Osborne lays the groundwork for IMF cash increase

The Chancellor has indicated that Britain could increase its IMF contribution - again. Tory Euroscep

George Osborne has said that Britain could provide more funds to the IMF if there is a "strong case" for an increase. Speaking at the World Economic Forum in Davos, the Chancellor said that he would consider increasing Britain's contributions above the £10bn extra already pledged, if there were adequate reassurances.

This is nothing new: Osborne has been laying the foundations for an increased British contribution for a while. It's vital for Britain that the IMF has enough cash to help struggling eurozone countries, because of our geographical position and trade links with Europe. But David Cameron gained some serious brownie points with his party when he opted out of further contributions to the eurozone bailout, and it will be difficult for the government to sell this as anything but propping up the eurozone by another name.

My colleague Rafael Behr recently explained why increasing IMF contributions is a political headache for Osborne:

The epicentre of instability is, of course, the eurozone, but Osborne cannot make an explicit commitment to bailout Britain's continental neighbours for fear of aggravating eurosceptic Tory backbenchers. Labour has also made it clear that it would oppose a direct transfer of UK money to a dedicated EU bailout fund - even one administered by the IMF. If enough Tories rebelled, a vote in parliament that ended up being framed in terms of whether or not good British pounds should be thrown after bad euros would be very tricky for the government. So any UK assistance to precarious eurozone economies has to be laundered through the general IMF kitty. (In practice that is hardly different from contributing to a specific euro bailout fund and eurosceptic rebels are unlikely to accept the distinction.)

Yet it looks as if it is edging closer to happening. The FT today reports that "Osborne has swept away most of the hurdles the government had erected to prevent Britain pledging billions of pounds for the International Monetary Fund", suggesting that the funds could be upped as soon as March.

Osborne will not be relishing the prospect of returning to parliament to ask for more funds -- particularly given the struggle he faced in July when the Commons voted on the last funding increase.

Sir Peter Tapsell summed up the feelings of many on the Conservative backbenches when he told David Cameron this week that "for Britain to commit still more funds to the IMF would, in effect, be providing a subsidy to Germany" because Berlin was not doing enough to support the euro.

The government is braced for a rebellion on this, but that will not mean it will not go ahead. It all comes down to Labour's position. The party sided with the sceptics in July (Ed Balls took a notably hostile position) but the Tory rebellion was not big enough to defeat the government. It's likely that there would be a higher turnout, and more strong feelings, in a repeat. The question is whether Labour decides to play the role of responsible global citizen (and some are reporting they might), or whether the chance to destabilise the coalition is too good to miss.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.