...as Treasury row over bailout costs hots up after muddle

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After calls late Tuesday night between high-level officials, the Treasury had persuaded the IMF to drop a claim that the cost of the bailout could spiral to £200 billion.

That estimate clashed with the Treasury's figure, which had been widely trailed as £60 billion.

In his speech Darling confused matters further by not referring to a specific figure. Instead he said: "My public finance figures today include a provisional estimate for the potential cost of this, totalling 3.5% of GDP." This figure, which analysts reckoned meant only £50 billion, clashed not only with the IMF's original figure but also with its revised one, which it claimed the Treasury had approved.

In its half-yearly Financial Stability Report on the state of the world's banks yesterday, the IMF reckoned the financial crisis could end up costing governments worldwide more than $4 trillion (£2.7 trillion).

The UK share of this, which it forecast to be £200 billion, amounts to 13.4% of annual gross domestic product, the second highest after Ireland. The Treasury insisted the figures were wrong, as they ignored fees paid by the banks into government coffers in return for rescue funds and assumed that all losses from the industry would accrue to government coffers. The IMF then cut its figure to 9.3% of GDP, which is around £130 billion.

A Treasury spokesman said: "The Budget made prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting public finances." After the first angry reaction from the Treasury, the IMF pulled the figures from its website and conceded the cost of the UK bailout had been incorrectly stated.

The IMF argued that Britain needs to explain how it intends to scale back debts.