How Winston rescued Attlee

March 19, 2004

Sir Winston Churchill covertly helped secure US funding that saved the Labour government of 1945 and enabled it to build the British welfare state.

New research has revealed the extent to which the Conservative leader worked with Clement Attlee's administration behind his Tory Party's back to persuade US politicians and financiers to loan the UK $3.75 billion (£2 billion).

Without the money, the country faced postwar bankruptcy, described as "a financial Dunkirk" by economist John Maynard Keynes.

Instead, the loan and subsequent Marshall Plan funds helped rebuild the UK's economy, without which the National Health Service and other reforms would have been impossible.

Richard Toye, fellow of Homerton College, Cambridge, drew on previously unpublished documents to tell the story for the first time at the "Rethinking Britain" conference at this week's Institute of Historical Research in London.

"Churchill could have turned the Americans against the loan, which could have led to the collapse of the Labour government," Dr Toye said. "Instead, he carries out unofficial economic diplomacy on behalf of Attlee to dig Britain out of its hole.

"In reciprocating the spirit of unity that Labour had showed in 1940, Churchill revived, during Britain's 'financial Dunkirk', the spirit and the ethos of the original," he said.

In 1945, Labour inherited a country ruined by six years of war. Churchill, now leader of the opposition, commented at the time: "The new government will have terrible tasks. We must do all we can to help them."

Yet many Tory MPs opposed a loan and rebelled againsttheir leader when he called for abstention in a Commons vote on the matter. Nevertheless, Dr Toye said Churchill still collaborated closely with Labour to secure the money, visiting the US in 1946 in part to garner American support.

One newly uncovered document details a meeting at which Churchill sought to change the mind of a group of US senators and congressmen sceptical about loaning money to a socialist government.

Another shows that Bernard Baruch, an influential financier, was persuaded to back the scheme almost as a personal favour to the respected wartime leader.

In return for the loan, the UK agreed to join US-supported institutions, such as the World Bank and the International Monetary Fund.

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