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By Root 860 0

been an almost total neglect of defence expenditure during the inter-war period—and economic welfare—neither Dominion held significant gold or foreign currency reserves—also helped safeguard their connection to Britain. This financial aspect was most critical and New Zealand's position was especially dire. The 1938 global financial depression had brought with it severe balance of payments constraints and the requirements for borrowing were consequently heavy. On the last day of March 1939 the Dominion's public debt stood at NZ£304 million, of which over half was held in Britain. Despite having pledged publicly not to do so, the socialist New Zealand government turned to London for help and Walter Nash, finance minister, was sent to negotiate directly for an agreement leaving behind him 'a tattered utopia'. He found both Whitehall and the City's financial institutions disinclined to help; the loan was eventually agreed, as much because of the coming war than any real sense of British willingness to help, but it was on stringent terms.41 There was also a compelling argument to be made that, despite its much greater measure of economic independence and the uncertainties that accompanied Mackenzie King's leadership, Canada could most likely be counted on to fight alongside Britain. King George VI's visit to Canada earlier in 1939 had been a great success, regenerating a great deal of popular support both for the British monarchy and the 'Imperial Idea'. With the recognition, albeit tacitly in some circles, of the degree to which Canada now lay within the United States' sphere of influence, further helping the position was the hardening American attitude towards the Axis powers.42

By far the greatest problem, despite what the memorandum had to say, was trying to say what would happen in South Africa. There were similar economic, defensive and emotional factors to those which had influenced Australia and New Zealand. As with Canada, there was also a substantial Nationalist group to be considered which counted amongst its ranks the South African leader, General J. B. M. Hertzog. This largely Afrikaans section of the population was similar to the Quebecois of French-Canada in having no great love for the government in London.43 The DO's fears about what all of this might mean had, however, finally spread. Within the FO there existed the 'Dominions Intelligence Department' (DID), established in 1926 to prepare information on foreign affairs to be passed to the Dominion governments. It had a small staff comprising a head supported by an assistant and three juniors who produced daily 'Intels' surveying the international situation. With the worsening European position this service had been substantially stepped up, so that by 1939 huge numbers of documents were being generated for Dominion consumption.44 Sir Alexander Cadogan was listed as being in charge but operating at the centre of British foreign affairs he had many other more important responsibilities, and much of the daily work fell to Robert Hadow. He and the South African high commissioner's private secretary had discussed what might happen in April, and this had left him sufficiently confident to declare afterwards that South Africa would 'most certainly come in should we be involved in war'. Similar statements had been made by a number of his FO colleagues during the previous months but, following the announcement that negotiations would take place with the Soviets, Hadow began to receive information from the Dominions that made his earlier confidence evaporate.45 He warned Cadogan that there was a risk of South African neutrality at the outset of war, 'perhaps only for a while but with dangerous possibilities'. This was dismissed as being overly dramatic and nothing more was said within the FO of the Dominion and its likely stance.46

The reality was that the memorandum had been broadly accepted within Whitehall as being accurate in its conclusions and an ominous lack of any discussion about what the near future might hold now settled upon the corridors of British power.