Mr Brown gets his visit to the IMF in early

Last night on Newsnight Mr Mandelson told us they wanted to take the stigma out of going to the IMF to borrow more.

That could be a very significant remark. It took place on the day that they announced the creation of $250 billion of Special Drawing Rights, available for IMF members.

It sounds to me as if the UK government has buttressed its wish to borrow and borrow not just by a policy of printing money at home, by also by a policy of gaining simple access to new liquidity abroad through the SDRs.

Labour remembers the dreadful pictures and publicity of its last visit to the IMF to bail out the UK after it had spent too much. This time round they intend to make it easier and to take the shame out of it. What a clever ruse. It still means more borrowing we have to pay back. Clearly there is no limit to how much they want to borrow. It’s always handy to have another credit card to flex.

The BBC said there was no Conservative available to put a point of view on the G20 on Newsnight. I was available and would have happily done so, but I guess they did want my kind of critique of it.

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29 Comments

  1. Johnny Norfolk
    Posted April 3, 2009 at 6:45 am | Permalink

    The BBC is a disgrace and have been taken in by it all. I spotted that the ground is being prepared for the IMF loan.
    The Tory party is far to timid and if we needed a fighting party we need it now. If they dont make it clear how bad things are they will get the blame when they are in office.

  2. Ian Jones
    Posted April 3, 2009 at 6:58 am | Permalink

    Well Mr King has stopped him borrowing by printing pounds so what better than to print some monopoly (IMF) money and swap it for some pounds to spend. Even better when there is no effect on the exchange rate from swapping monopoly money for pounds!

    His sole objective is to get public spending as high as he possibly can on the basis any Tory cuts will be painful giving Labour a win in 5 years time with still massive public spending.

    We are in a very dangerous situation.

    • Denis Cooper
      Posted April 3, 2009 at 12:56 pm | Permalink

      No, Mr King is helping him to borrow, by agreeing that the Bank will print pounds and use them to rig the gilts market.

    • Sir Graphus
      Posted April 3, 2009 at 2:14 pm | Permalink

      Spot on. Also, “Quantitative Easing” is part of the plan; it gives them money now, and inflation for the next govt. It’ll work, too. Maggie would have lost in 1983 if it weren’t for the Falklands, despite Foot’s “suicide note”.
      It speaks volumes for the character of the principle characters in this govt.

  3. Man in a Shed
    Posted April 3, 2009 at 7:15 am | Permalink

    John what do you think of Brown desire to get rid of the IMF’s gold reserves ? Is this a plan to avoid any real backing of currencies and allow the IMF to create money whenever it likes.

    PS I assume the BBC just wanted to broadcast Brown’s triumph and New World Order.

    Reply:Easy money from the sales, and he hopes this time it will be nearer the top of the gold market.

    • jim
      Posted April 4, 2009 at 2:56 am | Permalink

      They have been announcing this idea every few months to drive the price of gold down. They can’t sell any IMF gold without the approval of Congress, and that hasn’t happened so far. In any case the Chinese would buy it, so it would be bullish for gold.

  4. Stuart Fairney
    Posted April 3, 2009 at 8:12 am | Permalink

    This is as close to naked propaganda as the BBC dare go. I wonder how many tories they called to appear, perhaps a FOI request is in order?

    This is simply allowing the government to soft peddle a line that national humiliation is quite normal and we will need to rattle our begging bowl to the world.

    If this doesn’t persuade Mr Cameron about the BBC, nothing will.

    Mandy’s comments are nonetheless revealing.

    • Iain
      Posted April 3, 2009 at 12:32 pm | Permalink

      “This is as close to naked propaganda as the BBC dare go.”

      Yes the BBC has got very close to lying to the public, if not actually strying over the line in seeking to call the IMF money a trillion dollar injection of funds, when its not, all it is is an overdraft faciliy for countries in economic trouble.

  5. TomTom
    Posted April 3, 2009 at 8:19 am | Permalink

    They won’t get IMF funds without spending cuts – after all Britain has to be an example to the other IMF wards – and that will be most interesting as Enron-style SIVs come back on-sheet.

    Even SDRs spell the end of the Labour Party – their record of economic disaster is unbroken

  6. Demetrius
    Posted April 3, 2009 at 8:47 am | Permalink

    Stigma? That is the least of it, although my parents never forgot the shame they felt at having to rely on family when my father was unemployed in the 1930’s. At the risk of being historical (hysterical?), those interested in what can happen should look at the Banq

  7. Demetrius
    Posted April 3, 2009 at 8:52 am | Permalink

    Stigma? That is the least of it………..those interested in history should look at the Banque Royale crash in France in 1720, managed by John Law, a Scotsman. This took decades to unwind, and it is argued that the failure to create a modern banking system in France that was the consequence took decades to unwind, and finished the Monarchy in the end.

  8. Neil Craig
    Posted April 3, 2009 at 9:52 am | Permalink

    This is a disgraceful lie by the BBC on a purely party political point. Not even a lie about the BNP either, as usual, but about one of the 2 main parties. They should be backed against the wall on this.

    As regards the IMF- their 1970s conditions for lending us money did bring a significant amount of discipline to government spending (& even, since they were important then & more closely linked to Labour, made the unions more responsible). If the IMF behaved the same again it would not be too disasterous.

    Of course if one believed in conspiracies one could think Brown, in throwing his weight at G20 behind enlarging the IMF bureaucracy, has struck a deal that they will lend some of the extra to him, no questions asked.

  9. Acorn
    Posted April 3, 2009 at 10:11 am | Permalink

    “I think what we have here is a failure to communicate”.

    http://www.bankofengland.co.uk/publications/other/monetary/creditconditionssurvey090402.pdf

    • Denis Cooper
      Posted April 3, 2009 at 6:38 pm | Permalink

      Extraordinary – the reports on TV were about 80% wrong.

  10. Not an Economist
    Posted April 3, 2009 at 12:06 pm | Permalink

    I personally felt Peston’s report on the PM progamme last night was a disgrace. He basically recited the standard Keynesian pro govt line as if it was the gospel truth. In one sense thats okay provided there is a countervailing view put forward but there wasn’t. Liam Halligan from the Torygraph would have been an excellent candidate he was on Newsnight on Monday or Tuesday and was excellent) or maybe someone like Schiff or Jim Rogers if they don’t charge too much but no. Just Peston – the friendly face of Statism.

    The BBC seems to have taken the view that it has to be seen to be supportive of the govt’s policies. End of story. If this were just a game that would be okay. Unfortunately its not. Actions are being taken by this govt that will affect us all and our children for years to come. To my mind they will prolong and deepen this recession, lead to unrivalled social discontent and increased friction on the world stage. Yes there is evidence of an inflationary blip coming our way but that will only result in a deferring of the downturn which will probably be even more severe than it would have been had the govt not taken the coruse of action it has set itself upon.

  11. Iain
    Posted April 3, 2009 at 12:28 pm | Permalink

    Yes I saw that comment on CH4 news as well and immediately thought that Mandelson was preparing the ground for Brown to go cap in hand to the IMF, more so when the IMF Economist named the UK as a country that may need IMF help.

  12. Denis Cooper
    Posted April 3, 2009 at 12:52 pm | Permalink

    I doubt that the UK will need a loan from the IMF.

    While the Bank of England carries on buying existing gilts, the Treasury can carry on selling new gilts; and so I expect that the government will be able to borrow enough from private investors to cover its budget deficit.

    • Denis Cooper
      Posted April 3, 2009 at 1:23 pm | Permalink

      I should have added a caveat – “Unless RBS and Lloyds start making large claims against Darling’s insurance”.

      Which might happen; either because they’ve deceived him about the toxicity of the insured assets, or because the economic background gets a lot worse.

  13. Mark M
    Posted April 3, 2009 at 12:52 pm | Permalink

    I do wonder how hard the BBC tries to get Conservative spokesmen on. After all, recently they’ve given a great deal of airtime to the air-headed Derek Draper who must be fairly low down the list of ‘desirable Labour guests’. It’s a shame that their printer seems to run low on ink when printing out the ‘Tory desirables’.

  14. John
    Posted April 3, 2009 at 3:23 pm | Permalink

    On a technical point , do these SDR thingies require interest to be paid on them?
    If not then Brown has pulled a very fast one indeed and out manoeuvred the B of E and even if they do attract interest then presumeably it will be in the order of only 1-2% or so. Hm.

    SDRs will be allocated in proportion to so-called IMF quotas, which means that most will go to the richest countries.Including the UK – and Briwn doesn’t have to go to parliament to get authorisation to draw on them !
    Sounds like another version of PFI in the making. Off balance sheet accounting we all find out about years later if at all.

    John Law observation as above is apposite and chilling. A Scotsman from the same stable of arrogant/ignorant self belief as Brown . He truly screwed up French finances for about 100 years from 1717 onwards.

    Reply: Yes there is an interest rate if you borrow under the SADR scheme, but you avoid the condtiions and hassle of applying for a formal IMF loan

  15. mikestallard
    Posted April 3, 2009 at 3:52 pm | Permalink

    Actually, I think we all saw why Mr Brown went off visiting round the world: surely it was just to get some IMF money for the usual Labour bail-out.
    Next time you are in parliament, please do ask how much of the trillion or so pounds is going to come from our taxpaying pockets. It might be nice to know the exact figure.
    (This munificence is directly hurting now. Our Magnificent New College, by not being built, is causing enormous ructions here in Fenland. The money seems to have run out already.)

  16. alan
    Posted April 3, 2009 at 4:19 pm | Permalink

    Mr Redwood. The Tories must complain and keep complaining about the biased BBC. From their political editor to most political programmes, the absence of a tory spokesperson is quite deliberate, in my view.

    As for Mandleson’s slip of the tongue. Prior to that, and before the big big world changing announcement by Gordon Brown. At a press briefing, according to Paul Waugh in his excellent London Evening Standard blog, Stephen Timms said “We have moved beyond the era of stigma around the IMF”

    So it is a deliberate policy on behalf of this discredited government, to try and pave the way for a loan and everyone saying “Thats all right then!” As Dan Hannan said “People are being taken for granted, ripped off, lied to and ignored”

    One last quote from Channel Four News last evening:
    “Former IMF man’s warning to UK, Simon Johnson is the former IMF chief economist, so we should heed his warning that Britain’s economy is in “big trouble” and may need an international loan

    He said the UK could benefit from the International Monetary Fund’s lines of credit to help it get back on a path towards balancing its books. His remarks came too late last night for them to be picked up.

    “The point is that’s the time to turn your policies around – with all due respect to Gordon Brown and his Ministers, they need some help right now. Your economy – the UK economy – is in big trouble.”

    More power to your elbow!

  17. Lance Grundy
    Posted April 3, 2009 at 4:23 pm | Permalink

    I think that when Mr Madelson says they want “to take the stigma out of going to the IMF to borrow more” what he really means is they want to take the ‘sting’ out of going to the IMF to borrow more. It is the financial discipline [in the form of the spending cuts the IMF would ordinarily impose on a country as a pre-requisite for granting a loan] that terrifies Labour, not any sense of shame.

    What the Labour Party and their spendthrift fellow travellers in the G20 international community are trying to do is turn the IMF into just another source of easy credit for the G20 countries – specifically Britain. Members of this new club would have access to ‘no strings attached loans’. Countries outside the G20 would not. For them, the old rules would still apply.

    You can see where all this is leading.

  18. Ian Jones
    Posted April 3, 2009 at 11:01 pm | Permalink

    One final point that occurred to me overnight. Why would Labour want to go to the IMF at this point? They are a couple of years away from that if they keep spending at the current rate.

    I believe the reason is that they know the only way the Tories can institute huge public sector cuts is if the IMF demands it. Therefore by going to the IMF first and early they can take away this opportunity for Cameron.

    This is about setting up the scene for the General election after the one this/next year.

    Brown has spent 11 years building his monster, he fears Cameron destroying it in 2 years. It took 40 years for Thatcher to start changing the post war economy.

    If Cameron doesnt then we will stagnate and die.

  19. Lawrence Carter
    Posted April 4, 2009 at 12:13 am | Permalink

    There is a serious danger that Brown will load the economy with debt and high public spending and leave us with the massively unpopular task of cuts, cuts and more cuts.

    Grossly unfair, but I fear we are destined to be seen as the nasty party again. Don’t forget that the public sector are a significant part of the electorate. Where will that leave us in 4 or 5 years time when we ask the country for re-election?

    Now is the time for a very strong voice making clear just what a terrible position Labour have got the country into. I’m not hearing that voice at present.

    • alan jutson
      Posted April 4, 2009 at 11:19 am | Permalink

      Lawrence

      I completely agree.

  20. Brigham
    Posted April 4, 2009 at 7:50 am | Permalink

    Yes it is time for a strong voice to counter the labour non-democracy. I have long thought that at PM questions, the refusal of Brown to answer should be countered by Cameron saying, “As this excuse of a PM will not answer any questions we are going to leave the chamber.” And do so. If the lib dems did the same it would leave this awful PM standing there with no one to talk to, except the usual sycophants. He may get censured by the Speaker, but he still has to be held to account over the Damian Green debacle. (When is that going to happen?)

  21. Neil Craig
    Posted April 4, 2009 at 9:46 am | Permalink

    TYhe way to get round the Tories getting the blame for cuts is to do them all in the first 100 days. That way they are clearly a response to Labour messing up & are done when the public have just given their support & it gives 4 years for things to get better & the government to lighten up a bit.

    Machiavelli gave similar advice that it was better to be a mean leader & have something to be generous with when the time came than to be a profligate one & have nothing.

  22. Steve Cox
    Posted April 5, 2009 at 2:06 pm | Permalink

    In more prudent times, people who borrowed foolishly and failed to repay what they owed were sent to Debtors Jail. Charles Dickens told us all about this unpleasant experience (it happened to his father). Perhaps it is time for us to resurrect Marshalsea Jail and send this entire, useless, wasteful government there for a decade of penance?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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