Tuesday 5 July 10.30am proposal to put £9.5 billion extra into IMF

 

        On Tuesday morning  this SI Committee in Committee Room 14 at the Commons will allow  ninety minutes consideration of the extra £9.5 billion for the IMF. Some or even much of this money will be lent to Euroland countries in trouble. As  a comparison the Coalition government cut Labour’s spending plans by £5.2 billion in 2010-11 and by £9 billion in 2011-12.

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38 Comments

  1. lifelogic
    Posted July 3, 2011 at 12:58 pm | Permalink

    “will be lent to Euroland countries in trouble” – i.e. will be given away and wasted.

    What sort of joke system of government is this? Just think what £9.5Billion lent to healthy but currently often cash starved, British industry do and it would be repaid too.

    • lifelogic
      Posted July 3, 2011 at 3:50 pm | Permalink

      I see more and more adverts for these absurd solar energy house Bling roofs. Often advertised as “a government backed scheme guaranteeing payments for the next 25 years”. Cameron has already tacitly admitted the things are nonsense by stopping the feed in tariffs for the larger schemes.

      I can only hope they renege on this guarantee as soon as possible – just as they have (rightly) done on state sector pensions. The fewer of these nonsense things installed the better for all. You get £43.3p per KWH (from the tax payer) for electricity worth perhaps at true value of only circa 7p. Even with this subsidy they make very little sense. They usually quote returns before depreciation, maintenance and interest so do the sums and forget it. Is this state sponsored, miss-selling will any QUANGO give compensation later to those buyers I doubt it?

      • Posted July 3, 2011 at 10:34 pm | Permalink

        I’ve been led to believe you get it from the energy companies or the bill payer, i.e. if you don’t get one you ar paying for your neighbours returns. I have to be careful what I say about this as I work for trading standards and it is the policy of the elected government. No one elected me so i’s not for me to say whether it’s a good or bad policy.

        I’ve had a look into the numbers and tapped a blogger who knows a lot more than me about finance to help with the tricky sums like present value calculations. There are a lot of variables that go into the calculations for any expected return on investment. So if a salesman puts the wrong numbers in (like a south facing roof when really it is SSW facing, or doesn’t account for the shade) then that would be mis selling and possibly a regulatory offence or even fraud.

        The interesting one IMO is assumptions on RPI inflation (the feed in tariff is RPI linked) and electrcity price inflation. The official sources give you a cash value (not a present value though) yet some traders seem to be assuming things like 3.5% RPI and 9% electricity price increases in order to quote you amuch bigger cash figure.

        My personal view is that you should consider such an investment against expected returns from stocks or property for 25 years. It is a 25 year investment where no functioning secondary market for consumers to sell their feed in tariff income yet exists. So generally if you were making a 25 year investment stocks or property would be the mainstream choices.

        But I forsee that a secondary market (or even a wholesale securitisation and swaps market) could exist if take up was high enough. It’s very complicated and far beyond the financial capabilites of the average consumer IMO. I’d suggest getting independant advice from a good IFA or accountant if you are thinking about getting one.

        • lifelogic
          Posted July 5, 2011 at 6:09 am | Permalink

          I would suggest you just forget it. The cost of cleaning the leaves and moss off it (especially with the working at height regulations), depreciation, interest and maintenance will probably exceed the value of any electricity actually produced. The feed in tariffs may well be amended by a more sensible future government and it will probably devalue your home anyway or you will move before any return is actually made.

          • Posted July 5, 2011 at 6:55 pm | Permalink

            Once the MP’s have them on all 3 houses they might get amended upwards!

      • Chris
        Posted July 4, 2011 at 8:20 am | Permalink

        Yes, agree with this. I’m currently trying to dissuade my husband from considering these schemes…..not because I think solar panels don’t work, but because of the very thing you mention…..”guarantee”. It just aint gonna be there. I think if people want to try solar panels out, they should look solely at the potential benefit to themselves and their own home, and NOT at the aspect of making an extra income from it on the side. (And yes they are ugly things, especially on old houses).
        When people in this country start to feel the pain in their pockets, the last thing they’ll be wanting to do is take out loans for home improvements….food will be top priority. As for the pensions, well I’m mid-50’s now and I don’t expect to EVER see either my government pension or the state one. It’s all over. And with another £9 billion going to Europe, we may as well prepare now for revolution because there’s going to be one pretty soon.

      • alan jutson
        Posted July 4, 2011 at 9:07 am | Permalink

        Lifelogic

        Yes, more roof bling.

        Since posting on this very subject the week before last, I have been keeping a count on flyers put through my door.
        So far in 12 days, 6 leaflets, all trumpeting the benefits of solar power, Tax free, RPI guaranteed profit for 25 years, paid for by the Government subsidy of feed in tarrifs.

        Agree totally with you about roof and solar maintainance, the fact that you have to drill holes in your roof to install such should be some sort of warning to most people, although commonsense seems to fly out of the window when money talks.

        Complete and utter madness.

        • Bazman
          Posted July 4, 2011 at 7:06 pm | Permalink

          Couple of calculators here giving quite different results on a 2.4 KW system.
          http://www.talksolarpanels.co.uk/solar_calculator.php
          http://info.cat.org.uk/solarcalculator
          I was quoted £8200 for a 2.4 KW 10 panel system. Seems like the companies are quoting similar prices and over charging for the panels.
          Maintenance does not seem to be a problem though should any be needed would further add to the costs.
          I’ll leave it for the moment as my use of 3700KW would per year I suspect would not justify the outlay and returns. A bigger system would help but the roof is not large enough.

  2. John Bailey
    Posted July 3, 2011 at 1:05 pm | Permalink

    We are a EUSSR state still masquerading as a ‘Country’ of Idiots and do not deserve to be a Sovereign Nation and we deserve to be bankrupted and lose everything we have sacrificed and fought to build up over Centuries, and that is exactly what is happening and exactly what will happen.

  3. Stephen Gash
    Posted July 3, 2011 at 1:09 pm | Permalink

    The UK will be leaving the EU bail-out scheme next year, but will remain in the IMF scheme. So, will the EU help the UK in future if our economy flounders, lets say under a Labour-Lib Dem coalition?

    EU assistance to England has a poor record if the floods are anything to go by. There was no Solidarity Fund money for reparations following floods in England, at least not until the last floods in Hull and Worcestershire. However, Barroso personally went to Greece after fires there and gave Greece €405 million extra to the SF money it was already getting. This figure almost exactly equalled the fine levied against England for mishandling (by the British government in the British parliament) single farm payments in England.

    Whenever the EU wants extra cash it drums up a method for fining England.

    Nobody on the Tory side seems to be reminding Labour of the £7 billion per year UK rebate Blair gave away. Not long after Euroland went bust, so that was money down the EU drain.

  4. alan jutson
    Posted July 3, 2011 at 1:12 pm | Permalink

    90 mins for £9.5 billion.

    Does this sound right for a discussion of this amount ?.

    A bank robber gets longer in court than this.

    There again I could take less than 9 seconds, “Sorry it’s a No”.

    But if you are going to have any meaningful sort of discussion, I would have thought about 9 days is nearer the mark.

    Once again the government shows its priorities are all wrong.

    What more can you say, given its the total amount that has been so called saved over 12 months simply being given away.

    “All in it together”, really does make you wonder what its all for .

  5. grahams
    Posted July 3, 2011 at 1:34 pm | Permalink

    A blast from the past. I believe that this money was promised at the London Summit in 2009 where an expansion of IMF resources was heavily promoted by Gordon Brown to help “emerging market and developing economies”. So he has scuppered deficit reduction after all.
    It is ironic that some of this money will be used to veil the mistake of allowing unsuitable countries into the euro for political reasons and some to ensure that Irish banks remain independent. It would be one more disgrace if our Government connived in selling UK banks to foreign concerns to compensate for having to lend the necessary to the IMF.

    • grahams
      Posted July 3, 2011 at 1:46 pm | Permalink

      PS: Would it be possible, even at this late hour, to arrange for the money to be paid to the IMF from our foreign exchange reserves, which are being built up solely to depress sterling, rather than from public spending ?

  6. Posted July 3, 2011 at 1:40 pm | Permalink

    Dear Mr Redwood,
    Spending plans and actual spending are two very different things as I am sure you know well, and although the coalition may have reduced Labour’s forward plans to spend, they have not reduced actual spending, in fact that has gone up.

    That £9.5bln will push that spending up even further, but to match that against future spending planning is not quite cricket.

    Britain will have to borrow that money, and repay it, from International Bankers, give it to the IMF so that they can lend it out to other States no longer in a position to borrow, so that they in turn can repay the same International Bankers we borrow from for government debt that no taxpayer asked for or wanted.

    This quite ridiculous state of affairs where governments are socialising debt must come to an end, before the end is thrust upon us.

    • Posted July 3, 2011 at 10:49 pm | Permalink

      Why can’t the bankers just lendit to the IMF? The World Bank and the EIB issue bonds. Do the bankers not trust the IMF to cough up or something?

    • Foreign Aid is Evil
      Posted July 4, 2011 at 3:44 pm | Permalink

      Ian, I think you’ve been deliberately confused by Osborne’s evil rhetoric. The Coalition is only planning ‘real terms’ cuts. As the ‘cuts’ are less than the assumed rate of inflation, this means that cash spending will rise every year, although by very slightly less than Labour planned.

      This should be contrasted with Howe’s Chancellorship in the 80s. He insisted on cash cuts in budgets on the argument that most taxpayers don’t get index linked rises and that as government spending is such a high proportion of GDP, baking inflation into government spending forecasts also bakes it into the whole economy.

      You’r also correct to say that Osborne has spent and borrowed more than he forecast just a year ago. He’s probably done a bit better than a Labour Chancellor would have done but that isn’t much comfort if we still go bust. Worse, Osborne’s strategy of back-ending even real-terms cuts is very high risk. Growth might return to a level that makes these cuts relatively painless and people feel more prosperous and so returns a Conservative government in four years time. On the other hand the slow-mo train crash of the EU might continue, our debt rising to 140% of GDP might not even be remotely as easy as it is today aand some very nasty consequences could follow. Even if everythin does go to plan, I’m struck by Frasir Nelsons column in the spectator of a ‘voteless’, technical recovery that lack of leadership and muddling through produces. It’s interesting to note that Cameron and Osborne are both proteges of Major. Are the doomed to repeat him?

  7. Richard
    Posted July 3, 2011 at 2:13 pm | Permalink

    So we are going to borrow an additional £9.5 billion and then give this to the IMF who then will give it Greece who will give it back to the banks who lent it to us in the first place.

    Why dont we cut out the middle man and just give Greece the money directly ?
    Or even better just run the printing presses for a few days and send them the cash in some nice Jermyn Street suitcases?

    • Mark
      Posted July 4, 2011 at 11:30 am | Permalink

      I’m sure De La Rue can still do drachmas.

  8. Mike Stallard
    Posted July 3, 2011 at 5:49 pm | Permalink

    This government is hobbled.
    I am guessing that it was part of the deal at the beginning of the coalition that Nick Clegg and his EU allies agreed with the PM that the EU was to be out of bounds as a topic for discussion and that the PM agreed, swallowing his genuine concerns about Europe.
    Now the bits are beginning to fall off and more and more money is being poured out, all of which will actually have to be borrowed.
    But I suppose it is worth it to keep the government in power.
    Is it?

    • Simon
      Posted July 4, 2011 at 2:28 pm | Permalink

      Are you sure Cameron ever had any “genuine concerns about Europe” ?

      (other than “the project” that he believes in full was in danger of coming off the rails)

  9. Posted July 3, 2011 at 6:45 pm | Permalink

    That’s about 100 million a minute – high even by EU standards of spending.

    Will the committee ask for or receive any realistic loss scenarios and will they even enquire about the legality of the bail out.

    Probably not.

    Would Cameron take any notice if they refused to agree this – definitely not.

  10. Tim
    Posted July 3, 2011 at 7:09 pm | Permalink

    This Government is proving to be as disingenuous as the last and Tory voters won’t forget or forgive!!

  11. Goddard
    Posted July 3, 2011 at 7:16 pm | Permalink

    Our government is certain to waste £9.5 billion of our money by giving it away to the IMF, the only question is why waste 90 minutes talking about it ?
    So far this government shows no inclination to tackle wasteful public spending.

  12. Acorn
    Posted July 3, 2011 at 7:22 pm | Permalink

    Does the committee get a chance to say, “thanks but no thanks, we have had a better offer”?

  13. Posted July 3, 2011 at 8:27 pm | Permalink

    When you have too many commitments already, the easiest way to constrain expenditure, is not to take on any more. Or, if in a hole……….

  14. Brian Tomkinson
    Posted July 3, 2011 at 8:58 pm | Permalink

    Why does anyone think that this government is really trying to reduce the deficit when faced with such evidence? Was Osborne lying when he said that he intended to cut the structural deficit by 80% spending cuts and 20% tax increases? If, as now seems likely, this government fails to make any really significant reduction in the deficit after all the misleading propaganda about tackling spending when the reality is that they are spending more, who will believe that there is any hope of electing a government that is prepared to sort out the country’s finances? Just why the markets haven’t reacted against Osborne is a mystery which can only be explained that they think we are a slightly less basket case than Greece, Portugal and Ireland – but for how long?

  15. Mr Leslie Smith
    Posted July 3, 2011 at 9:02 pm | Permalink

    Our “politics” are all out of proportion if our Parliament only allow some 90 mins discussion on such a huge sum of money going out in risky loans. The loan to Ireland was huge in itself and some £9.5 Billion to Euroland is GIGANTIC . Why is the BBC and our UK Media not focussing and commenting more on these massive loans, which receive alomst no Parliamentary scrutiny??

    • lifelogic
      Posted July 5, 2011 at 6:15 am | Permalink

      The BBC thinks the main storey at the moment is the News of the World phone hacking!

  16. BobE
    Posted July 3, 2011 at 10:36 pm | Permalink

    The ConDems know this is a one off parliment. Next will be a labour government. So all they are doing is preparing a path to their next jobs. The country is not relevent to to there job prepoaration. Watch as each is appointed in 3 years time.

  17. Posted July 3, 2011 at 10:59 pm | Permalink

    Will it ever end? I’m not one of these people that think the likes of Mr Bernanke are out to dupe us, but this never-ending bail out of everything in the hope ‘things will get back to normal’ is naive in my opinion.

    The main problem IMO is perception. People seem to believe ‘normal’ is the Blair years of rampant house price inflation and good times. As western demographics shift to an older population and oil get’s less plentiful we might actually have it harder.

    People need to wake up and smell the coffee here, then ditch their unreasonable expectations of the future. The baby-boomer retirement plans (that they can sell their houses to their kids at a price their kids can’t afford to pay and that working ages people will donate all their money to them) can’t work.

    • Simon
      Posted July 4, 2011 at 2:32 pm | Permalink

      Now that we’ve established the principle of “bail outs” , every company around the World will be trying to get their share .

      It’s about the only growth industry we have .

  18. Martin
    Posted July 3, 2011 at 11:10 pm | Permalink

    Given the way the supreme masters of the universe (EC1 part) in Threadneedle St are devaluing the currency (was that really why Brown kept us out of the €Euro – the right to devalue!) we should be grateful anybody is interested in our debased currency.

  19. Caterpillar
    Posted July 4, 2011 at 12:56 am | Permalink

    I don’t know how the financial assets of households are held, but given that they are around £2,500 billion in total, let us say 20% (this percentage is a guess) is in deposit / savings accounts and earning a negative real interest rate of about -2%.
    The amount ‘taken’ from savers in the UK per year by the current high inflation-low interest rate policy is of the order:
    £2,500 billion x 0.2 x 0.02 = £10 billion pa.
    How much time is given to discuss this (or even report a correct calculation – the above is a bit finger in the air but I suspect about right)?

  20. Duyfken
    Posted July 4, 2011 at 9:27 am | Permalink

    I have no confidence this meeting by the Commons SI committee will achieve anything worthwhile, unless of course in the unlikely event they refer it back to the Chamber for a full debate.

  21. Denis Cooper
    Posted July 4, 2011 at 10:46 am | Permalink

    The remit of the SI Committee is stated here:

    http://www.publications.parliament.uk/pa/jt201012/jtselect/jtstatin/167/16701.htm

    “The Joint Committee on Statutory Instruments (JCSI) is appointed to consider statutory instruments made in exercise of powers granted by Act of Parliament.”

    In this case, the relevant Act is the International Monetary Fund Act 1979:

    http://www.legislation.gov.uk/ukpga/1979/29/contents

    “The role of the JCSI, whose membership is drawn from both Houses of Parliament, is to assess the technical qualities of each instrument that falls within its remit and to decide whether to draw the special attention of each House to any instrument on one or more of the following grounds … ”

    “… vi. that there appears to be doubt about whether there is power to make it or that it appears to make an unusual or unexpected use of the power to make”.

    Is there any way that I could suggest to members of this Committee that there must indeed be doubt about whether the Treasury still has the power to make this Order under the 1979 Act?

    Given that the money is clearly intended to fund eurozone bail-outs which are illegal under the Maastricht Treaty, as incorporated into our national law by the later and superior European Communities (Amendment) Act 1993.

  22. Denis Cooper
    Posted July 4, 2011 at 3:37 pm | Permalink

    Having sent an email to the clerk, I am informed by an assistant that the Committee has not yet received this SI.

  23. simple soul
    Posted July 4, 2011 at 6:50 pm | Permalink

    The Greek bailout is bad enough on its own, but it is only one small part of a lavish spirit of expenditure and profligacy which has entered government policy recently. I refer of course to the huge increase in the Aid budget, the huge increase in the Danegeld paid to Brussels, the indecisive but expensive war in Libya. Sometimes it looks as though it is the new Government which is in deficit denial. Sad to say we still have a print and borrow and spend government – as usual.

  • 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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