IMF

Ed Balls Excerpts

Monday 23rd April 2012 Commons Chamber

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

In thanking the Chancellor for advance sight of his statement today, let me begin by setting out three propositions on which I believe all parts of the House can agree. First, the ongoing crisis in the euro area is a major threat to the stability of the European and global economies, including Britain’s. Secondly, the International Monetary Fund is a hugely respected organisation that must be properly funded if it is to play its proper role. Thirdly, solving the euro crisis and ensuring that the IMF is properly resourced are both firmly in the British national interest.

However, the agreement that the Chancellor signed up to at the weekend fails on all three counts. It will not speed up, but further delay the decisive action we need from European leaders to kick-start growth and empower the European Central Bank to act. If those extra resources were to result in the IMF stepping in to act when the European Central Bank would not, that would risk weakening the IMF as an institution. Furthermore, in those circumstances, allowing eurozone leaders further room for delay and exposing the IMF and British taxpayers’ money when rich eurozone countries will not act would categorically not be in the British national interest.

Members across the House will find it baffling that that is precisely the view that the Chancellor took, just a few weeks and months ago. Following the G20 summit in October, when euro area leaders tried and failed to get international agreement on IMF resources to bail out the euro, he told the House:

“But the IMF contributing money to the eurozone bail-out fund? No. And Britain contributing money to the eurozone bail-out fund? No. That is Britain’s clear position.”—[Official Report, 27 October 2011; Vol. 534, c. 471.]

He went further in February when he told Sky:

“We are prepared to consider IMF resources but only once we see the colour of the eurozone money and we have not seen the colour of the eurozone money”.

Will the Chancellor tell us what has actually changed since then, because we have categorically not seen the colour of the eurozone’s money? The eurozone agreement that was reached last month was widely dismissed as a “sticking plaster” that merged two funds with no new money. As Wolfgang Münchau of the Financial Times stated:

“Ignore the headlines. This is not an increase in the eurozone’s rescue fund”.

In recent weeks, as market doubts have grown about Spain and Italy, market analysts have been clear that the eurozone bail-out fund has nowhere near the resources that it would need to stop a renewed crisis. There is still no firewall, and the only institution that comfortably has the resources to act—the European Central Bank—is prevented from doing so because rich euro area countries refuse to put sufficient money at risk. So, let me ask the Chancellor this: does he really think that the eurozone’s firewall is sufficient? Is this really the “big bazooka” that the Prime Minister talked about last summer? Does the Chancellor really think that the ECB now has the political backing to act as lender of last resort, and so stop contagion spreading? No, of course he does not. So why is he now signing up to an agreement that will mean that the IMF will be pressured into supporting Italy and Spain because the ECB will not, exposing as meaningless his nonsensical “countries not currencies” slogan?

Is it not the truth that the Chancellor is now conspiring in allowing the IMF to become the de facto central bank of the euro area, putting the resources of UK taxpayers and some of the world’s poorer countries at risk because rich euro area countries will not act? This deal might, for a short period, take the pressure off euro area leaders, but it will be at the cost of delaying a proper solution to the euro crisis, and it will undermine the IMF in the process.

The Chancellor says that his UK critics, on both sides of the House, are “isolated” in the global community in opposing this weekend’s agreement, but the United States has not signed up to give more money either. The US Treasury Secretary said, just this month:

“Europe is a very rich continent and they have the means to solve this on their own…I don’t think it is appropriate for the IMF to take on a larger role. The world needs to see that Europe is working on helping itself first. We are not going to shift our help for them so that the burden is on the American taxpayer”.

Canada is not contributing more money either. This is what the Canadian Finance Minister said about euro area leaders this weekend:

“They need to step up to the plate and overwhelm this issue with their own resources.”

The Chancellor says that we are “out on a limb” on this issue, but with America and Canada there too, that is some limb.

Will the Chancellor tell the House why he chose to tell us on Friday that he was contributing “just under” £10 billion more? With the US not contributing, that is clearly less than the UK’s quota share. Could it be that if he had contributed a fraction more, he would have had to come to the House and ask for parliamentary approval? After the Budget shambles—should I say the “omnishambles”?—of the last few weeks, is not the Chancellor running scared of those on both sides of the House of Commons?

Could the Chancellor also explain what has happened to the UK’s contribution to the IMF through the new agreement to borrow? When an IMF quota was first increased in 2009, it was understood that it would be offset by a reduction in UK exposure to the NAB—the new arrangements to borrow. Let me remind the Chancellor what the Financial Secretary told the House last summer:

“The G20 summit in London agreed on the importance of preserving the IMF status as a quota-based institution…so at the G20 meetings last November, agreement was reached to review the NAB and to reduce it in size once the quota increase was implemented.”—[Official Report, Second Delegated Legislation Committee, 5 July 2011; c. 3.]

So let me ask the Chancellor this: can he update the House? Has the UK contribution to the IMF been reduced through the NAB as the quota increases, as the Financial Secretary said, or has the Chancellor found a back-door route to increase the net UK contribution by more than £10 billion, without the permission of Parliament?

[Mr Speaker]

I am sure the shadow Chancellor is bringing himself to his last sentence.

[Ed Balls]

Finally, Mr Speaker, as for the Chancellor’s claim that the UK has sorted out our problems, unlike the US, the UK is mired with the rest of the euro area in no growth, high unemployment and much more borrowing than was planned, so how out of touch can this deluded Chancellor get? He should have stuck to his guns this weekend. He capitulated. This agreement was bad for the euro area, bad for the IMF, bad for the British taxpayer and bad for the British national interest.

[Mr Osborne]

First, I congratulate the shadow Chancellor on running the London marathon yesterday and raising money for good causes, but his arguments are a bit like his marathon legs—wobbly and about to collapse. His response started so well. In the first 30 seconds, he said he supported increased resources for the IMF and supported Britain’s contribution to it, but spent the next 10 minutes telling us why he was against those things. He was in favour of the loan before he was against it. I have to say it smacks of the political opportunism and empty opposition that have been the hallmark of his shadow chancellorship.

People in Washington this weekend who know the shadow Chancellor, because he used to help represent Britain at the IMF, were completely astonished by his opposition to the IMF deal. They wondered whether he was the same person who was in the Treasury for all those years and who wrote all those speeches for the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) about the importance of the IMF and of the international architecture being part of global solutions. Is it the same shadow Chancellor who said in November that

“the Labour party supports an increase in the UK’s International Monetary Fund subscription”?

He was asked in an interview why he opposed the Government’s decision and he said:

“I support an increase in resources to the IMF”.

Then, the interviewer said:

“Sorry? I thought you didn’t.”

He said:

“No…I support an increase in resources for the IMF”.

One is led to the conclusion that only political opportunism is driving the shadow Chancellor to the position he takes.

The right hon. Gentleman asked just a couple of specific questions. I think I answered all of them in the statement, which he should have listened to before he asked his questions. The US Treasury Secretary went out of his way to welcome the deal, but pointed out that the US had not made a loan at the London G20 summit and did not do so again because of the swap lines. Since we talked about this in the autumn, the European Central Bank has provided $1 trillion of liquidity support and €200 billion extra to the firewall, but I completely agree that euro countries need to do more to ensure reforms in their own economies.

Is the right hon. Gentleman really saying that, when a request is made for the countries of the world to come together at the IMF to provide increased contributions, Britain should stand apart from it? He represents a Labour party that stands, or used to stand, for internationalism and for the institutions of the world coming together. Now he has led the party down a complete blind alleyway. He even voted against the highlight of the Labour Government—the deal done at the London G20 summit. This is what the shadow Chancellor has done to his party—left it in no man’s land, not taken seriously at home and not taken seriously abroad. If he were ever in charge, we would be getting a bail-out from the IMF, not giving it a loan.