583. SECRET IMMEDIATE PERSONAL
1. I did not receive the full text of your 48051 until I reached New York yesterday. Endeavoured to reach you on the phone last evening and this morning but without success. Will try again this evening. In meantime I would like to make the following observations.2
2. I appreciate fully the difficulties in which you find yourself and greatly appreciate the personal attention you have given to the matter when you have so many other important matters in your mind. I hope, however, that you will be able to reconsider your ideas in the light of the following comments. In any event I agree we should proceed cautiously and make no final commitment until we have more information of the attitude of the United States and non-Commonwealth countries.
3. I appreciate that it would be impossible for us to make a decision now to contribute 60 million pounds over six years and misleading to give the impression that an initial contribution of 10 million pounds in the first year would necessarily be maintained in subsequent years without regard to the budgetary and balance of payments situation. In the light of our unpredictable balance of payment we would however be perfectly justified in explicitly setting an overall limit for six years while offering a contribution for the first year exceeding the annual equivalent of the six year figure. This is perfectly logical if we think our situation will be better in 1950/51 than later.
4. I would not feel that Australia should consider offering a first year's contribution as low as 3 million pounds. It would certainly make a poor impression compared with the magnitude of the problem and the contributions we are expecting from others. Not only would it be conspicuous in its inadequacy beside the contributions to internal assistance programmes of Canada and others, about3 it is indeed negligible besides the countries4 Australia has made in the early pre-war years to the United Kingdom. In any case we are not obliged to make gifts and at least a considerable proportion, in my view the great proportion, of our contribution could and I hope would take the form of loans. Many of the programmes, in particular that of India, lend themselves to loan finance because of preparation of details of projects on which planning is based. Money loaned is not money necessarily lost.
5. Neither the United States nor anyone else will commit themselves definitely over six years, although the United States would be expected to undertake a moral obligation of some kind (as in the case of E.R.P.) with a greater degree of precision than Australia.
6. I assume from your telegram that you could agree that we are in a position to make a contribution this year of 10 million pounds. Therefore on the basis of your views and the foregoing comments, I wonder whether you could agree that at this stage we should proceed bearing in our minds the following tentative assumptions:—
(a) That we may be able to make an initial contribution of 10 million pounds.
(b) That we shall make it clear that any initial contribution will not necessarily be maintained from year to year.
(c) That we shall eventually indicate that we shall endeavour to make an overall contribution of at least 25 million pounds over the six years but that subsequent contributions after the first year will depend on a review of the programmes and our own balance of payments position.
(d) That some of our contributions might be given as gifts but that the larger proportion could be made available on loan either through the international bank or otherwise.
7. In any case I hope my recommendation of a contribution of 10 million pounds in the first year will not be rejected before there has been an opportunity to explore all aspects. I feel sure you will agree this is to be desired.
8. I have in the meantime told McCarthy5 not to take any action or reveal in any manner the contents of your cable to me.
9. My warmest regards to you.
[NAA: A9879, 2202/El part 1]