Published on 21 Apr 2012 Sections , , , ,

Osborne defends £10bn loan to IMF

In an interview with Channel 4 News Chancellor George Osborne defends his decision to give an extra £10bn loan to the International Monetary Fund while preaching austerity measures at home.

The £10bn loan, which forms part of a $400bn extraordinary fundraising from the IMF, will not be subject to parliamentary approval although Osborne argues he’s spent the last year explaining his plans to MPs.

“What I’m talking about here is making a loan from Britain to the IMF. That’s a loan we get back with interest. Nobody has ever lost money lending money to the IMF,” Osborne said in an exclusive interview with Channel 4 New’s Faisal Islam.

“A loan to the IMF does not add to our debt, it does not add to our deficit. We get a liquid asset, to use the technical phrase, in return. It comes out of our foreign exchange reserves so this is not money that could be used for cutting taxes or increasing public spending in Britain. It is different,” Osborne said.

Back-door bailout?

I’d be the first to accept that the headlines haven’t been great. But I don’t think the economics have been bad. – Chancellor George Osborne

But to millions of Britons reading daily headlines announcing new taxes – from a pasty tax on baked goods to the so-called “granny tax” on pensioners – the IMF loan sounds like a back-door bailout of the eurozone. Not so, says Osborne.

“It’s basically a question that everyone has to ask themselves. Does Britain want to play its part to try to sort out problems that have a direct impact on the British economy?” Osborne said.

“I’d be the first to accept that the headlines haven’t been great. But I don’t think the economics have been bad. I think actually the policies have not only held up, but people now say hold on, here’s a country, Britain, that is cutting its business taxes, sorting out its income taxes to make it competitive, giving a tax cut to working people across the country” he said.

Read more on Faisal Islam's blog: Chancellor: We have completely won the arguement on austerity

Euro woes

“Ultimately my responsibility to the British people is to do what is necessary to get the economy moving, not to write tomorrow’s headlines or write Channel 4 News’s headlines,” Osborne added.

The chancellor, speaking to Channel 4 News at the IMF’s Spring meeting in Washington, DC, was adamant that the IMF loan wasn’t a gift and that the ceiling has already been already set by parliament.

He said it met his four conditions for extra money: that the eurozone had boosted its own firewall, that the funds were not earmarked for the euro, that it was part of an international effort, and that conventional IMF conditions would be attached.

The problems affecting Greece, Portugal and Ireland have a direct impact on the UK, he said.

“You can either pull over the bedcovers and pretend these problems don’t exist ,or we can engage with those problems, require more of the Europeans – which is what we’ve done – and make sure the international institutions are strong enough to deal with whatever is thrown at them.”