Anglo - American loan The Anglo - American Loan Agreement was a post World War II loan made to the United Kingdom by the United States on 15 July 1946 , and paid off 29 December 2006 . The loan was negotiated by John Maynard Keynes on behalf of the United Kingdom from the United States and Canada at the end of World War II . Background . The loan was made primarily to support British overseas expenditure in the immediate post - war years and not to implement the Labour government ' s welfare reforms . British treasury officials believed they could implement the Labour government ' s domestic reforms without the loan if Britain withdrew from all major overseas commitments . Additionally , Britain ' s lend - lease balance was written off for $ 650 million ( US $ million in 2018 ) . At the start of the war , Britain had spent the money that they did have in normal payments for materiel under the " US cash - and - carry " scheme . Basing rights were also traded for equipment e . g . the Destroyers for Bases Agreement , but by 1941 Britain was in a terrible financial state and Lend - Lease was introduced . Large quantities of goods were in Britain or in transit when Washington suddenly and unexpectedly terminated Lend - Lease on 29 August 1945 . The British economy had been heavily geared towards war production ( around 55 % GDP ) and had drastically reduced its exports . The UK therefore relied on Lend - Lease imports to obtain essential consumer commodities such as food while it could no longer afford to pay for these items using export profits . The end of lend - lease thus came as a great economic shock . Britain needed to retain some of this equipment in the immediate post war period . As a result the Anglo - American loan came about . Lend - lease items retained were sold to Britain at the knockdown price of about 10 cents on the dollar giving an initial value of £1 , 075 million . Agreement . Terms . John Maynard Keynes was sent by the United Kingdom to the United States and Canada to obtain more funds . British politicians expected that in view of the United Kingdom ' s contribution to the war effort , especially for the lives lost before the United States entered the fight in 1941 , America would offer favorable terms . Instead of a grant or a gift , however , Keynes was offered a loan on favourable terms . Historian Alan Sked has commented that , " the U . S . didn ' t seem to realize that Britain was bankrupt " , and that the loan was " denounced in the House of Lords , but in the end the country had no choice . " America offered $ US 3 . 75bn ( US $ billion in 2018 ) and Canada contributed another US $ 1 . 19 bn ( US $ billion in 2018 ) , both at the rate of 2 % annual interest . With the interest instead of paying the original loan amount the United Kingdom ended up paying a total of $ 7 . 5bn ( £3 . 8bn ) to the US and US $ 2 bn ( £1bn ) to Canada . The loan was made subject to conditions , the most damaging of which was the convertibility of sterling . Though not the intention , the effect of convertibility was to worsen British post - war economic problems . International sterling balances became convertible one year after the loan was ratified , on 15 July 1947 . Within a month , nations with sterling balances had drawn almost a billion dollars from British dollar reserves , forcing the British government to suspend convertibility and to begin immediate drastic cuts in domestic and overseas expenditure . The rapid loss of dollar reserves also highlighted the weakness of sterling , which was duly devalued in 1949 from $ 4 . 02 to $ 2 . 80 . In later years , the term of 2 % interest was rather less than the prevailing market interest rates , resulting in it being described as a " very advantageous loan " by members of the British government , as elaborated below . Repayment . The last payment was made on 29 December 2006 for the sum of about $ 83m ( £45 . 5m ) , the 29th being the last working day of the year . The final payment was actually six years late , the British Government having suspended payments due in the years 1956 , 1957 , 1964 , 1965 , 1968 and 1976 because the exchange rates were seen as impractical . After this final payment Britain ' s Economic Secretary to the Treasury , Ed Balls , formally thanked the US for its wartime support . Quotes . The original size of the debt and repayment terms ( including deferments ) can be ascertained from the debates in the House of Commons on 28 February 2002 and House of Lords on 8 July 2002 as recorded in Hansard : " Bob Spink : 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 ; [ 38441 ] … " < br > " Ruth Kelly : The information is as follows . . . " < br > " 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 . < br > As at 31 March 2001 , principal of £243 , 573 , 154 [ $ 346 , 287 , 953 at the exchange rate on that day ] was outstanding on the loans provided by the United States Government in 1945 . The Government intends to meet its obligations under the 1945 Agreement by repaying the United States Government in full the amounts lend [ sic ] in 1945 . " Similarly , Hansard records from a debate that took place in the House of Lords on 8 July 2002 : " Lord Campbell of Croy : My Lords , is this payment part of the lend - lease scheme under which the United States supplied munitions , vehicles and many other requirements including food and other provisions that were needed badly by us in the last part of the war ? < br > Lord McIntosh of Haringey : My Lords , I referred to lend - lease in the context of the generosity of the United States throughout that period . However , the debt that we are talking about now is separate ; it was negotiated in December 1945 . < br > Lord McIntosh of Haringey : My Lords , the loan originally was £1 , 075 million , of which £244 million is outstanding . The basis of the loan is that interest is paid at 2 per cent . Therefore , we are currently receiving a greater return on our dollar assets than we are paying in interest to pay off the loan . It is a very advantageous loan for us . " In television . Sir Christopher Meyer presented a history of the loan and its effects in the BBC series " Mortgaged to the Yanks " . Meyer erroneously claimed that the loan was primarily needed to pay for the Labour government ' s welfare reforms .