IMF to seek British cash boost

 

Britain looks set to be asked to commit more money to the International Monetary Fund, after the global organisation confirmed it was planning to raise an additional $500bn to shore up ailing economies.

The announcement sparked warnings of a possible rebellion by Government backbenchers unhappy at the prospect of British taxpayers being asked to underwrite lending to eurozone countries struggling to cope with their debts.

The UK is currently liable for 4.5% of the IMF's $400bn lending capacity, leading to speculation that the planned increase would mean an additional British liability of around £17bn.

But Treasury sources said it would be misleading to put a figure on any possible additional contribution, stressing that talks were only at a preliminary stage and the IMF had put no firm proposals on the table.

Parliament has already approved around £40 billion in support for the IMF, of which about £30bn is committed. Any new request going beyond the £10 billion "headroom" available to Chancellor George Osborne would have to be approved by MPs.

Downing Street confirmed that Mr Osborne was ready to put any "decent" request from the IMF to MPs.

But Prime Minister David Cameron made clear that any increase in UK funding would have to be designed to assist struggling countries and not to bail-out the euro.

Speaking at 10 Downing Street following talks with Italian Prime Minister Mario Monti, Mr Cameron said: "We are founder members and great supporters of the IMF. It's a key international institution.

"We set out our conditions at the Cannes G20 summit about expansion of the IMF. We believe the IMF must always lend to countries, not to currencies. We would only act if that was with others, not just as part of a eurozone measure.

"But above all, we want to see that the eurozone is standing behind its own currency.

"The case has to be looked at in that context, but we are founder members of the IMF and strong supporters of it."

Mr Osborne, who is on a tour of the Far East, was asked on Monday whether he would be prepared to contemplate a boost in the UK's contribution to IMF funds.

He replied: "If I felt it was a decent request by the IMF, then, of course, I would be willing to go to Parliament and make that request.

"Britain has always been prepared to provide the resources in the past and will be willing to provide the resources in the future if there is a strong case."

In a statement, the IMF made clear that a request was likely.

"Based on staff's estimate of global potential financing needs of about $1trillion in the coming years, the Fund would aim to raise up to $500bn in additional lending resources," said a spokesman.

"This total includes the recent European commitment of about $200bn in increased Fund resources.

"At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations with the Fund's membership have been completed."

Tory backbencher Peter Bone said ministers would face a "good deal of trouble" in any vote on increasing the IMF contribution.

"My view, and I think of a number of other Conservative MPs, is that enough is enough," he said.

"It is not that people are against funding the IMF, it is that they are against funding the IMF for a purpose not originally intended...

"We are absolutely against putting money into countries where they are in the euro and have no way of devaluing their currencies."

The Wellingborough and Rushden MP suggested a Tory rebellion could be as serious as over demands for a referendum on EU membership - where 81 MPs defied the leadership.

"I think the Government would have a good deal of trouble getting this through," Mr Bone said.

Mr Monti was challenged at a press conference in the City of London over why British taxpayers should find the money to help Italy deal with the debts run up by his predecessor Silvio Berlusconi.

He replied: "To my knowledge, my country has not cost a penny to the UK so far as I know. Nor vice versa. At least in the present historical phase.

"I don't see a reason why this should change in the future.

"I believe both Italy and the UK are huge beneficiaries from the single market and European integration.

"You make some personal observations that I respect about a recent Italian prime minister.

"I, however, fail to see the connection between your characterisation of his personality and any financial burden for UK taxpayers."

PA

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