Was the list limited to those companies and trade associations which had previously attended consultation events with the CBI, where, presumably, the CBI leadership s pro-eu stance was spelled out? The answers which YouGov were forced to disclose under the Rules of the British Polling Council and the circumstances in which the 2013 report was composed are capable of giving rise to the inference that the CBI handpicked the respondents to the 2013 poll to ensure that the results mirrored the pro-eu views of the CBI s leadership. After Vote Leave complained to the British Polling Council about the survey on 2 November 2015, the Secretary to the Council s Management Committee, Nick Moon, commented that the survey looks pretty dodgy. The parallels with the CBI s deeply flawed membership surveys during the euro campaign are striking. (8) The difficulties of ascertaining the real views of the CBI s members are compounded by the fact that the CBI refuses to publish the composition of all of its ten regional councils and three national councils. Will the CBI commit to publishing full membership lists of all of those bodies? (9) The CBI repeatedly claims to be in favour of membership of a reformed EU. Leaked minutes of the meeting of the CBI s President s Committee on 6 July 2015 show that members want the CBI to have clear criteria for judging reform, enabling them to assess whether a deal is sufficient and supportable. The CBI currently has not produced such criteria and continues to support British membership of the EU regardless of the terms, undermining the pretence that the CBI supports fundamental reform. Indeed, the leaked minutes show that the CBI President, Sir Mike Rake, who campaigned for Britain to join the euro, has said that it is important not to overplay our hand in negotiations with Brussels. This directly contradicts what the CBI says that its members want. How can the CBI claim to support a reformed EU, if it privately argues that the Government should not fight for full reform and admits that it does not yet know what constitutes reform? Will the CBI now set out clear and specific criteria by which the success or failure of the renegotiation can be judged? If the renegotiation is not successful according to such criteria, will the CBI accept that Britain should leave an unreformed EU? 43 CBI, Our Global Future, (2013), p. 4 < 7

8 (10) Your predecessor described recent criticism of the CBI s stance on the EU as a badge of honour. 44 Do you agree? The CBI misrepresented British businesses views on the euro, made predictions about the euro and EU reform that were empirically false, consistently supported the transfer of control from the UK to the EU, exercised little or no influence over regulations it regarded as damaging and misrepresented the facts concerning the structure and views of its membership. Now it claims to speak for British businesses on the EU, while continuing to mislead about its membership, survey methodology, and support for EU reform. I know that all these things happened under your predecessors. You have signalled a new approach, stating that you greatly look forward to representing the voice of British businesses of all sizes on the EU question. 45 I would urge you to take this opportunity to set the record straight and restore the reputation of the CBI at the start of your term as its new Director General. I look forward to your reply. Best wishes Dominic Cummings Campaign Director of Vote Leave 44 S Gordon & G Parker, Departing CBI chief: 20 years to restore trust in UK business, Financial Times, (3 November 2015), < 45 S Gordon & H Mance, Carolyn Fairbairn to replace John Cridland as CBI chief, Financial Times, (29 June 2015) < 8