TREASURY PAPERS
Series Two: Treasury Papers of John Maynard Keynes
(Public Record Office Class T 247 - Papers relating to International Finance and the Chancellor of the Exchequer's Consultative Committee, 1940-1946)

Publisher's Note

This collection provides all the working papers of John Maynard Keynes and his private office at the Treasury, covering his second period of service at the Treasury, from 1940 until his death in 1946. These papers relate to his membership of the Chancellor of the Exchequer's Consultative Committee and cover the whole range of economic policy, especially international finance, reconstruction and the external constraints on post-war domestic policy.

There are a considerable number of files on topics such as:

• general post-war economic policy
• post-war national income
• maintenance of full employment
• comments and reflections regarding the 1946 budget
• Mutual Aid
• Lend-Lease
• financing the war effort
• the Clearing Union and Stabilisation Fund
• the Dominions
• the International Bank for Reconstruction and Development
• Bretton Woods and monetary discussions
• the balance of payments
• sterling balances
• gold and dollar balances
• relations with the United States
• reparations
• UNRRA and relief work
• international trade and finance

In June 1940 the Chancellor of the Exchequer asked Lord Keynes to become a member of his Consultative Council of eminent authorities who were to advise him on questions of policy, and a room was provided at the Treasury. He was not a civil servant and drew no salary. His anti-inflationist arguments as summarised in How to Pay for the War were accepted, along with his work on the national income accounts, as the basis for Kingsley Wood’s budget of 1941. Keynes spent most of the next five years in difficult financial negotiations with the Americans to establish the terms and conditions for American loans, aid and material, and in devising a post-war financial system that met American demands without sacrificing Britain’s interests. However, he was enormously influential on all aspects of economic policy, both at home and abroad, during this period when he occupied a position “half way between an official and a minister”. His influence was based on personal authority. He was perceived as the most significant adviser in the Treasury, but also independent of it, with a special role and position. This is reflected in the 130 Treasury files reproduced in this project.

Much of his influence was indirect. If he intervened on any issue, his views tended to be decisive. His memoranda tended to clarify positions and assist colleagues in taking difficult decisions. The files reveal that Keynes had significant input in the wartime budgets, the conception of Bretton Woods and a gradual domination of all overseas financial policy. There is much evidence on the financial and commercial negotiations with the United States and the Dominions, on the consideration and implementation of policies for the transition back to peacetime, and on the needs for reconstruction. The evolution of his Clearing Union Plan as it progressed through Whitehall and to negotiation with the Americans, the Dominions and the European Allies, can be followed in detail. His work involved six trips to the United States. Once the main structure of war-time finance, both domestic and external, had been decided in 1941-1942, he turned his attention to securing the external basis of Britain’s post-war existence.

He had major influence on:

• techniques of exchange control
• the policy of gold sales to India and the Middle East
• all aspects of the Bretton Woods compromise
• the processes of the Clearing Union

Keynes served as the main conduit between the Treasury and the economists recruited into the Economic Section, the Central Statistical Office and other Ministries. These were his professional colleagues, many of them former students, for whom he was a natural leader and ally. Keynes served under three Chancellors - Kingsley Wood, John Anderson and Hugh Dalton. He got on well with the two key figures inside the Treasury, Sir Richard Hopkins, permanent secretary from 1942, and Sir Frederick Phillips, controller of finance, who spent much of the period 1940-1943 as the British Treasury representative in Washington DC, where he developed a very good working relationship with Morgenthau. As a result, Sir Wilfrid Eady took Phillips’s place as head of Finance in London in 1942. Eady tried without success to restrict Keynes’s domination over overseas finance in the final years of the war. Keynes was exasperated by Eady’s lack of technical acumen.

Hopkins had been instrumental in bringing Keynes to the Treasury in 1940. Both men had great respect for the other, and as a result of Keynes’s influence, Hopkins departed from his pre-war fiscal and monetary orthodoxies. Hopkins also came to appreciate that Keynes reinforced the Treasury’s war-time position and status; accordingly he was happy to allow Keynes a loose rein.

Keynes led the way for Britain in the two major Lend-Lease negotiations of 1941 and 1944. He devised the basic strategy for meeting the problems of “Stage III”, the transition to peace in 1945-1946. He was leader of the British Delegation which negotiated the American Loan in Washington in September/December 1945 (despite disagreements on strategy and opposition from Sir Wilfrid Eady). In February 1946, Keynes was appointed a Governor of the International Bank for Reconstruction and Development.

These papers at the Public Record Office are quite separate from the private papers of John Maynard Keynes at King’s College, Cambridge, microfilmed by Chadwyck-Healey. This microfilm project is a very important addition covering the crucial war years, international negotiations, post-war planning and finance.

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