War Debts

Treasury written question – answered on 28th February 2002.

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Photo of Bob Spink Bob Spink Conservative, Castle Point

To ask the Chancellor of the Exchequer

(1) what outstanding liabilities there are to the United Kingdom of lend-lease loan facilities arranged during the Second World War;

(2) what total payments have been made to meet World War II debts owed to the United Kingdom by other countries; what debts remain unpaid; and what the schedule is of future payments to the UK;

(3) what the level is of First World War debt owed by the United Kingdom to the United States of America; in what year repayments were last made to the USA; and what plans he has to (a) pay off the debt and (b) cancel liability to this debt;

(4) what outstanding schedule of payments the United Kingdom Government will make to the USA in respect of World War II debt; and what the date is of the final payment;

(5) what loans and other financial liabilities incurred by the United Kingdom with the United States of America for World War II (a) have been paid and (b) are outstanding;

(6) what recent representations the United Kingdom Government have made to the USA for the cancellation of (a) World War I and (b) World War II debts and lend-lease loans.

Photo of Ruth Kelly Ruth Kelly Economic Secretary, HM Treasury

The information is as follows.

First World War debt

At the end of the First World War the United Kingdom debt to the United States amounted to around £850 million. Repayments of the debt were made between 1923 and 1931. In 1931, President Hoover of the United States proposed a one-year moratorium on all War debts, which allowed extensive international discussions on the general problems of debt repayment to be held. However, no satisfactory agreement was reached. In the absence of such an agreement no payments have been made to, or received from, other nations since 1934.

At the time of the moratorium the United Kingdom was owed more by other nations (£2,269 billion) than the outstanding principal it owed the United States ($4,368 billion—at 1934 exchange rates this was around £866 million).

Second World War debt

Under a 1945 Agreement the United States Government lent the United Kingdom a total of $4,336 million (around £1,075 million at 1945 exchange rates) in war loans. These loans were taken out under two facilities: (i) a Line of Credit of $3,750 million (around £930 million at 1945 exchange rates); and (ii) a Lend-Lease loan facility of $586 million (around £145 million at 1945 exchange rates), which represented the settlement with the United States for Lend-Lease and Reciprocal Aid and for the final settlement of the financial claims of each government against the other arising out of the conduct of the Second World War.

Under the Agreement the loans would be repaid in 50 annual instalments commencing in 1950. However the Agreement allowed deferral of annual payments of both principal and interest if necessary because of prevailing international exchange rate conditions and the level of the United Kingdom's foreign currency and gold reserves. The United Kingdom has deferred payments on six occasions. Repayment of the war loans to the United States Government should therefore be completed on 31 December 2006, subject to the United Kingdom not choosing to exercise its option to defer payment.

As at 31 March 2001 principal of $346,287,953 (£243,573,154 at the exchange rate on that day) was outstanding on the loans provided by the United States Government in 1945. The Government intend to meet its obligations under the 1945 Agreement by repaying the United States Government in full the amounts lend in 1945.

All World War II debts owed to the United Kingdom by other countries have either been repaid or settlements have been agreed with the countries concerned. Details are provided in the Finance Accounts of the United Kingdom and their successor the Supplementary Statements to the Consolidated Fund and National Loans Fund Accounts for the financial years 1945–46 to 1987–88 and the following Command Papers:

China CM 198;

Czechoslovakia Cmd 7798 and Cmnds 55, 56 and 2280;

France Cmnd 6988;

Netherlands Cmd 7358;

Poland Cmd 6864 and 7148 and Cmnd 1057;

Turkey Cmds 6165 and 9120; and

USSR Cmd 7297.

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