Thanks for the Loan Uncle Sam
As the first slurred booms of Auld Lang Syne begin tonight, the Bank of England will transfer £42million to the US Federal Reserve.
Although this probably won’t be too widely reported, it will mark the last chapter in the story of Britain’s alliance with America in the Second World War. The transfer of funds represents the last repayment against a loan taken out in 1946.
For most of the Second World War the US supported Britain through a Lend Lease programme. This delivered millions of dollars of military equipment, general goods and food in return for leases on British military bases around the world. Without it Britain’s war effort would almost certainly have been doomed to failure.
Shortly after VJ-Day in August 1945 the Americans suddenly and unexpectedly announced the end of the Lend-Lease system leaving Britain, who had spent 10 of the last 30 years engaged in war, in a very desperate financial situation.
Attlee’s new Labour government had won an election by promoting ambitious plans of creating a welfare state, giving free healthcare and nationalising Britain’s main industries. In September 1945 the cabinet instructed John Maynard Keynes, the economist and negotiator, to go to Washington to negotiate a $5billion ‘moral obligation’ grant, but all he returned with was a $3.75 billion loan fixed at 2% over 50 years.
The entire affair strained the relationship between Britain and the US, even more so when the Americans used the loan as a vehicle to force Attlee to make pound sterling freely convertible by 1947.
In a world crippled by war, most countries duly converted their sterling to the mighty dollar and this contributed to more years of hardship and rationing for ‘victorious’ Britain.
But thanks Uncle Sam and, on behalf of fellow Brits, we’re sorry we failed to stick to the 50-year loan term.
