Government to pay back Churchill’s WW1 debt


James Moore
Saturday 01 November 2014 00:00 GMT

Britain is finally preparing to pay off some of the huge debt it incurred as a result of the First World War.

While the conflict’s financial toll pales by comparison to the human cost – eloquently symbolised by the poppies carpeting the grounds of the Tower of London – the move is still significant because it will mark the first repayment of an undated gilt for 67 years.

The bonds to be cancelled – some £218m will go on 1 February 2015 – are part of the 4 per cent Consolidated Loan, issued in 1927 by a certain Chancellor Winston Churchill who found some fame in a later conflict, to refinance National War Bonds dating from World War One along with other debt.

The UK Debt Management Offices estimates that the nation has paid a staggering £1.26bn in total interest on these bonds – known as 4 per cent Consols – since 1927.

The National War Bonds they refinanced were first issued in 1917 as the government scrambled to raise money to finance the ongoing cost of conflict.

Its first issue of the first war loan, however, came in November 1914, and large publicity campaigns were employed throughout the conflict in an attempt to persuade the public to invest.

It is partly due the Government’s current ability to raise debt at much lower rates than paid by the 4 per cent Consols that the Chancellor has acted to repay them.

An additional £2bn of First World War-linked debt remains on the state’s books. Officials are, however, looking into the practicalities of paying that off too.

In addition to the First World War bonds, some of the debt wrapped up in the 4 per cent Consols dates back as far as the 18th Century and includes the legacy of other conflicts

In 1888, Chancellor George Goschen, for example, converted bonds first issued in 1752 and subsequently used to finance the Napoleonic and Crimean Wars, the Slavery Abolition Act of 1835 and the Irish Distress Loan of 1847.

And in 1853, then Chancellor William Gladstone consolidated, among other things, the capital stock of the South Sea Company originating in 1711, which had collapsed in the infamous South Sea Bubble financial crisis of 1720. All subsequently became part of the Consols.

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