London, 30 September 1950
4746. CONFIDENTIAL PRIORITY
Commonwealth Consultative Committee
The meeting of Commonwealth M inisters adjourned yesterday with the report more or less in final shape with the intention of re-assembling next week in order to finalise the report after there have been discussions with non-Commonwealth countries. It has been decided to recommend to Governments that the report be published in due course.
2. Committee has considered different ways of setting out the need of the developing countries for external financial assistance. The report as drafted at present purports to summate the total external finance required by the developing countries for the six years 1951-57. This is a composite figure which includes the estimate aggregate balance of payments deficits of India and Pakistan and the estimate of the external finance needed by the other developing countries calculated on the difference between the total cost of their developmental programmes and the amount of finance they expect to be able to raise internationally. This amount will not necessarily be identical with balance of payments deficits in the case of Malaya and Ceylon.
3. Major emphasis is placed in the report on the running down of sterling balances of the countries in this area as a contribution to the total external finance needed. The United Kingdom is stressing that this will be the major Commonwealth contribution to the programme.
4. During the last two days I have had the text of the chapter dealing with the ‘need for capital’ rearranged in order to emphasize in respect of the expected drawings by Commonwealth Governments upon their sterling balances that these drawings will represent not merely a burden in real terms upon the United Kingdom economy but also a substantial measure of self-help on the part of the countries concerned by so using their own property. My purpose has been to have the argument presented in the best light from the point of view of United States reaction.
5. I am now disinclined to press that Australia hold back from offering a contribution until United Kingdom undertakes to offer some contribution beyond the release of sterling balances contemplated. You will remember that in my telegram 4671 to you1 I recommend that this be made one of the prerequisites to an Australian contribution. Gaitskell2 [yesterday]3 in the meeting said that it would be out of the question for the United Kingdom to offer any supplementary financial assistance until reserves had been drawn down to minimum levels although I gather from what he said in private that some additional aid of not very great dimensions might be found by United Kingdom. In any event the United Kingdom is contemplating a release of sterling and financial support to the area, including contributions from the Colonial Development Office and Welfare Funds totalling in all approximately £330 million over six years. In the light of balance of payments this will clearly involve a heavy real burden on the United Kingdom. In the circumstances I do not feel that I can usefully intervene to press that a faster rate of drawings be permitted for expenditure on the cost of the programme itself, bearing in mind that at the present moment I am still not in a position to indicate that Australia will be making any contribution at all.
6. Moreover, £10 million is not a substantial contribution in comparison with the United Kingdom’s efforts, especially when it is considered that our contribution would be largely an immediate additional physical burden on the United Kingdom, particularly if our contribution is not spent in Australia.
7. I have agreed that the section of the report dealing with the contributions of the Commonwealth countries [should] be confined to a following general statement, [probably as follows]:— (quote)
‘The Commonwealth Governments are considering how large a part of the external finance requirements can be provided by their countries … ‘ unquote.
It is agreed that during the course of the next few weeks Commonwealth Governments will endeavour to decide more precisely on the form and size of any contribution so that this may be set out in a supplementary memorandum which can be passed at the appropriate time to the United States Administration. I am still anxious, however, that I should receive a reply to my telegram 4671 if possible before the beginning of next week so that the Delegation may indicate the order of size of contribution being recommended to the Australian Government (see paragraph 15 of my telegram).
8. It is not irrelevant to say that Canada, whom I think from observations made by leader of delegation is most likely to make a contribution is already committed to a substantial degree of external assistance under the North Atlantic Treaty operations.
[NAA: A3320, 3/4/2/1 part 2]
1 Document 107.
2 H.T.N. Gaitskell, UK Minister of State for Economic Affairs.
3 Words in square brackets and those following inserted by hand.