External Finances and the Balance of Payments

Financial Statement – in the House of Commons on 25th April 1944.

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I now turn to the position of our external finances, which will become an increasingly important problem as the war draws to its close. Last year, Sir Kingsley Wood gave a general account of the factors in our external finances. I need not repeat this, but hon. members may find it useful to look at that story as a guide to the further chapter which I shall unfold. Once again we are receiving the immense contribution to the pooling of resources represented by Lend-Lease from the United States, not only of finished munitions, but also of food and raw materials. Similarly the Canadian Government have during the last two financial years made a most munificent contribution to our needs, first by the billion dollar gift to us and last year by a corresponding gift to the United Nations; and it gives me deep pleasure to inform the Committee that I have learned that the Canadian Government will again make a contribution to the war effort of the United Nations this year on similar lines.

For our part, we give mutual aid to the United States and Russia and our other Allies on a very large scale and in proportion to our resources. On this it may be remembered that we have a population of about one-third of that of the United States and a national income of not much more than one-fifth. This story is told in the Report on Mutual Aid published last November as Command Paper 6483.

There is another side to the story—the drain upon our resources of the external costs of the war. We have to meet vast and growing cash expenditure in other countries for military operations and supplies. To finance our purchases in the United States before Lend-Lease, and to meet these external costs, we have already parted with overseas assets to the extent of £1,000,000,000, and we have incurred undischarged overseas liabilities amounting to £2,000,000,000. We are not yet at the end of this tale. We have parted with all this, not to neutrals, but nearly all of it, some 90 'per cent., to our Allies and associates, most of whom will emerge from this war with their overseas financial position greatly strengthened as a result, just as ours is greatly weakened. I make no complaint of this, for we are in this war with all we have got, but no one must suppose that a country can wage a war on this basis for several years and emerge at the end without a price to pay. We have not yet paid that price.

I sometimes detect indications of a temper in the country and in the House in the attitude to the future which does not pay due regard to these sombre facts. I must, therefore, explain our problem to the Committee.