UK Begins Paying Back First World War Debt

The Government has announced it will pay off part of the UK's First World War debt - the first such payment for 67 years.

The Treasury will repay £218m of the £2bn still owed from the 1914 to 1918 war , as part of a redemption of bonds stretching as far back as the 18th century.

The payment, to be made on 1 February next year, will be the first repayment of National War Bonds by a Chancellor since 1947.

The 4% consolidated loans were first issued by Chancellor Winston Churchill in 1927, partly to refinance National War Bonds from the Great War.

Britain has paid £1.26bn in interest on them since then, according to the Debt Management Office.

Chancellor George Osborne said he had decided to redeem some of them now because interest rates are lower than the 4% it is currently paying.

He said he could save taxpayers money by refinancing the debts at a lower rate.

"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," he said.

"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."

The Government first issued National War Bonds in 1917 to help finance the crippling cost of the First World War, which saw the deaths of more than 700,000 British soldiers.

They paid out an attractive rate of 5% interest, with huge publicity campaigns urging the public to make a patriotic investment.

The bonds are held by 11,200 registered holders, with 92% owning less than £10,000 each.

Some of the repayment relates to bonds dating back more than 300 years.

In 1853, the Government consolidated the capital stock of the South Sea Company, which collapsed in the South Sea Bubble financial crisis of 1720.

And in 1888, Chancellor George Goschen converted bonds first issued in 1752 to finance the Napoleonic and Crimean Wars, the Slavery Abolition Act (1835) and the Irish Distress Loan (1847).

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