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Government to 'retire' some of its WW1 debt Government to 'retire' some of its WW1 debt
(about 1 hour later)
The UK Government has said that it will 'retire' £218m of the UK's £2bn First World War debt by refinancing bonds issued in 1917. It is the first payment of its kind for 67 years. The UK Government has said that it will 'retire' £218m of the UK's £2bn First World War debt by refinancing bonds, originally issued by Winston Churchill.
The debt has not been paid off previously because of the relatively low interest it incurs. The UK has paid a total of £1.26bn in interest on these bonds since then.
The Treasury is planning to cut the annual cost of the debt by re-borrowing money at today's rates. The debt has not been paid off before because of the relatively low interest it incurs.
The rates today are lower than the 4% interest on the debt. The Treasury plans to cut the annual cost of the debt by re-borrowing money at current market rates. It is the first such move for 67 years.
The war debt comes from bonds that were sold to finance the First World War and converted into perpetual bonds in 1927 by Winston Churchill, who was Chancellor at the time. The bonds that Chancellor George Osborne has acquired have a lower rate than the 4% interest on the debt.
Perpetual bonds, as the name suggests, pay a steady stream of interest forever. Winston Churchill first issued "4% Consols" in 1927 when he was Chancellor partly to refinance bonds from the First World War.
The bonds that Chancellor George Osborne have acquired instead have a much lower interest rate. In addition to the war bonds, some of the debt being refinanced by the Treasury dates back to the 18th Century.
Winston Churchill first issued "4% Consols" partly to refinance bonds from the First World War. The UK has paid a total of £1.26bn in interest on these bonds since 1927.
In addition to the war bonds, some of the debt being refinanced by the Treasury dates back to the 18th century.
One of these bonds was issued by William Gladstone in 1853 to consolidate the capital stock of the South Sea Company, which was founded in 1711.One of these bonds was issued by William Gladstone in 1853 to consolidate the capital stock of the South Sea Company, which was founded in 1711.
The South Sea Company collapsed during the South Sea Bubble financial crisis of 1720, leaving behind it a lot of debt.The South Sea Company collapsed during the South Sea Bubble financial crisis of 1720, leaving behind it a lot of debt.
The continued existence of the war bond debt illustrates the lasting shadow cast by World War One.