31st October 2014
The government has announced it will pay off part of the nation’s First World War debt, a century after the war started.
Chancellor George Osborne has said the government is redeeming bonds that stretch back as far back as the eighteenth century. This includes £218 million of debt from the 4% Consolidated Loan or ‘4% Consols’ that were issued by then chancellor Winston Churchill in 1927 in order to refinance National War Bonds originating from the First World War.
National War Bonds were first issued in 1917 to raise money to finance the cost of the First World War and a large publicity campaign was introduced to encourage the general public to make a patriotic investment and take advantage of a 5% interest rate.
The Debt Management Office estimates that the nation has paid £1.26 billion in total interest on these bonds since 1927. Around £2 billion of First World War debt still remains.
Osborne said: ‘I am delighted to be able to announce today that we will repay part of the country’s First World War debts. We are only able to take this action today thanks to the difficult decisions that this government has taken to get a grip on the public finances.
‘The fact that we will no longer have to pay the high rate of interest on these gilts means that most important of all, today’s decision represents great value for money for the taxpayer. We will go on working through our plan that is gripping the public finances and delivering a brighter economic future.’
In addition to the war bonds, some of the debt being repaid in redeeming 4% Consols dates as far back as the eighteenth century. In 1853, then chancellor William Gladstone consolidated the capital stock of the South Sea Company originating in 1711 which had collapsed in the South Sea Bubble financial crisis of 1720.
In 1888, chancellor George Goschen converted bonds first issued in 1752 and subsequently used to finance the Napoleonic and Crimean Wars, the Slavery Abolition Act (1835) and the Irish Distress Loan (!847). All of this debt will be repaid through the redemption of the 4% Consols.