Proposals to repay £2bn WWI debt

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Published: Friday 31st October 2014 by The News Editor

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Steps to repay the UK’s £2 billion in outstanding First World War debt have been unveiled with plans to redeem bonds dating back to the 18th century.

National War Bonds were first issued in 1917 as part of an effort by the government to raise money to finance the continuing cost of the First World War, which started with the issue of the first war loan in November 1914.

As the UK has made estimated interest rate payments totalling £1.26 billion since then, the Treasury said today it is looking into the practicalities of repaying the outstanding debt of around £2 billion.

A f irst repayment of £218 million is due in February, which would represent the first settlement of an undated gilt in 67 years.

There are eight undated government bonds outstanding, including one issued by William Gladstone to consolidate among other things the capital stock of the South Sea Company, 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 First World War bond, known as 4% Consols, was issued by then chancellor Winston Churchill in 1927 to refinance the National War Bonds from the First World War.

There are 11,200 registered holders of the bond, with 7,700 investors holding less than £1,000 and 92% of holders owning less than £10,000 each.

The Treasury said the moves would deliver value for money to taxpayers by refinancing the borrowing at lower rates than the 4% it is currently paying.

It added: “Around £2 billion of First World War debt remains, which is one graphic illustration of the legacy of this war on our nation and the long-term effects of high debt. The Government is looking into the practicalities and value for money of repaying this outstanding debt in full.”

Published: Friday 31st October 2014 by The News Editor

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