When the Marshall Plan to reconstruct war-torn Europe through massive US economic and technical aid was introduced to Britain in the second half of 1948, President Harry Truman's administration and Attlee's socialist Labour government seemed unlikely and uncomfortable bedfellows in the field of economic reconstruction. On the one hand, US policymakers saw the removal of restrictions on trade and a flourishing free market as the formula for recovery; on the other Labour favoured a protectionist approach and much more active role for the state. As the balance of power in the relationship naturally lay firmly with the creditor, Labour's ability to withstand pressure from the US to cross this ideological divide would play a pivotal role in defining the success of its most ambitious projects, the creation of the Welfare State and its pledge to bring the nation's industries under public ownership.
Yet, rejecting Marshall Aid and thereby avoiding the risk of being forced to compromise on its domestic agenda, was never a serious option for Labour. Postwar economic recovery had been paralyzed by a chronic shortage of dollars, which made the purchase of essential imports, such as food and raw materials, impossible. This in turn severely hampered the nation's ability to revive its traditional manufacturing and industrial base which meant that dollar earning exports continued to be in short supply. The European Recovery Programme (ERP), as the Marshall Plan was officially known, promised to break this cycle by providing the UK--like other countries of western Europe--with the materials and goods to help raise levels of productivity.
The prime minister Clement Attlee was all too aware of the political dangers that the economy's fragile state encompassed. In 1947 he faced and survived an attempted coup orchestrated by the then President of the Board of Trade, Sir Stafford Cripps, who had become disenchanted with the Prime Minister's leadership as the UK's economic performance continued to falter. Attlee showed a characteristic deftness of political touch to face down the coup, but he was left with no doubt that his future as prime minister, not to mention the survival of the government, depended on economic recovery and therefore on Lahour's participation in the ERE As a result, Labour seized upon the American initiative when it was first publicly outlined by General George Marshall on June 5th, 1947, and were relieved to see Congress give its backing to the ERP in April of the following year.
Just as Truman had to secure legislative backing to launch the Marshall Plan, the Labour Government's receipt of aid was dependent upon the approval of Parliament. While the prospect of Britain's participation in the ERP was generally supported in the House of Commons, a motley crew of rightwing Conservatives, Labour backbenchers and Communists found themselves allied in opposing the motion, put before the House of Commons on July 5th and 6th, 1948, which asked MPs to support the Bilateral Agreement which would bring the ERP into force. The extremes on both right and left viewed the Marshall Plan as being both unnecessary and a final ignominy for Britain on the world stage. Leslie Solley, a Labour rebel, captured this sense of unease and frustration when he stated his belief that it would be a 'disaster of the first magnitude for this country to sell its grand heritage for a mess of pottage'.
In fact, after reviewing early drafts of the Bilateral in May 1948 members of the Government had had good reason to agree with the sentiments that would later be expressed by Solley. There was a general consensus that the document would be seen publicly as an American attempt to dictate economic policy and and there was indignation that in spite of the Anglo-American wartime alliance, the UK would not receive preferential treatment under the ERP and, formally at least, would be placed on the same footing as all other participating nations, including Italy, an ex-enemy country. …