When World War II finally ended on 2nd September 1945, six years of conflict had taken its toll, not only in terms of the estimated 50 million people who had lost their lives, but also financially on the participating nations.
Britain was desperately in need of money to help rebuild the shattered infrastructure and exhausted economy. As a result, the British government borrowed $4.34 billion from the United States. The biggest part of the loan ($3.75 billion) was a line of credit.
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The remainder was a “lend-lease” loan relating to wartime supplies from the US that were already in transit to the UK at the time. Launched by US President Franklin Roosevelt in 1941, the Scheme stopped abruptly soon after VJ Day on 15th August 1945.
What had the US provided for Britain?
Shipments of $31 billion worth of supplies needed for Britain’s war effort were despatched free of charge by the US. This included thousands of transport aircraft and trucks, food, oil and other materials.
When the war and the programme ended, the US government charged Britain for the supplies already in transit. However, they charged at a hugely discounted rate.
The US had set up a similar “lend-lease” arrangement with other Allied nations. At the end of the war, it was estimated that around two-thirds of the trucks used by the Soviet Army were made in America.
The items were initially free to aid the war effort, so Britain significantly benefited from the arrangement, as did other nations.
What were the repayment terms?
With the sudden end of the Lend-Lease Act, many items that were already in the UK, or in transit, must be either paid for or returned to the US. Britain needed most of these items during the austere post-war years, but the government was unable to pay for them immediately, hence the loan agreement between the US and UK was drawn up.
The United States provided low-interest loans to the nations involved in the programme, including Britain. Loans were to be repaid at an interest rate of 2% in 50 annual instalments.
Payments began in 1950 and it was anticipated that the total loan would be repaid by the year 2000. At that time, the UK was in massive debt that was the equivalent of more than 200% of its Gross Domestic Product.
Did Britain keep the repayments on track?
Various factors impacted on the repayment plan including political and financial situations, such as an impractical exchange rate at various times. The British government was permitted to defer payments for up to six years.
The UK took full advantage of this and deferred the annual repayments in 1956, 1957, 1964, 1965, 1968 and 1976, which extended the duration of the repayment until 2006. Finally, in December, the UK had finally repaid the loan to the United States. This brought to an end Britain’s World War II debts and was a momentous occasion for the nation. The amount finally repaid, when combined with the interest, amounted to twice the sum borrowed at the end of the war.
The final working day of 2006 (29th of December) was dubbed the D-Day of the final payment. The British government wasn’t interested in extending the duration of the loan further. Ed Balls, the then Economic Secretary to the Treasury, formally signed off the commitment between the British and American governments.
While the debt owed to the US by the UK was finally wiped clean, other obligations from World War I are still outstanding. Money is owed to other countries by Britain dating back to the 1914-18 conflict, while some nations owe Britain huge sums of money from the same period.
However, at the height of the Great Depression in the 1930s, governments suspended all payments of war debts relating to World War I internationally. The suspension was indefinite and no repayments from WWI have been made anywhere since 1934.
Logbook Loans 247 will be remembering those who gave their lives defending our future freedom in times of conflict. At the 11th hour on the 11th of November, we will be observing the two-minute silence. Our thoughts and prayers are also with the people of Ukraine, who continue to endure enormously troubling times.