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IMF Loan Of £10bn Prompts Fury From Tory MPs

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OSBORNE
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George Osborne faced fury from the Tory back benches today after he announced Britain is to commit another £10 billion to the IMF.

The chancellor said the increased funding was vital to protect jobs and growth in this country.

But Conservative Peter Bone branded the move "bonkers" and said the money would be wasted trying to prop up the eurozone. The Wellingborough MP also complained that the level had been set to avoid triggering a parliamentary vote.

Finance ministers and central bank governors struck the deal at a meeting in Washington.

Alongside the UK's increase, Australia is to contribute an extra seven billion US dollars, Singapore four billion dollars, and South Korea 15 billion dollars.

Mr Osborne said: "The UK sees itself as part of solution to the challenges facing the global economy, not part of problem. We are helping to solve the global debt problem rather than adding to it.

"Jobs and growth in Britain depend on stable world economy. That needs a strong IMF.

"And because we have taken strong action to rescue our own economy, we can be one of many countries that can support the IMF, instead of being bailed out by the IMF."

The US and Canada are not thought to be contributing any extra funding under the agreement.

Parliament has previously approved around £40 billion in support for the IMF, of which about £30 billion has already been committed.

If the increase had gone beyond the £10 billion "headroom" still available to Mr Osborne it would have required a fresh vote by MPs.

Committing money does not mean it will necessarily be drawn against and, because it would be given in the form of a loan, it would not deplete public spending budgets.

Mr Bone said: "It is £10 billion of money that he is spending without telling Parliament in advance he was going to do it.

"It seems to me it is all about bailing out the eurozone. It should not be up to British taxpayers to shore up a doomed project that is for the benefit of our European colleagues.

"People will not understand how we can have all these cuts but put £10 billion at risk for other countries. It is bonkers."

However, Mr Bone said there was now no obvious way of forcing a Commons vote on the issue - which could have been highly embarrassing for the Government.

"It does seem very strange that £10 billion can be spent without getting a proper parliamentary debate," he added.

Tory MP Mark Pritchard, secretary of the influential 1922 Committee, said Mr Osborne appeared to have "got away with the politics" of the issue by avoiding a fresh vote.

But he told BBC Radio 4's PM programme the UK should not be underwriting a currency that "clearly is not working".

"Indirectly that is exactly what British taxpayers' money and IMF funding is going to do," he added.

He also pointed to wider disaffection on the Conservative backbenches.

"The government is suffering from strategic drift," Mr Pritchard said. "I don't think it permanent, I don't think it is terminal ... but I think the government does have to listen more to backbenchers who listen to their constituents."

Shadow chancellor Ed Balls accused Mr Osborne of "running scared" of parliamentary scrutiny.

"It is disappointing that the chancellor has not taken the opportunity to press the wealthy eurozone countries to dig into their own pockets and establish a strong firewall of their own, before offering up more funding from Britain," he said.

"There is a real risk that yet another sticking plaster response will mean the eurozone continues to duck the tough decisions they need to take.

"The IMF has a vital role to play in the global economy and should have the resources to do that job, but it should not be bailing out the eurozone when the euro area countries are not doing their own bit to help themselves."

Mr Balls added: "George Osborne needs to explain why he has suddenly changed his mind and why he is running so scared of parliamentary scrutiny on this important issue."

The Institute of Directors warned that Mr Osborne could be "throwing good money after bad".

Chief economist Graeme Leach said: "Given the tight nature of Britain's finances, it is concerning that George Osborne may be throwing good money after bad with this agreement.

"If the IMF is going to be given even more funding, then the government should strongly insist that it is only lent as part of a plan that is a feasible solution, not simply to stave off a crisis for a few more months.

"Although no-one has ever lost money lending to the IMF, every investor knows that past performance is not necessarily a guide to the future."

Emma Boon, Campaign Director of the TaxPayers' Alliance said: "Osborne shouldn't hand any more money to the IMF, effectively supporting a Eurozone bailout by the back door.

"The government keeps telling British taxpayers that we won't have to pick up the bill for futile rescue attempts of a currency they rightly refused to join, yet now we hear this.

"Hard-pressed families struggling at home will wonder why they are cutting back when they see Osborne is committing another £10 billion - right up to the limit of what he can without a vote in Parliament."

UKIP leader Nigel Farage said the extra commitment was an "absolute disgrace".

"He's pouring good money after bad for the sake of a political project," Mr Farage said.

"Osborne calls this money a 'contingent liability'. The reality is that the greatest liability we in this country face is a Government that is determined to screw down on the British people, in order to bail out a failing currency."

Treasury Select Committee chairman Andrew Tyrie said the increase was "essential".

"The IMF is the only fire-brigade available to the global economy," he said. "It is vital that the IMF has the necessary tools to deal with the current eurozone crisis and the risks to wider global financial stability.

"Any IMF loans to the eurozone must be on rigorous terms, with full conditionality.

"The IMF must not flinch from its long-standing policy of negotiating only with member countries."

The Tory MP added: "Britain benefits more than most from having a tough global watchdog and no country outside the eurozone has more reason to want the crisis resolved than the UK."

In total, the IMF is believed to have secured about $400 billion (£248 billion) in extra funding from members. Half of that was pledged by eurozone countries last year.

Japan has committed $60 billion (£37 billion) and Switzerland $26 billion (£16 billion).