Britain finally pays off WWII debt
Britain will today make the last repayment on loans lent by the US and Canada during the second world war – 61 years ago.
The Treasury will send £42.4 million to the US and £9.98 million to Canada via electronic payment, the 50th instalment on a loan that without which Britain may have collapsed under the cost of six years of war with Germany.
“This week we finally honour in full our commitments to the US and Canada for the support they gave us 60 years ago,” Ed Balls, the economic secretary to the Treasury, said last night.
“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.”
The original loan was for $4.3 billion from the US – the equivalent of about £27 billion in today’s money – in 1945 and a year later, Canada also agreed to lend Britain $1.2 billion.
The loans were given at a very favourable two per cent rate of interest and under the agreement Britain was allowed to defer payments whenever it wanted.
It did this six times, in 1956, 1957, 1964, 1965, 1968 and 1976, arguing that international exchange rate conditions and the UK’s foreign currency reserves may payments in those years impractical.
The loans provided essential capital for the reconstruction of Britain after the war – in 1950, national debt stood at twice (200 per cent) the gross domestic product (GDP) of the country. This compares with just 36.8 per cent today.
Loans issued by and to Britain during the first world war have never been resolved. A deal was struck in 1931 to wipe them out, to give countries a chance to rebuild during the Great Depression.