By Robert Winnett, Tim Ross and Christopher Hope
10:00PM BST 20 Apr 2012
The Chancellor is braced for a political backlash against the move, which was condemned by some Conservative MPs, at a time of unprecedented public spending cuts and a squeeze on family finances.
Mr Osborne has repeatedly pledged not to use British money to bail out the euro. He is now facing accusations that the IMF funds are an indirect way of helping to prop up the beleaguered single currency.
Senior government sources said it would be “incredibly irresponsible” for Britain not to have offered the extra money amid fears that countries using the euro are on the brink of being plunged back into crisis.
The contribution means every household has a potential liability equivalent to more than £1,600 to help rescue troubled foreign countries.
Britain will have a total liability to the IMF of almost £40 billion, as well as billions more in separate loans to Ireland and Greece.
Eurosceptic Tory MPs and Labour are expected to unite to try to block the extra funding, though the Coalition is not planning to allow a Parliamentary vote on the decision.
One Tory MP said the refusal to hold a vote was “cynical and calculating”.
The IMF intends to double its budget in anticipation of a new round of world economic turmoil.
America, the world’s largest economy, has refused to participate in a global deal to boost IMF funding.
China, the second largest economy, also refused to provide extra funding but is expected to sign up to the deal.
There are growing fears that European countries such as Spain and Portugal may require international assistance amid renewed concerns over their economic health. Mr Osborne offered the extra money after talks with other finance ministers in Washington yesterday. The Chancellor said: “The world needs a strong IMF and we can be one of the many countries that will support the IMF. It’s part of a global effort.”
A senior government source said: “Some people will disagree with this decision but it would have been incredibly irresponsible not to participate. This decision was not entered into lightly. It is in our interests to do what is necessary for the economy.”
Britain contributes 4.5 per cent of IMF funding and Mr Osborne has already committed about £29 billion.
After the previous financial crisis, MPs voted to allow a doubling in potential funding. The Chancellor had the authority to commit another £10 billion to the IMF without returning to Parliament – taking total funding to almost £40 billion. He has now exercised this authority.
Conservative MPs lined up last night to criticise the Chancellor’s decision. Backbenchers’ anger could be directed at Mr Osborne and David Cameron.
The Tory MP Mark Reckless said: “I don’t think we should be giving money to the IMF now as it will most likely be used to prop up a currency we chose not to join. It will just throw good money after bad.”
Peter Bone, another Conservative MP, branded the move “bonkers”.
The Labour Party is also expected to oppose the IMF funding.
In an interview with The Daily Telegraph today, Ed Balls, the shadow Chancellor, said: “It would be wrong to ask the global taxpayer to put up [the] money.”
The IMF technically issues its own loans which are underwritten by Britain and other countries. The increased British backing for the organisation will not add to this country’s debts.
Mr Osborne said IMF money could only be lent to countries agreeing to major reforms and cutbacks – rather than the euro bail-out fund. No country has ever lost on loans to the IMF.
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