For the British Treasury, only today is the war over
Guardian Online Link
Guardian Online Link
For most people the second world war is a distant memory or relived through books or television. But for the British Treasury, the war only ends today.
Gordon Brown's officials will, at the push of a button, make two electronic transfers of so-called "war loan" across the Atlantic, marking the end of a chapter of British history that began under Labour chancellor Hugh Dalton in 1945. The final payments of the loans, to the United States and Canada, are not negligible - $83.25m (Â£42.5m) and $22.7m respectively.
In 1945 Britain borrowed $4.34bn from the US consisting of a $3.75bn line of credit and a "lend-lease" loan facility of $586m. The following year the government agreed a $1.185bn line of credit loan from Canada. The money was primarily designed to assist in the post-war reconstruction of Britain's exhausted economy and shattered infrastructure. But the lend-lease loan related to wartime supplies already in transit from the US under President Franklin D Roosevelt's programme of the same name which began in 1941 and which ended abruptly shortly after VJ Day in 1945. Roosevelt famously said the scheme was like lending a neighbour a hosepipe to put out a fire. It marked a significant step away from America's post-first world war isolationism.
Under lend-lease, shipments of $31bn worth of supplies vital to Britain's war effort, including thousands of trucks and transport aircraft, were made free of charge by the US. After the programme ended, goods already in transit were charged for but at a huge discount. Shipments were also made to other countries. By the end of the war, for example, two thirds of the trucks used by the Soviet Red Army were American.
Repayments on the loans began in 1950, since when Britain has paid 50 instalments worth $7.5bn to the US and $2bn to Canada at a 2% rate of interest. The economic secretary, Ed Balls, said: "This week we finally honour in full our commitments to the US and Canada for the support they gave us 60 years ago. It was vital support which helped Britain defeat Nazi Germany and secure peace and prosperity in the post-war period. We honour our commitments to them now as they honoured their commitments to us all those years ago."
Successive British governments have never in the duration of the loans lobbied to have them reduced or cancelled, and have always insisted it is right to meet the commitments it made in return for the financial support given by the US and Canada before and after the war.
The government deferred six annual instalments in 1956, 1957, 1964, 1965, 1968 and 1976, on the grounds that international exchange rate conditions and the UK's foreign currency reserves made payments in those years impractical. The ability to defer payments was set out in the terms of the original loan agreements.
In 1950, Britain's national debt stood at about 200% of gross domestic product, much higher than today's figure of 36.8%.