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British financial commitment In response to a question about World Bank loans in the House of Commons from Derek Twigg MP, the Department for International Development (DfID) has claimed that the Department “does not maintain an aid programme to Argentina and no UK aid is spent providing loans to Argentina at the International Bank for Reconstruction and Development (IBRD).” 1 That statement is misleading as Britain is a major shareholder in the World Bank. The Bank’s institutions and its affiliates fund their programmes through a mix of equity from shareholders and borrowing. The commercial borrowing cannot be separated from equity from shareholders as it borrows on the basis of its equity base. The equity base in turn is based on a total capital subscription from each Member State. Part of that subscription is left uncalled but it is still a real commitment that enables the Bank to borrow affordably, and for which British taxpayers are ultimately liable. Britain’s total capital subscription at 30 June 2011 was £8.4 billion (of which £7.8 billion was uncalled), which made it the fifth largest shareholder in the Bank. 2 Loans are made by the relevant bank, either the International Bank for Reconstruction and Development (IBRD) or one of the affiliated Multilateral Development Banks (MDBs). The Inter-American Development Bank (IADB) is one of those MDBs and provides loans to Argentina alongside the IBRD. Liabilities for individual loans are held by the relevant bank as a whole, rather than specific loans being tied to specific shareholders, and therefore British taxpayers fund all of them to the extent of their shareholding. The Government has provided the following information on the outstanding loans to Argentina from two institutions within the World Bank, in response to a Parliamentary Question from Priti Patel MP: 3 “The Inter-American Development Bank currently has outstanding loans to Argentina valued at $10.6 billion. The UK has a 0.96% shareholding at the Inter-American Development Bank. The International Bank for Reconstruction and Development currently has outstanding loans to Argentina valued at $5.6 billion. The UK has a 4.5% shareholding at the International Bank for Reconstruction and Development.” 1 Hansard, House of Commons, Written Answers: International Development, 30 April 2012: Column 1226W 2 World Bank, IBRD Management’s Discussion & Analysis and Financial Statements, Year-end (audited), June 2011 3 Hansard, House of Commons, Written Answers: International Development, 8 March 2012: Column 867W 55 Tufton Street, London, SW1P 3QL • www.taxpayersalliance.com • 0845 330 9554 (office hours) • 07795 084 113 (24 hours) 2
That implies British taxpayers are responsible for over $300 million – over £200 million – in loans to Argentina. Institution Outstanding loans to Argentina UK shareholding Outstanding loans attributable to the UK International Bank for Reconstruction and $5,600,000,000 4.50% $252,000,000 Development Inter-American Development Bank $10,600,000,000 0.96% $101,760,000 Total $353,760,000 The Government statement is technically correct that there is no distinct UK aid programme to Argentina and that there is no specific funding from the British Government tied to World Bank programmes assisting Argentina. However, the contribution that British taxpayers make to the equity base of the IBRD and the IABD means that their money is clearly supporting loans to Argentina on a substantial scale. Reflecting that, DfID has votes at both the IBRD and the IADB, in line with the British shareholding. British taxpayers’ money buys political influence at the Banks that could be used to oppose loans to Argentina, but is currently not. There are a number of analogous situations where the Government will clearly be using British taxpayers’ money to assist a project, but doing so indirectly through a financial institution in order to maximise their effect, for example: • The International Monetary Fund and its assistance to struggling economies. • The proposed Green Investment Bank and its support for investment in renewable energy and other schemes expected to reduce greenhouse gas emissions. Deputy Prime Minister Nick Clegg said the Bank would be “one of the tools we use to rebalance our economy” and described its investments as a “real legacy of the Coalition Government’s green commitment.” 4 4 Speech to Climate Change Capital on the green economy, 23 May 2011 55 Tufton Street, London, SW1P 3QL • www.taxpayersalliance.com • 0845 330 9554 (office hours) • 07795 084 113 (24 hours) 3
Page 1: Research Note 109 | 06 June 2012 Br
Page 5: There has also been the recent nati

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