Friday, December 29, 2006

WOOHOOO!!

So today the British government electronically wired to washington the final repayment of our war debts (yeah - thanks "allies"). Over the last 60 years they have, on numerous occasions, hampered our economic development ('50s, 60's and 70's all saw defered payments as we couldn't make ends meet...)

So does this mean we can finally stick two fingers up at our friends across the pond, and tell them where to jump?

3 comments:

Rob said...

It's probably best not to burn our bridges with America, you never know when they might come in useful.

In 1945, Britain needed money to import food and for reconstruction to help us through the consequences of post-war adjustment, rather than the war itself.

The post-war loan was part-driven by the Americans' termination of the Lend-Lease scheme (which replaced the Cash-and-Carry scheme, which saw straight payments for material). Since 1941, the US had effectively donated equipment for the war effort, but anything left over in Britain at the end of hostilities and still needed would have to be paid for. This seems pretty fair to me, but to make things even better, the US only wanted one-tenth of the production cost of the equipment and would lend the money to pay for it (which was useful as we couldn't afford to pay for the equipment, but we couldn't afford to give it back). The terms of the loan were extremely generous, with a fixed interest rate of just 2%, so it should come as no surprise that the UK chose to keep this low-interest loan going rather than pay it off early. Even if you can afford to pay it off early, you should invest it and pocket the interest.

This isn't the only debt that Britain's had/has, there are some that predate the Napoleonic wars, because it is better value for taxpayers to keep paying the low interest.

Britain still appears to owe £866m from WWI (£40bn when adjusted by RPI), but we're also owed £2.3bn by other nations (£104bn adjusted). The UK Government's position on these loans is: "Neither the debt owed to the United States by the UK nor the larger debts owed by other countries to the UK have been serviced since 1934, nor have they been written off".

Which is why it seems crazy that the media are making such a fuss over Britain and its "war debts", or why people seem to think it was such a bad thing to have accepted 60 years ago.

Anonymous said...

I recon it was a bargin.

Emily Wearmouth said...

I am not saying it was a bad thing to take the loan. It was essential.

I a merely commenting that its great to have repaid this loan. There is absolutely no doubt that during the course of this financial arrangement global political power has moved from London to Washington.

And personally I strongly object to just about everything that the American political powers does. So more distance between us and them, and a closer relationship with our genuine allies in Europe (who are so much more like us) the better.

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