Letter: Endless loans

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The Independent Online
Sir: I was pleased to see someone writing about War Loan and the long-forgotten Consols (Money, 21 January).

War Loan was originally supposed to be redeemed in "1956 or later" and as late as 1950 it was confidently expected that it would be redeemed in 1956. The stock was then standing at about 97. Many pensioners bought it on their bank manager's recommendation - including my father, who invested half the money that he received on retirement.

Government stock was originally called "gilt-edged" not just because dated stock would ultimately be redeemed at par but also because the Government maintained an unofficial "floor" for the price, with the Government Broker buying-in shares if the value fell seriously below 100.

However, the Conservative government that came to power in 1951 removed this unofficial floor. The City understood what was happening and the price fell. Many pensioners who had bought government stock precisely because they did not have financial expertise held on to their War Loan and Consols expecting the price to rise again. Even when they did understand what had happened, they still hoped that some government, perhaps Labour, would feel morally obliged to help them. It did not happen.

Some pensioners could never bring themselves to sell their stock at such a loss (particularly after the 10-fold inflation in the 1970s and early 1980s). I eventually got my mother to sell her War Loan in 1987, when I discovered how poor she really was. There may be some elderly people who still hold War Loan, including stock bought during the First World War.


Wilmslow, Cheshire