IMF bail outs

 

I support President Obama, who has said that the USA does not wish to put more into the IMF to bail out members of the Eurozone. The USA thinks the Eurozone should do more for itself. I do not think the UK should be putting more of our money at risk in the Euro through the IMF either.

IMF programmes are for sovereign countries. They usually require austerity packages, which are plentiful in Euroland, and devaluations, which are ruled out within the Euro. They require states going through an IMF programme to follow appropriate monetary policies for them controlled by their Central Banks and governments.  Again, Euroland members cannot do this, as they have to accept the one size does not fit all policy laid down by the ECB and the EU.

Greece or Portugal are to Euroland as Arkansas or California are to the US monetary union. No-one thinks the IMF should lend money to an American state in a tight corner. Similarly there would be  no question of IMF loans to Wales or  Northern Ireland if they needed financial help within the sterling area. The duty and responsiblity rests with the sovereign of the currency area to send them enough transfer payment or to stand behind the collective borrowing to finance their activities.

It is not the rest of the world’s fault that Euroland lacks a full sovereign to back up the currency and to send sufficient transfer payments from the rich to the poor within the union. I do  not see why the IMF should provide money that the Union itself is unwilling to provide, when the troubles in Euroland primarily relate to imbalances within the union that the Union should sort out.

The UK Parliament has already approved this money. I did  vote against when it was put to the vote.

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75 Comments

  1. David Williams
    Posted April 21, 2012 at 6:11 am | Permalink

    How can Mr Osborne be so soft and foolish. I will not be voting Conservative any more.

    • Mike Stallard
      Posted April 21, 2012 at 2:34 pm | Permalink

      Look, don’t you realise, it is not his money!

  2. lifelogic
    Posted April 21, 2012 at 6:21 am | Permalink

    What is “morally repugnant” taxing the pensioner £3B then using it to lend £10B to the IMF to use to delay the sinking of the EU ship or legally avoiding taxes in order to prevent Osborne from wasting it.

    Is it “morally repugnant” to give £1600 of each families money at this time in total to the PIGIS to delay the sinking of this absurd ship. Has he learned nothing from Major’s ERM fiasco? Is it also not repugnant to evade any house of commons say in this matter.

    I see Peter Bone MP, has branded the move “bonkers” I think he is being far too kind. Parliament need to act for a change and make it clear it will not allow this. Needless to say the BBC seem basically all in favour given the absurdly soft interview given to Osborne.

    • lifelogic
      Posted April 21, 2012 at 7:23 am | Permalink

      Is there back bench MPs can do to prevent this £10B of insanity JR or have they given in?

      Reply: 33 of us voted against this money along with some Labour MPs – it has already got approval.

      • lifelogic
        Posted April 21, 2012 at 8:26 am | Permalink

        Can they not block other things or obstruct other business in some way – in order to get a new vote on the matter? Perhaps block the taxes on charities and OAP that are part raising these funds to be wasted on the PIGIS.

        Something at least is needed.

      • Bob
        Posted April 21, 2012 at 6:37 pm | Permalink

        Reply to reply:
        “33 of us voted against this money along with some Labour MPs – it has already got approval.”

        Thirty three – is that all?

        Mr. Redwood. how many Tories voted in favour of squandering more of our hard earned money into the Euro money pit?

        Reply: Most of the others voted for the IMF money

    • lifelogic
      Posted April 21, 2012 at 7:35 am | Permalink

      Judging from small companies I am aware of, who cannot borrow all they need at sensible rates, then £10B lent to a sound UK banks and lent on to UK industry would create perhaps 100,000 jobs. Thus creating more taxes and less benefit payments. Still I am sure these unemployed would rather George just tipped the money down the IMF/PIGIS drain to follow all the other £Billions.

  3. Kevin Ronald Lohse
    Posted April 21, 2012 at 6:36 am | Permalink

    Bravo!

  4. Paul Danon
    Posted April 21, 2012 at 6:47 am | Permalink

    Bravo. Is the 25-state treaty anything like the sort of austerity which the IMF might impose on a sovereign?

    • Denis Cooper
      Posted April 21, 2012 at 10:39 am | Permalink

      That must depend upon the individual circumstances of the country, but in general it will be worse because:

      1. As applied to a eurozone country the “fiscal compact” allows no scope for restoring competitiveness through devaluation of the currency; and

      2. It targets a balanced budget, rather than merely a government budget deficit which would be sustainable and would allow the country to return to the markets and borrow at acceptable interest rates.

      This is why some Irish opponents of the treaty have moved from describing it as the “Austerity Treaty” to the “Permanent Austerity Treaty”.

      http://www.irishtimes.com/newspaper/ireland/2012/0419/1224314926338.html
      “THE FISCAL compact is a “dangerous experiment” that will be “extremely painful” if implemented, an Oireachtas committee was told yesterday.

      Prof Terrence McDonough of the school of business and economics at NUI Galway told the Committee on European Affairs the compact was “completely without historical precedent”.

      Forcing a country at the bottom of a depression to run budget cuts and tax increases year after year, and forcing the same policy on its neighbours, was not “the safe option”.

      “If the Irish people are against permanent austerity they should reject this treaty.””

      “Megan Greene, senior economist at economic research company Roubini Global Economics, said the treaty was Germany insisting all other countries look more like Germany. “It is completely misguided, but I still think Ireland should support it.”

      She said rejecting the treaty would put important relationships with EU countries in jeopardy. Ireland would “absolutely need a second bailout” and she did not believe that if Ireland rejected the treaty the IMF would “break ranks” with the troika and provide funding.”

      I think Osborne should be looking at this question of whether the EU, in effect Germany, should be allowed to prevent the IMF from assisting Ireland in the event that the Irish people had rejected this “completely misguided” treaty, through which Germany is “insisting all other countries look more like Germany”.

      He’s supposedly on close terms with Lagarde, he’s just obliged her by agreeing to pledge another £10 billion of our money to the IMF, so why doesn’t he press her to say that IMF assistance to Ireland or any other country would not be conditional upon its ratification of Germany’s “fiscal compact”?

  5. A.Sedgwick
    Posted April 21, 2012 at 7:25 am | Permalink

    Book to be published in 2015 :

    How Cameron and Osborne killed off the Conservative Party.

    • lifelogic
      Posted April 21, 2012 at 9:43 am | Permalink

      and Clegg killed the Libdems even more effectively than Major’s ERM.

  6. oap
    Posted April 21, 2012 at 7:43 am | Permalink

    Agreed. The Osborne excuse is weak.

  7. Timaction
    Posted April 21, 2012 at 7:53 am | Permalink

    I am afraid that Mr Osborne has proven to be at best disingenuous and at worst an unpatriotic fool. He said catagorically in October that the IMF should not be used for the bailout of the Euro and here we are in April and he’s agreed the opposite. He has ensured there is no Commons vote by keeping the figures just below the £10 billion threshold.
    There is absolutely no difference between this Coalition Government and the last lot of incompetent clowns. They are more interested in Gay marriage, House of Lords reform, giving away money we haven’t got in foreign and EU aid than repatriation of powers from the EU, controlling immigration or deporting foreign criminals. I’m frankly disgusted.

    • lifelogic
      Posted April 21, 2012 at 8:35 pm | Permalink

      Gay marriage, House of Lords reform and gender of royal succession indeed any distraction, from real issues, is welcome to them.

  8. Antisthenes
    Posted April 21, 2012 at 8:09 am | Permalink

    I suspect not only the spirit of the IMF rules are being broken but the letter of the rules are as well. It is easy to see why Osborne is pledging this money though because if the crisis is not solved UK banks along with many others will go bust and will have to be recapitalised once again. So the by far the cheaper option is to to keep throwing money at the problem. Of course if that does not work then that money will be wasted as well. To me the euro or Europe’s national economic crisis will never be solved until there are major structural changes and reforms of the euro-zone, EU and it’s member states. As these changes and reforms are not going to happen then the future is one of continuing decline that current policies are only going to slow a bit.

  9. lojolondon
    Posted April 21, 2012 at 8:23 am | Permalink

    Russia and China and Australia and all the African and Asian countries agree with you, John, and so do the Taxpayers and voters of the UK, and particularly Conservative party members.

    I hope you can see now why we are voting UKIP, because the Conservative party says one thing and does another, and never considers the feelings of their constituents and funders.

    All covered by the weasel-words that Dave and George use all the time now :

    “I don’t think people want X, I think people want Y”
    or
    “I believe I am doing the right thing by doing X”

  10. MajorFrustration
    Posted April 21, 2012 at 8:24 am | Permalink

    JR -surely there must be MPs who recognise that this support does not go down well in the Country. Good money(gtee) after bad. Why us. Has the US implemented its agreed allocation of 2009 – dont think so. Whilst you might get re-elected in 2005 or before I cant see this lot going on for another term.

  11. JimF
    Posted April 21, 2012 at 8:46 am | Permalink

    I think most of your contributors are past the point of no return on the judgement as to whether this government is as profligate as the last one.
    Perhaps “We’re all in this together” actually meant Labour, Liberal and Conservatives have no difference between them on how to handle the fall-out from bad banks, bad government borrowing and bad lending to prop up a bad currency. It will be very difficult for you to argue, come the next election, that the Conservatives are there to offer a different or better solution than the other two parties.
    The taxes which this government are so determined have to be raised by squeezing the bulk of the population are being thrown into a pit to save a system which is on its way out.

  12. stred
    Posted April 21, 2012 at 8:49 am | Permalink

    What rate of interest will to UK obtain from the IMF? What happens if the PIGIS default? What currency are we lending in and will the value of the loan vary with currency movements? At what rate are we borrowing the money to make the loan?

    • zorro
      Posted April 21, 2012 at 6:55 pm | Permalink

      Osborne will say that no country which has loaned money to the IMF has ever lost out……hahahaha….I’m sure that we can all trust Gideon….

      zorro

    • stred
      Posted April 22, 2012 at 1:18 am | Permalink

      Would anyone in government like to answer this question ?/ Including civil servants unnamed.

  13. Nick
    Posted April 21, 2012 at 9:00 am | Permalink

    So are you going to vote against the next lot that Osbourne has just announced?
    If there is a loss on the money, is Osbourne going to be sacked and forced to compensate us for his losses?

    No, exactly.

    I’m not responsible because I haven’t had a vote on the issue.

    I’m doubly not responsible because Osbourne has lied on the issue.

    Here is what he said

    ““Britain will not be putting money into the bail-out fund either directly or through the IMF”

    Osbourne has lied. There is no other way to put it.

    Reply: Were there to be another vote of course I will vote No. However, he does not need a vote for this extra £10 bn as it was covered by the previous vote I have already lost.

    • zorro
      Posted April 21, 2012 at 6:56 pm | Permalink

      But Osborne has lied, hasn’t he John?

      zorro

      • Bob
        Posted April 22, 2012 at 8:48 am | Permalink

        “Osborne has lied, hasn’t he John?”

        No answer was the firm reply.

        • outsider
          Posted April 22, 2012 at 10:54 am | Permalink

          Mr Osborne did not lie, he was economical with the truth as political leaders so often are. The IMF money will not be put into the EU bail-out fund. It will be lent directly to the country concerned alongside EU bail-out money. Thus Mr Osborne consciously gave a misleading impression, which in the self-invented rules of politics, unhappily, is not viewed as being the same as a lie.

          • zorro
            Posted April 22, 2012 at 7:19 pm | Permalink

            One of my definitions of ‘cynical’ on the other blog….

            zorro

  14. Lindsay McDougall
    Posted April 21, 2012 at 9:05 am | Permalink

    It seems to me that the IMF is forever lending money to nations that shouldn’t be borrowing? Do we really need the IMF? Perhaps it exists for the benefit of creditors who don’t want to see a default.

  15. Brian Tomkinson
    Posted April 21, 2012 at 9:10 am | Permalink

    Since the EU has its own placewoman Christine Lagarde at the head of the IMF we shouldn’t be surprised that the IMF is trying to look after Euroland and that Cameron and Osborne will always obey their EU masters’ orders. Amazing isn’t it that we are told all the time that there is no money and taxes must increase and out of thin air Osborne can produce another £10 billion to add to the previous £30 billion? In your blog on 17 April you told us that “the UK’s position was undecided”. That should have read “unannounced” for it was clearly decided some time ago. As each day goes by your party is becoming less and less electable. The first casualties will be local councillors who will be punished for supporting an incompetent party of government.

  16. alan jutson
    Posted April 21, 2012 at 9:13 am | Permalink

    This is so, so, so depressing.

    Anyone would think we are in financial good health, judging by the recent actions of our government.

    How can Cameron or Osbourne now get up, and ask for cuts here, because we are in debt, when they have just committed us to more debt (yes I know its lending, or as Brown would call it, an investment) but its lending, and a so called investment to a bankrupt who has no idea or hope of ever paying it back in full let alone with interest.

    If this is what expensive private education does, I am pleased I went to a bog standard secondary modern school, where at least they made sure you could do simple maths correctly.

    The problem is John, us out here who are trying our best to live within OUR MEANS, are being frustrated by the Government (with increasing tax charges on us) who cannot live WITHIN THEIRS.

    Its enough to drive anyone to drink , while they still haver some money left !!!

    Oh almost forgot, only before the minimum price is approved.

    • stred
      Posted April 22, 2012 at 1:25 am | Permalink

      Alan. Private education at public school( ie .fee paying, for non uk) teaches you that the truth is not necessarily the truth. So, keep on fiddling while changing the languauge.

  17. Matthew
    Posted April 21, 2012 at 9:23 am | Permalink

    If Mr Brown had been returned to Downing Street, what would be different, in policy to what we have today?
    Not much I think, the BOE would be on the same course.
    Only thing is we’d still have had HIP’s

  18. libertarian
    Posted April 21, 2012 at 9:24 am | Permalink

    I’d much rather have the Monster raving loony Party running the country than the current Conservatives. I include ALL the parliamentary Conservatives in this too because they are there to represent us the people and it is them and only them that can stop the buffoon brothers Cameron and Osbourne. Vote no confidence, kick them out .

    • uanime5
      Posted April 21, 2012 at 3:20 pm | Permalink

      Can’t do that any more as on of the first thing Cameron did was raise the number MPs needed for a vote of no confidence to 66%. So as long as 217 MPs support Cameron he’ll remain in power.

      • stred
        Posted April 22, 2012 at 1:28 am | Permalink

        This was the first news that made me realis that this PR creation was seriously (unreliable-ed).

        • sjb
          Posted April 22, 2012 at 9:35 pm | Permalink

          There are two ways to trigger an early general election:

          #1 434 MPs vote for the motion: “That there shall be an early parliamentary general election.”

          #2 The Government lose a no-confidence motion AND the House of Commons fails to pass a confidence motion in the new Government within fourteen days.

          The motions in #2 only require a simple majority.

          Source: s2 Fixed-term Parliaments Act 2011

  19. Bob
    Posted April 21, 2012 at 9:30 am | Permalink

    Is this the money he raised by freezing the pensioners allowance + putting 20% VAT on Cornish pasties + forcing more people into the 40% tax rate + 3p on petrol in August + withdrawing child allowance for families with one earner over 50k, but not for two earners with £99k split equally?

    So what are the exact terms of the IMF intervention? will they be imposing austerity measures? or are they just laundering our cash so that we are not seen to be pouring it straight into the Euro zone?

    I wish I could say that I will not be voting Tory any more, but I already stopped voting for them when they chose Cameron as their leader.

    In the mayoral election I will be voting for Lawrence Webb the UKIP candidate, Boris will get my second vote. I feel really angry with the people who voted for this government. I hope they don’t make the same mistake again.

    Reply: Stating your second preference implies you think UKIP will not be winning then.

    • Brian Tomkinson
      Posted April 21, 2012 at 2:54 pm | Permalink

      There you go again John, you just can’t resist knocking UKIP. Methinks thou dost protest too much. I predict a significant overall drop in the Conservative vote across the country and a significant increase in UKIP’s share.

      Reply: I am not knocking UKIP, and have not spent time criticising its people or policies. I just need to point out to all those who write in and tell me UKIP is the answer and they will soon pull us out of the EU and solve all our problems, that that is just not true. You need to recognise the past polling results at election after election, and what the current polls say about the position of UKIP even today, when UKIP supporters are so optimistic. The latest national poll has Labour, a federalist EU party, on 45% and UKIP on 7%. That is the reality.

    • zorro
      Posted April 21, 2012 at 7:04 pm | Permalink

      I doubt that anyone has ever contemplated UKIP winning the race to be London Mayor! But Bob is entitled to his vote, and frustrations shouldn’t be taken out on him because you voted for Cameron……something which you might now regret.

      zorro

    • Bob
      Posted April 21, 2012 at 7:34 pm | Permalink

      Reply to reply
      Stating your second preference implies you think UKIP will not be winning then.

      Mr. Redwood, unlike yourself, I don’t know who will be winning the mayoral election, I only know what my first and second preferences are.

      I’m sure you didn’t intend your reply to sound so smug, but you know what comes before a fall.

      I suppose you’ll be telling me next that you had a tenner on Galloway for a landslide victory in Bradford West! 🙂

      Reply: No, I was not being smug. None of us can be sure who will win the election, but the polls and doorsetep mood tells us it is between Boris and Ken, with Boris in the lead at the moment. I am constantly battered by UKIP supporters coming onto this site telling me that UKIP is about to break through and pull us out of the EU, so I just think we need to examine the true past voting positon of UKIP and then analyse carefully their future progress. In the current national polls federalist EU Labour is 45% and UKIP is on 7%.

      • Bob
        Posted April 21, 2012 at 8:45 pm | Permalink

        Reply to reply:

        “In the current national polls federalist EU Labour is 45% and UKIP is on 7%. “

        mmm! and what did the polls predict in Bradford West?

      • JimF
        Posted April 21, 2012 at 11:09 pm | Permalink

        Reply to reply:

        And your conclusion from this is that we must all vote Labour because nobody else can possibly win? At what point does it become possible for another team to win? Logic adrift I’m afraid. People vote for what they BELIEVE is right.

        Your local Championship team, Reading, has just been promoted to the Premiership. Last December no doubt you’d have said nobody has ever come back from 150-1 to win 14 from 16 games and win the Championship, so it wouldn’t be worth the players even trying. Well, they just had BELIEF.

        Reply: No, of course not. But don’t keep telling me UKIP can solve all the problems when they haven’t been able to get anyone elected to the Commons.

  20. Glenn Vaughan
    Posted April 21, 2012 at 9:56 am | Permalink

    Can we reinstate capital punishment for this treasonable action?

  21. Freeborn John
    Posted April 21, 2012 at 10:11 am | Permalink

    This is what voting Conservative leads to; Eton boys too weak to stand up to Merkozy cutting public services and wasting the proceeds on propping up the wealth-destroying euro. 

    The Conservatives need to lose so badly in 2015 that Cameron has no choice but to step down and be replaced by someone more in tune with the mainstream. Cameron has made a major strategic mistake in thinking the liberal party in Westminister has the same views on the EU as those who vote Liberal or Labour. Actions like this alienate the mainstream withdrawing wealth from the British economy reducing growth in a time of recession.

    • uanime5
      Posted April 21, 2012 at 3:25 pm | Permalink

      Given that Cameron’s only work experience prior to becoming an MP was as a PR man for a TV company, while Osborne’s only work experience was (modest-ed) is it any surprise that they’re making bad decisions about the economy.

      • Bob
        Posted April 21, 2012 at 7:50 pm | Permalink

        I can’t wait for the autobiography…
        and I said “no Christine, the British taxpayers will be furious if I pour so much of their money into the Euro black hole after categorically promising that I wouldn’t, the Tories will be finished for good!” and Christine replied, “don’t worry George, we’ll take care of you and the boys if and when it all goes pear shaped, just make sure your passports are kept up to date and be ready to move quickly if the need arises, after all you know what happened to DSK don’t you?”

      • stred
        Posted April 22, 2012 at 1:33 am | Permalink

        Glad you have caught on. When do you start taking sense too about re distribution etc.

  22. Bernard JUBY
    Posted April 21, 2012 at 10:16 am | Permalink

    You say, “It is not the rest of the world’s fault that Euroland lacks a full sovereign to back up the currency and to send sufficient transfer payments from the rich to the poor within the union. I do not see why the IMF should provide money that the Union itself is unwilling to provide, when the troubles in Euroland primarily relate to imbalances within the union that the Union should sort out.”
    I agree with this BUT how do we prevent Disney- sorry- Euroland from getting some???
    At a time of great austerity and ever mounting interest re-payments PLUS difficulties of micro-businesses getting loans why on earth aren’t we using the money to pay of our debt rather than loaning it to the IMF?
    If we are getting a better interest rate from them than we are having to pay then fair enough (unlikely though that seems to be!).
    Otherwise is just seems b****y stupid and Osborne is off his trolley!

  23. merlin
    Posted April 21, 2012 at 11:27 am | Permalink

    As John states the £10 billion has already received approval- so job done by Osborne. I hate to state the obvious but at the next election there will either be a Conservative or Labour led government and the strong probability is that UKIP will, yet again, get no seats. At present there is a majority of MP’s who wish to remain in the EUSSR, at the next change of government this majority will still be there, so we are in the EU for at least another 8 years. As they say, barring disaters , nothing is going to change. The political will to make euroland work is extremely strong and embedded in politician’s minds, there is no plan B. I’d also bet that there will be no referendum on either repatriating powers or withdrawal. Look at the benefits for failed UK politicians in Europe, the gravy train awaits.Realistically the future for more governance from europe is the only game in town

  24. Bob
    Posted April 21, 2012 at 12:34 pm | Permalink

    Just read this on order-order.com

    Quote
    In October last year after British taxpayers sent £9 billion to the IMF – £9 billion that Osborne had to borrow, Osborne told the House of Commons categorically:

    “Britain will not be putting money into the bail-out fund either directly or through the IMF…. The IMF exists to support countries, it does not exist to support currencies… The IMF contributing money to the eurozone bail-out fund, no; Britain contributing money to the eurozone bail-out fund, no. That is Britain’s clear position.”

    The Chancellor could not be any more clear, he gave his word, it was an unqualified promise. Which Osborne has now broken.

    I wonder why the traditional news media and the BBC cannot report so eloquently.

    • zorro
      Posted April 21, 2012 at 7:07 pm | Permalink

      As we all know it doesn’t support their agenda….They are the Brussels Broadcasting Corporation.

      zorro

  25. Arthur
    Posted April 21, 2012 at 12:40 pm | Permalink

    George Osborne made a ‘Freudian slip’ on Sky news….”Donation to IMF”

  26. Normandee
    Posted April 21, 2012 at 12:42 pm | Permalink

    Who does the IMF answer to ? because if it cannot lend to Europe, because it is not a sovereign state, and it does, who arrests Christine Lagard ?
    Europe has made it perfectly clear it does not recognise it’s own laws when convenient, are all the supranational organisations thus free to make it up as they go along ? If so why are members of criminal organisations ?

  27. Normandee
    Posted April 21, 2012 at 12:44 pm | Permalink

    poorly written comment, excuse me, but I think you get the drift.

  28. Bill
    Posted April 21, 2012 at 12:47 pm | Permalink

    i would just like to say Mr osborne it will be us the UK public voting in 2015 not your friends in the IMF or the EU.And somehow i do not fancy your chances or that of the Torys .

  29. Mactheknife
    Posted April 21, 2012 at 12:49 pm | Permalink

    This money is being borrowed by the Uk, so Osborne is adding further debt to that already in existance via Liebour. Bearing in mind he categorically stated he would not provide further funds to the IMF, particularly to prop up the Eurozone, how can the Conservative party allow this to continue ?

    I am now convinced that Osborne (and Cameron) are out of their depth, which I understand is the current thinking within certain parts of the Conservative party.

    My feeling is that with a couple of years left there is still time for a change of chancellor to someone more competant.

  30. Denis Cooper
    Posted April 21, 2012 at 1:21 pm | Permalink

    Listen to Osborne slipping up and referring to this as a “donation” to the IMF, right at the start here (after the ad):

    http://news.sky.com/home/politics/article/16213146

    Quickly corrected(?) to “loan”.

  31. Denis Cooper
    Posted April 21, 2012 at 2:22 pm | Permalink

    I read in the Daily Mail that Bill Cash and others are consulting lawyers about the legality of these contributions to the IMF, with a view to mounting a court challenge.

    I don’t what legal grounds they may be envisaging, but as a layman I have repeatedly argued that it must be improper to use Orders under the International Monetary Fund Act 1979, secondary legislation, to authorise IMF contributions which are clearly intended to be available for eurozone bailouts which are illegal under the EU treaties and therefore under our national constitutional law, namely the European Communities Act 1972 as amended by the European Communities (Amendment) Act 1993.

    That 1993 Act approving the Maastricht Treaty, including the “no bail-out” articles, must in part supersede the 1979 IMF Act, both because the 1993 Act is the later and because the EU treaties are legally superior to the IMF Articles of Agreement, and therefore as matters stand there is a strong argument that the government cannot legally use a mere Order under the 1979 Act to commit extra money to the IMF so that it can be laundered for eurozone bail-outs.

    From the point of view of correcting the position not under EU law but under our national law, which is of course the most important consideration, a full Act authorising the contributions “notwithstanding the European Communities Act 1972” would do the job, as our courts would then know that Parliament had consciously decided to do this even if it breached the EU treaties.

    • sjb
      Posted April 21, 2012 at 5:08 pm | Permalink

      Professor Allan has cast doubt on whether a notwithstanding clause would be sufficient, Denis. This is what he said in his evidence to the HoC European Scrutiny Committee:

      “I think that the halfway house, keeping the European Communities Act unamended but then having a notwithstanding clause in relation to a later measure, sets up a real contradiction. The longer we remain a member of the European Union and the more powers that are transferred, the less realistic it becomes, probably, for judges—not to deny that Britain could not withdraw altogether—but the more unrealistic it becomes to expect judges to disapply or, rather, to override EU law in particular instances. I do think there is some possibility there that doctrine may shift in that respect and so we might then see Thoburn as one step towards a larger modification whereby the judges would say, ‘Well, we must have an explicit repeal or amendment of the European Communities Act.'”

      Evidence from expert witnesses (see Q42)

      • Denis Cooper
        Posted April 23, 2012 at 12:34 pm | Permalink

        Thanks for that.

        Back in May 2006 when Bill Cash unveiled his “magic words” the fuller version included an explicit instruction to the courts.

        Bill Cash speaking at Column 753 here on May 15th:

        http://www.publications.parliament.uk/pa/cm200506/cmhansrd/vo060515/debtext/60515-0010.htm

        “The mechanism to enable the constitutional procedure to have the effect that I desire is contained in the new clause … We need the backing of primary legislation, using the magic words,

        “notwithstanding the European Communities Act 1972”,

        and then referring to the fact that it shall be binding in legal proceedings in the United Kingdom. That provides the mechanism whereby the judiciary are under a duty to give effect to that latest Act of Parliament.”

        And in the clause itself, New Clause 17 as put to a division on May 16th, Column 945 here:

        http://www.publications.parliament.uk/pa/cm200506/cmhansrd/vo060516/debtext/60516-0017.htm

        “DISAPPLICATION OF EUROPEAN COMMUNITIES ACT 1972 (NO. 2)”

        ” ‘ (1) An order made under Part 1 containing provision relating to Community treaties, Community instruments or Community obligations shall, notwithstanding the European Communities Act 1972, be binding in any legal proceedings in the United Kingdom.’ ”

        I note that even Allen said elsewhere:

        “At the moment I think that a clear notwithstanding clause would probably be accepted, but I don’t think we can be confident that that will remain the case for ever.”

        And as Bill Cash has pointed out, and no doubt judges are well aware, if it cared enough Parliament could deploy the ultimate sanction of removal from office against any judge who flagrantly defied its clearly expressed will.

  32. Alfred E PHILP
    Posted April 21, 2012 at 2:25 pm | Permalink

    I appreciate that Osborne already has approval for the money. Surely the rule of common sense is being broken and he should be put on the spot by the appropriate committee or have our MPs also lost the plot.

    Reply: Let us see what Parliament now does. The Opposition, with the largest bloc of votes after the government, has said it is against this IMF money, so they could table a motion or require a debate.

  33. Denis Cooper
    Posted April 21, 2012 at 2:59 pm | Permalink

    JR: further to my reply to Paul Danon above, I am very concerned that the Irish are being told that if they don’t vote for the “fiscal compact” then they will be denied support not just from the ESM but also from the IMF.

    Like the economist Megan Greene, this briefing to the Irish Congress of Trade Unions:

    http://tomasoflatharta.com/2012/04/15/will-this-be-the-ictu-position-on-the-austerity-treaty/

    assumes that if Ireland needed a second bail-out then that could only come from the ESM:

    “Clearly we are between a rock and a hard place and the complexity of our position is recognised by the ETUC. Trade unions in all European countries are against this treaty for good reasons. The problem for us is that we are a programme country with the gun of ESM pointed at our heads.”

    “We would certainly have had to oppose the treaty in the referendum if its provisions were to be inserted into the constitution. The enabling nature of the question at least offers the hope of escaping from permanent austerity if political conditions change. The decision now becomes more finely balanced because access to the ESM is crucial to our economic survival. While the treaty is wrong from our economic and social perspective it becomes hard to oppose it unless a satisfactory alternative to the ESM can be advanced.”

    Similarly Open Europe assumes that if the ESM refused assistance to Ireland because it hadn’t ratified the “fiscal compact” then the IMF would automatically follow suit:

    http://openeuropeblog.blogspot.co.uk/2012/04/should-uk-contribute-to-imf.html

    “Ultimately dispersal of IMF funds in the eurozone crisis is reliant on similar provisions from the eurozone bailout funds. So far the format has been 2/3 eurozone and 1/3 IMF.”

    What is there in the rules of this global body, the IMF, which means that it could legitimately deny assistance to a country on the grounds that it hadn’t ratified this treaty?

    Has there been any precedent anywhere in the world where the IMF has demanded that a country must put a balanced budget rule into its national constitution as a pre-condition for receiving crisis assistance?

    Do Cameron and Osborne believe that this treaty is a good treaty, which should be applied to all EU countries apart from ourselves?

    Or do they agree with an increasing number of economists that it is actually a very bad and dangerous treaty, and so it would be better if it fell, and so they should not stand by and watch as the Irish people are bullied into accepting it?

    Would it really be in our national interests to have Ireland forced into permanent austerity by the operation of this treaty?

    Reply: When a country is no longer in any meaningful sense sovereign because it is a member of the Euro and the EU the IMF may be forgiven for working with and alongside the true sovereign, the Euro/EU.As they will be joint lenders to Ireland or another bail out country, the EU and IMF will work together, and EU requirements will be IMF loan requirements as part of the programme. That is especially true now Mme Lagarde is the Head of the IMF.

    • Denis Cooper
      Posted April 22, 2012 at 8:56 am | Permalink

      I think we agree that the IMF should stick to its purpose of rescuing countries, not currencies, and it should not have been dragged into efforts to preserve the eurozone intact.

      However I disagree with your argument that the IMF should treat a eurozone country as being no more eligible for assistance than California, because all the EU member states are still individual IMF member states whereas California is not an IMF member state.

      As a paid-up member state of the IMF since 1957, under its Articles of Agreement Ireland must have the same right to apply for and receive IMF assistance as any other IMF member state; there is nothing in the EU treaties whereby Ireland has agreed to waive that right, or subject it to EU or eurogroup approval; nor indeed is there anything in the intra-eurozone ESM treaty which says that ESM members forgo their individual rights as IMF member states; and nor has there been any change to the IMF Articles of Agreement recognising that henceforth IMF assistance to an EU member state shall be subject to EU or eurogroup control.

      My legal objection is not that an eurozone country like Ireland is ineligible for IMF assistance, but that the other EU member states have carelessly made themselves ineligible to contribute towards such assistance by incorporating the “no bail-out” rule in their treaties, and that legal conflict has not yet been resolved by treaty change.

      As Lagarde herself said, the EU treaties are “… very straightforward. No bailing out.”, and the EU treaties make no exception for intra-EU assistance mediated through the IMF even though that could easily have been written in.

      I find it difficult to see on what legal basis Lagarde could reject an Irish application for IMF assistance, even if Ireland had been barred from receiving ESM assistance; so should it not be made clear to the Irish people that they would not be cut off from all external assistance if they voted against Germany’s “fiscal compact”?

    • Lindsay McDougall
      Posted April 22, 2012 at 4:25 pm | Permalink

      As a corollary to your reply, if I don’t want the Euro to exist and I don’t want huge areas of the EU’s authority to survive, then I don’t want to add any more UK money at all to the IMF’s bail out funds, especially because the pro-EU Mme Largarde is the Head of the IMF.

      When are you going to accept that the very existence of a large European Federation, firstly acquiring its own currency, secondly acquiring fiscal authority and thirdly acquiring its own armed forces, is a complete menace to the independence, perhaps the very existence, of the United Kingdom? It’s not enough to leave it; it has to be destroyed from the inside.

      • Denis Cooper
        Posted April 23, 2012 at 10:30 am | Permalink

        Correct; the existence and continued expansion of the eurozone is a deadly threat to our long term national interests.

        Cameron had the opportunity to demand EU treaty changes to minimise that threat in exchange for the radical EU treaty change demanded by Merkel in the autumn of 2010, but he failed to do that and far too readily assented to that EU treaty change, formalised as European Council Decision 2011/199/EU of March 25th 2011:

        http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF

        With talk of a referendum on Lords reform, my reaction is that we should first have a referendum on that radical EU treaty change.

  34. Hugh
    Posted April 21, 2012 at 3:46 pm | Permalink

    John,
    How is this to be accounted?
    Is the £10bn treated as ordinary expenditure or as a re-imbursable advance?
    Thanks

    Reply : I understand it is a loan, so it counts as a UK asset which could be repaid one day.

  35. Barbara Stevens
    Posted April 21, 2012 at 4:16 pm | Permalink

    Mr Redwood I respect your decision to have voted against this putting of more of our money into the IMF. When you speak to your fellow MPs will you point out we now have ‘free food stores’ in most towns, British people brought down to the level of begging for food to feed themselves and their children.
    Meanwhile, we give more money to the IMF, plus, the foreign aid of some £29 billion, plus, the £55 million on free health care for health tourists, and plus fighting wars we don’t agree with for loss of life first then costs to this nation. It beggers belief, and you cannot make it up.
    Mr O cannot justify what he’s done, whatever he’s got to say. The country will not forgive or forget this folly. However, the Conservative party it’s self will have to justify to its supporters and activists their actions. My point is that will enough MPs make enough noise to make it uncomfortable for Cameron and Mr O, they should if they’ve got any sense or responsiblity for this nation. Enough is enough, the problems in the media of the last seven days shows what’s wrong with this nation, we are hemmed in by the throat by the EU on all levels.
    We have to break free for this nation to breath again. If it means breaking the coalition so be it, is the nation not more important than a few Lib Dems. Take them to the brink, they have more to lose than many, and I think you will find they shy away from denying the Tories their way. This nation is now in Tory hands, if they deal a wrong deal they will themselves be doomed for years to come, what will we be left with, Labour again, God help us all.

    Reply: The nation is not in Tory hands. The nation did n ot vote the Conservative party into office. All the time Parliament is without a majority the power effectively resides with the people, or with the Coalition.

    • Bob
      Posted April 21, 2012 at 8:09 pm | Permalink

      The nation did not vote the Conservative (sic) party into office.

      Even after the most disastrous period of boom & bust government under Gordon Brown!

      So what went wrong for the Tories?

    • JimF
      Posted April 21, 2012 at 11:21 pm | Permalink

      If the Conservative Party felt they were doing fundamentally wrong things as part of this Coalition, they could break it tomorrow. The LibDems will never break the Coalition as they’d be annihilated, so the nation is in Tory hands. This donation of tax payers’ cash by a Tory Chancellor to prop up the Euro when pulling families off of child benefit here in the UK is fundamentally wrong.

  36. Arunas Ruksnaitis
    Posted April 21, 2012 at 7:07 pm | Permalink

    “I support President Obama, who has said that the USA does not wish to put more into the IMF to bail out members of the Eurozone.”

    This is not the same as Obama not wanting to bail out the Eurozone. He just does not want to do it through IMF and is propping up the ECB directly through “currency swap lines”. In other words, ECB prints euro and gives it to US Federal Reserve, FedReserve in turn gives very real dollars back to ECB to prop up the flagging economies. So far, around 200 bn USD has been disbursed, I think (it isn’t easy to find reliable data of these under-cover operations).
    Britain should do a similar thing, if they want maximum effect for the money. Putting money in IMF is propping up a dysfunctional international apparatus that very few people of influence respect these days. If we want to support our neighbours, we shall do it directly and openly; on the conditions that suit both parties involved and not through third parties IMF, where the likes France and USA order the music. Giving GBP to our strategic trading partners is sure way to stimulate our exports and manufacturing in short term, while our economy is struggling to come out of the slump.

  37. PedroelIngles
    Posted April 21, 2012 at 10:36 pm | Permalink

    John, I have follow your columns and all the comments for so long but minute by minute we are getting deeper in the glue. Neighbours so utterly conservative since birth now openly say they will vote UKIP; there really is no more time. The Home Office fiasco has provoked a sense of utter shame of our Country’s weakness now capped with the grovelling gift to the IMF to rescue the Euro to the financial detriment of our people young and old. We have lost face and respect and enough is enough. Now England Expects…. and I mean Now – the talking has to stop.

  38. outsider
    Posted April 21, 2012 at 10:57 pm | Permalink

    Leaving the issue of principle aside, I am mystified at what these loans to the IMF mean for UK taxpayers.
    As I understand it, the IMF’s new borrowing arrangements, which have Gordon Brown’s fingerprints all over them, turn loans to the IMF into an asset, a loan note currently paying 0.15 per cent interest. So governments can claim that lending to the IMF does not count as public spending.
    But where does the £10 billion come from? Either:
    a) We simply switch foreign currency reserves from, say, dollars into IMF money, with little effect beyond losing a bit of interest, or
    b) The Bank of England creates sterling which is handed over to the IMF, like a sort of global QE, which also seems fairly painless or
    c) The Treasury borrows the money, in which case it pushes up the UK National Debt and costs taxpayers quite a lot in net interest, about £30 million a year at the moment if it is borrowed in Treasury Bills but more than £200 million a year if it is raised in longer gilt-edged.
    I have searched the Treasury website in vain for any explanation or press release, which makes one rather suspicious.

  39. ROGER THE PILOT
    Posted April 22, 2012 at 7:31 am | Permalink

    So, John, let me just check that I understand this correctly; the UK government borrows money from the IMF, because the IMF needs to borrow money to lend to another country that cannot repay its existing debts, so it needs to borrow more, so the IMF will borrow money from Britain, amongst others, which we have originally borrowed from the IMF! Now, if the country who has borrowed the money cannot repay its existing debts how will the IMF repay our loan to them, so that we can repay our loan to them? …Are you sure we are not being ruled by The Raving Looney Party?

  • 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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