Funny money for the IMF

 

            There has been argument over the Chief Secretary’s use of a £40 billion figure for the UK’s contribution to the  IMF yesterday on TV. I have been back and checked the Hansard record of the Committee I attended to hear the government’s case for an increased subscription on July 5th 2011. The Minister said:

            “The subscription is drawn in the IMF’s unit of account and currently stands at 10.74 billion SDRs which is approximately £10.7 bn at today’s exchange rate. The Order will raise the subscription to 20.16 bn SDRs, equivalent to £20.15 billion.”  It appeared we were being asked to approve an extra £9.5 billion.

            Apparently the figure including borrowing will be double the new total in this speech. Had I been told  that at the time it would have made no difference to my action, as I voted against the increase anyway when it came up for vote in the Commons  on 11 July.  Others must say if it might have affected the way they voted, where they voted to approve the Order. I thought an extra £9.5 bn was too much given the UK’s current financial position, and the possible use of these funds for Euro area rescues that may not work as intended. Double that would  in my view be worse.

PS  The Prime Minister clarified the position this afternoon. Parliament did vote to approve a couple of Orders in 2009 and 2010 to increase the UK  borrowing resouces for the IMF, so the government does have permission to make up to £40 bn available.

 

 

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30 Comments

  1. lifelogic
    Posted November 7, 2011 at 6:41 am | Permalink

    Anything even one single pound wasted, to prolong a system that clearly cannot not work, is a waste. Given that many sound businesses are totally unable to borrow at all or only on absurd terms.

    Much is being made of the claim that we have not lost money lending to the IMF in the past. I suspect this is not true in real terms anyway.

    Banks have also not lost lending to sound UK businesses – on average they have made huge profits this type of lending. That is where the money should go. It will be paid back, it will create jobs, tax revenue and it will reduce benefit payment.

    There is no contest.

    • lifelogic
      Posted November 7, 2011 at 7:11 am | Permalink

      Also in the telegraph this morning.

      The disorderly break-up of the euro would mean a short, sharp economic shock and probably a recession, but would be followed by a quicker return to strong economic growth, according to the Centre for Economics and Business Research.

      Centre for Economics and Business Research (CEBR) economists suggest that the demise of the euro would “not be anything like the disaster that has been argued”. Freed from the constraints of the single currency, strong countries such as Germany would see their currencies gain in price in relation to the pound, boosting British exports.

      So we would be wasting £40 Billion(?) for a negative benefit rather than getting it to UK businesses for real return in more jobs, more taxes, interest and loans paid back and fewer benefits payments thus due.

      Who but a fool would choose the former?

      Reply: Indeed – I have been arguing on the media that exits from the Euro are the least bad way forward for the distressed Euro zone members, and also for the UK.

      • zorro
        Posted November 7, 2011 at 7:42 am | Permalink

        Indeed, it is madness…..so the question is why? What possible motive could make politicians approve this. Could it be that they intend to benefit in some way?

        It is refreshing that at least some organisations are calling out this nonsense that if the Euro ends, we will all be in mortal danger, and live in caves and eat berries.

        Zorro

    • Disaffected
      Posted November 7, 2011 at 9:57 am | Permalink

      Alexander also confirmed to Mr Vine he was”happy” for the money to go to Greece via the IMF. Incompetent the lot of them. This is our money and the Coalition expect us to work longer and pay more taxes so they can help Dave’s billion pound throw away schemes. Alexander is now to employ 2,000 tax collectors! Alexander has got to go. He was another who wanted the UK in the single Currency, he tried to deflect this stupid idea yesterday.

  2. norman
    Posted November 7, 2011 at 7:05 am | Permalink

    A politician misleading people, who’d have thunk it?

    It would actually be tripling the extra £9.5bn rather than double, from £10bn to £40bn.

    Still, Merv can ‘print off’ £40bn in 10 seconds so need to panic just yet.

  3. Edward
    Posted November 7, 2011 at 7:12 am | Permalink

    Absolutely spot on John. Definitely some ‘truth economics’ going on there with Danny Alexander. Also did you notice how he responded to the question regarding Euro justification. Twice he made the argument for not having the Euro, but did not even try, as he has in the past, justifying the Euro. Methinks the emperor has no clothes.

    • Tim
      Posted November 7, 2011 at 2:19 pm | Permalink

      Danny (words left out-ed) Alexander can see no wrong in his own dubious expense claims yet is happy to employ more tax inspectors to capture people who avoid tax. He is a total hypocrit and reason why people hold so many MP’s in contempt. Present company excluded Mr Redwood.

  4. Mike Stallard
    Posted November 7, 2011 at 7:15 am | Permalink

    I really do wish that the papers and TV would actually address the points that matter instead of just endlessly guessing what could happen.
    I, for one, simply do not understand why my country is “on the brink of disaster” when we are not even in the Eurozone. Why are we pouring borrowed money into a lost cause? What is happening within the Greek Army? How can a mysterious one trillion thinggies solve the problem in Italy when their debt is 1.8 trillion thinggies? What would happen if we just walked out of the EU?
    None of this is ever confronted head on. Why not?

    Reply: The prior question is where are the trillion thingies? So far they have raised 13bn only.

    • zorro
      Posted November 7, 2011 at 7:48 am | Permalink

      There will be something hot off the (printing) press….

      Zorro

  5. Pete the Bike
    Posted November 7, 2011 at 7:18 am | Permalink

    Let’s hope enough MPs agree and vote the increase down.

    Of course if we had a Conservative prime minister this would never be an issue in the first place.

    Reply: I think we will be told that was the vote.

    • lifelogic
      Posted November 7, 2011 at 8:34 am | Permalink

      Had we had a real Conservative leader (instead of a green, caring, sharing, pro EU one) the Tory party would have won the election outright too. We would then not have to listen to Alexander, Huhne, Cable, Clegg, Clark and the rest of the loons who have been proven so wrong.

      • Bazman
        Posted November 7, 2011 at 6:30 pm | Permalink

        If a hard line Conservative government had stood they would have been politically annihilated. Why do you think there is a coalition? Just because you would have voted for then does not mean that the majority of the population think this way. Quite the opposite and not because of the BBC.

    • JimF
      Posted November 7, 2011 at 8:35 am | Permalink

      You mean Major, Heath, IDS, Hague?
      It is a fallacy on this blog that your normal, average, would-be Conservative leader these past 50 years would have reacted vigorously in these circumstances.
      Infact, thinking hard, I can think of one only.

      • JimF
        Posted November 7, 2011 at 8:36 am | Permalink

        PS and that isn’t Macmillan

  6. Patrick
    Posted November 7, 2011 at 8:28 am | Permalink

    What am I missing?

    “The Order will raise the subscription to 20.16 bn SDRs, equivalent to £20.15 billion”

    How can this possibly translate to £40 billion? Where has the “extra headroom” come from?

    Is there not a case for the Minister to clarify his earlier statement to the House?

  7. Brian Tomkinson
    Posted November 7, 2011 at 8:38 am | Permalink

    Ministers cannot be allowed to do this. They are treating Parliament with contempt if they take permission to increase the subscription by £9.5 billion to allow them to increase it by £29.5 billion. They must be held to account.

  8. alan jutson
    Posted November 7, 2011 at 8:41 am | Permalink

    John

    This is exactly the problem with the whipping system, and the lazy lobby fodder politicians, who just troop in for a vote on which they know absolutely nothing, simply because they are ordered to.

    Many times on this site I have said that once a debate is started, only those present in the chamber should be allowed to vote, as it is only those who have attended the debate know the full arguments, both for and against.
    Aware this may cause some problems with other engagements, management of individuals time etc, but what cost time against £20 billion.

    The more and more I see of what is going on in our supposed name in the HOC, the more disgusted I am becoming.

    I thank you for your efforts.

    Cameron, Clegg, Miliband, shame on you all.

  9. oldtimer
    Posted November 7, 2011 at 8:47 am | Permalink

    From the outside this looks like another instance of a smoke and mirrors operation but thius time it is MPs, not the general public, who have been duped. Will the Minister be recalled to explain himself to MPs and how his comment on SDRs squares with those of Mr Alexander`s £40 billion?

  10. Nick
    Posted November 7, 2011 at 9:19 am | Permalink

    Get your story straight.

    Douglas Alexander is saying 40 bn.

    Who is lying?

  11. Acorn
    Posted November 7, 2011 at 9:32 am | Permalink

    As far as I can make out, since 03/11, the UK quota subscription is 4.23 % of the current funds limit of 477 billion SDR; that is 20.1 billion SDR. We appear to have signed up for lending above our quota, up to 18.7 billion SDR for the NAB. Plus another 1.7 billion SDR, under the GAB.
    http://www.imf.org/external/np/exr/facts/gabnab.htm

    Total 40.5 billion SDR, circa £40 billion.

    • Denis Cooper
      Posted November 7, 2011 at 2:04 pm | Permalink

      Thanks.

      I searched for “International Monetary Fund” on the Statute Law Database:

      http://www.legislation.gov.uk/

      and found a lot of Statutory Instruments going back over the years, of which this 2010 No. 1880 made on July 21st 2010 is the relevant one:

      http://www.legislation.gov.uk/uksi/2010/1880/made?match-1

      “The International Monetary Fund (Limit on Lending) Order 2010”

      “A draft of this Order has been laid before the House of Commons in accordance with section 2(3) of that Act and approved by a resolution of that House.”

      But it doesn’t give any further details, and the search engine on Parliament’s website doesn’t make it easy (or maybe even possible) to find them.

      From the Explanatory Note:

      “This Order increases the total amount that the United Kingdom can loan the International Monetary Fund (IMF) from 12,470 million to 18,657.38 million special drawing rights.

      The limit was previously increased from 2,577 million to 12,470 million special drawing rights by the International Monetary Fund (Limit on Lending) Order 2009 (S.I. 2009/1830), which is revoked by this Order.”

    • Denis Cooper
      Posted November 7, 2011 at 7:23 pm | Permalink

      Well, I’ve found a Written Ministerial Statement from George Osborne on June 23rd 2010:

      http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100623/wmstext/100623m0001.htm#column_15

      “Written Ministerial Statements

      Wednesday 23 June 2010

      Treasury

      IMF (New Arrangements to Borrow)

      The Chancellor of the Exchequer (Mr George Osborne): The Government have today laid the International Monetary Fund (Limit on Lending) Order 2010 before the House of Commons. Copies of the revised New Arrangements to Borrow, which relate to this order, have been deposited in the Libraries of both Houses.”

      Followed by approval of the Order without a debate or a vote at about 7.30 pm on July 20th 2010, just after the division for the Third Reading of the Finance Bill:

      http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100720/debtext/100720-0003.htm#column_243

      “Business without Debate

      Delegated legislation

      Motion made, and Question put forthwith (Standing Order No. 118(6)),

      Sea Fisheries

      That the Fishing Boats (Electronic Transmission of Fishing Activities Data) (England) (Scheme) 2010 (S.I., 2010, No. 1600), dated 14 June 2010, a copy of which was laid before this House on 16 June, be approved. – (Bill Wiggin.)

      Question agreed to.

      Motion made, and Question put forthwith (Standing Order No. 118(6))

      International Monetary Fund

      That the draft International Monetary Fund (Limit on Lending) Order 2010, which was laid before this House on 23 June, be approved. – (Bill Wiggin.)

      Question agreed to.

      Motion made, and Question put forthwith (Standing Order No. 118(6)),

      Dangerous Drugs

      That the draft Misuse of Drugs Act 1971 (Amendment No. 2) Order 2010, which was laid before this House on 12 July, be approved. – (Bill Wiggin.)

      Question agreed to.

      20 July 2010 : Column 244”

      No indication of whether the Order had been considered by a Committee between June 23rd when Osborne laid it and July 20th when MPs nodded it through.

      • Acorn
        Posted November 8, 2011 at 9:11 am | Permalink

        Reference your PS to this post, “Parliament did vote to approve a couple of Orders in 2009 and 2010 to increase the UK borrowing resources for the IMF, …”

        JR; HOW COME YOU DID NOT KNOW PARLIAMENT HAD VOTED THIS MONEY??? Does every bit of secondary legislation just get nodded through regardless; affirmative or negative resolved types?

        Have any of the agents mentioned in the following fact sheet, ever stopped an S.I.? http://www.parliament.uk/documents/commons-information-office/l07.pdf

        Reply: The SIs are discussed by a handful of MPs and approved by them. There was no Commons vote on the 2010 Order so I did not have a chance to express a view.

  12. stred
    Posted November 7, 2011 at 9:52 am | Permalink

    The machinations of all this money bunging is very confusing. Is this right?

    The UK can’t pay for increasing public expenditure. Like the Greeks the civil servants will not actually cut existing payouts and curtail future cuts. So we are printing £s in the form of buying back IOUs with more IOUs.

    Meanwhile the Euro lot are also bust and so they are creating SPIVS to pay for continuing credit. However, this is insufficient and consequently it is necessary to involve the International Monetary Fund, who deal in Thingies (T). All countries will contribute to this fund of Ts, including the UK, which does not have any money and will have to borrow it. This will have to be paid back in $,Euros, Dongs or Ts. We have sold all of our gold for bugger all during the Brown bottom. The Euros we bought at the time are now worth less.

    The UK has ahigh credit rating and will not have to pay as high a rate of interest as Italy, which has about the same debt, but can’t print money and devalue Italian Euros, as they are not just Italian.

    China has lots of spare $ and can change them for Ts and bung Euroland a lot, so that they can keep buying Chinese products and avoid making them at home. To help further, they will let their currency rise in value, so that the Eurolanders have to pay them even more.

    Is this right and can anyone print Ts or exchange them for£s? Will Ts still be worth the same agaist the £ when we have to repay the money borrowed to loan to the IMF for the PIGIS?

  13. stred
    Posted November 7, 2011 at 10:32 am | Permalink

    Sorry Yuans not Dongs.

  14. Denis Cooper
    Posted November 7, 2011 at 11:08 am | Permalink

    In practical terms the definitive vote was that taken in the Second Delegated Legislation Committee on July 5th:

    http://www.publications.parliament.uk/pa/cm201012/cmgeneral/deleg2/110705/110705s01.htm

    That was after 90 minutes debate including explanations from Mark Hoban, the Financial Secretary to the Treasury, and because the MPs on the Committee voted 10 – 6 in favour of the Order the government could proceed to get confirmation through a vote of the whole House, without any further debate, on July 11th, Division No 320 here:

    http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110711/debtext/110711-0004.htm

    Presumably if the Committee had voted against the Order then the government could not have proceeded with it, and the mass of MPs would not have been required to vote on a matter which very few of them could have fully understood

    So it seems to me that the 9 coalition MPs other than Mark Hoban who voted for the Order on July 5th, and also the Chairman Philip Hollobone, should be asking themselves whether Mark Hoban had given the Committee all the necessary information so that they could fully understand the consequences of approving the Order.

    Apparently an approved increase in the IMF subscription of £9.5 billion has translated into an increase in the total IMF commitment of £19 billion, and how deeply must an MP delve into the workings of the IMF, and perhaps previous legislation, in order to pick up that important point?

    However I noted at the time that out of the 10 coalition MPs who voted for the Order, only 4 said anything other than “aye” during the whole course of proceedings.

    The other 6 – Goodwill, Hands, Mensch, Morris, Reid and White – asked no questions and made no points, even though the non-committee members who attended and spoke – Baker, Bone, Carswell, Cash and Redwood – and also some of the Labour MPs on the committee had set forth good reasons why the increase in the subscription should not be authorised.

    Reply: The definitive vote was the vote of the whole House, which could have overturned the Committee. The whole House had to rely on the Minister’s statements in Committee, available in Hansard.

  15. Chris
    Posted November 7, 2011 at 5:20 pm | Permalink

    I see from report in Guardian (Cameron faces questions over G 20 and German gold) that Germany has apparently refused to use its gold to boost EFSF, thus putting pressure on IMF (with Cameron apparently happy to commit the UK to £40 million contribution). Cameron is apparently under pressure to “take a tough line” on this with EU partners .
    http://www.guardian.co.uk/politics/2011/nov/07/cameron-g20-summit-german-gold

    “A German refusal to use Bundesbank gold reserves to fund an expansion of the European Financial Stability Fund (EFSF) contributed to the breakdown of the G20 talks on Friday, UK sources have said.
    The news is likely to intensify pressure on David Cameron and George Osborne to take a tough line with their EU partners at a meeting of European finance ministers in Brussels.”

    Reply I think £40 billion not million in total

  16. Peter Richmond
    Posted November 7, 2011 at 6:10 pm | Permalink

    40Bn, 20Bn…either way it is a good few hundred pounds for everyone in the UK to stump up. Does this government really want to be popular and win the next election?

  17. David Price
    Posted November 7, 2011 at 6:59 pm | Permalink

    To put £40b in some context..

    It’s the entire corporation tax receipts by HMRC in the 2010-11 tax year (according to their October 21st 2011 figures) give or take the salary and bonus of a couple of Quango or local council CEOs. That’s about 9% of the total tax & NI take for that tax year.

    .. and what exactly do we get for this?

  18. Steven Whitfield
    Posted November 7, 2011 at 11:44 pm | Permalink

    I think what this shows beyond doubt is that support for EU federalism goes to the very heart of the British Establishment. Hatred and suspicion of England, whether it be her values, traditions or institutions is hard wired into the political system.

    The coalition it seems is absolutely determined that the EU project must not fail – whatever the cost. But why ? .The answer cannot be found by reason or logical debate – support for the EU is for deeply ideological reasons.

    I thought our deputy PM articulated this all too common anti English sentiment very well when he wrote about the relationship between England and Germany after the second world war. “We need to be put back in our place”. Quite Mr Clegg, and what better way than to strip away our identity,competitive advantages and turn us into a province of the EU ?

    Until we confront these unsettling questions and confront deeper motives I don’t see how the ‘Euro sceptic’ cause can ever gain any real ground – unless the failure to curb spending causes an even bigger economic crash.

    In my view, if we look logically at the argument for spending 40 billion on propping up the Euro it is obvious it is a foolish thing to do. But Euro fanatics it seems are imune to facts and reason. The concensus, or establishent view will simply repeat a set of wooly and untruthful counter arguments hoping this will divert attention from the underlying motives. A weary and well cushioned electorate can be relied upon to be not too questioning.

    The adoption of Political correctness, EU integration and mass immigration and other revolutionary changes didn’t happen to this country by accident – they happened because those that sought to rule us had an agenda of radical change. Instead of arguing about 40 billion here or 20 billion there, we need to step back and see the bigger picture.

  • 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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