George Osborne defends £10bn extra funding for IMF

George Osborne defends £10bn extra funding for IMF:

Chancellor says jobs in UK depend on stable world economy, but critics claim British taxpayers are bailing out eurozone
George Osborne is facing anger from Tory backbenchers and Labour after announcing Britain is to commit another £10bn to the IMF.
The chancellor insisted the increased funding was vital to protect jobs and growth in this country, but critics said he was putting the taxpayer on the hook for more bailouts of the struggling eurozone. He was also accused of dodging a potentially embarrassing parliamentary vote on the extra contribution.
Finance ministers and central bank governors struck the deal, which should boost the IMF's resources by $430bn (£267bn), at a meeting in Washington.
Alongside the UK's increase, Japan is to contribute an extra $60bn, South Korea $15bn, Switzerland $10bn and Australia $7bn. However, the US and Canada have refused to add any more to the pot.
Osborne said: "The UK sees itself as part of solution to the challenges facing the global economy, not part of the problem. We are helping to solve the global debt problem rather than adding to it.
"Jobs and growth in Britain depend on a stable world economy. That needs a strong IMF.
"And because we have taken strong action to rescue our own economy, we can be one of many countries that can support the IMF, instead of being bailed out by the IMF."
The IMF managing director, Christine Lagarde, said: "We warmly welcome pledges by our members to increase IMF resources by over $430bn, almost doubling our lending capacity.
"This signals the strong resolve of the international community to secure global financial stability and put the world economic recovery on a sounder footing.
"These resources are being made available for crisis prevention and resolution and to meet the potential financing needs of all IMF members. They will be drawn only if they are needed, and if drawn, will be refunded with interest.
"I would like to express my thanks to all the countries that have already announced specific contributions … I am also grateful to China, Russia, Brazil, India, Indonesia, Malaysia and Thailand, and other countries, all of whom have indicated that they will be among the contributors."
Parliament has previously approved around £40bn in support for the IMF, of which about £30bn has already been committed.
If the increase had gone beyond the £10bn "headroom" still available to Osborne it would have required a fresh vote by MPs.
Committing money does not mean it will necessarily be drawn against and, because it would be given in the form of a loan, it would not deplete public spending budgets.
The shadow chancellor, Ed Balls, accused Osborne of signing up to a "sticking plaster" deal and "running scared" of parliamentary scrutiny.
"It is disappointing that the chancellor has not taken the opportunity to press the wealthy eurozone countries to dig into their own pockets and establish a strong firewall of their own, before offering up more funding from Britain," he said.
"There is a real risk that yet another sticking plaster response will mean the eurozone continues to duck the tough decisions they need to take.
"The IMF has a vital role to play in the global economy and should have the resources to do that job, but it should not be bailing out the eurozone when the euro area countries are not doing their own bit to help themselves."
Balls added: "George Osborne needs to explain why he has suddenly changed his mind and why he is running so scared of parliamentary scrutiny on this important issue."
The Conservative MP Peter Bone branded the move "bonkers" and said money used to prop up the euro would be wasted.
"It seems to me it is all about bailing out the eurozone," he said. "It should not be up to British taxpayers to shore up a doomed project that is for the benefit of our European colleagues.
"People will not understand how we can have all these cuts but put £10bn at risk for other countries. It is bonkers."
However, Bone said there was now no obvious way of forcing a Commons vote on the issue.
"It does seem very strange that £10bn can be spent without getting a proper parliamentary debate," he added.
The Tory MP Mark Pritchard, secretary of the influential 1922 Committee, said Osborne appeared to have "got away with the politics" of the issue by avoiding a fresh vote.
But he told BBC Radio 4's PM programme the UK should not be underwriting a currency that "clearly is not working".
"Indirectly that is exactly what British taxpayers' money and IMF funding is going to do," he added.
However, other senior Conservative figures expressed support for Osborne.
The Treasury select committee chairman Andrew Tyrie said the increase was "essential".
"The IMF is the only fire brigade available to the global economy," he said. "It is vital that the IMF has the necessary tools to deal with the current eurozone crisis and the risks to wider global financial stability.
"Any IMF loans to the eurozone must be on rigorous terms, with full conditionality.
"The IMF must not flinch from its long-standing policy of negotiating only with member countries."
The Tory MP added: "Britain benefits more than most from having a tough global watchdog and no country outside the eurozone has more reason to want the crisis resolved than the UK."