1911 Encyclopædia Britannica/Consols

CONSOLS, an abbreviation of consolidated annuities, a form of British government stock which originated in 1751. Consols now form the larger portion of the funded debt of the United Kingdom. In the progress of the national debt it was deemed expedient, on grounds which have been much questioned, instead of borrowing at various rates of interest, according to the state of the market or the need and credit of the government, to offer a fixed rate of interest, usually 3 or 31/2 %, and as the market required to give the lenders an advantage in the principal funded. Thus subscribers of £100 would sometimes receive £150 of 3 % stock. In 1815, at the close of the French wars, a large loan was raised at as much as £174 3 % stock for £100. The low rate of interest was thus purely nominal, while the principal of the debt was increased beyond all due proportion. This practice began in the reign of George II., when some portions of the debt on which the interest had been successfully reduced were consolidated into 3 % annuities, and consols, as the annuities were called, and other stocks of nominally low interest, rapidly increased under the same practice during the great wars. In times of peace, when the rate of money has enabled portions of the debt at a higher interest to be commuted into stock of lower interest, it has usually been into consols that the conversion has been effected. Temporary deficits of the revenue have been covered by an issue of consols; exchequer bills when funded have taken the same form, though not constantly or exclusively; and some government loans for special purposes, such as the relief of the Irish famine and the expenditure in the Crimean and Boer Wars have been wholly or partly raised in consols. The consequence has been to give this stock a pre-eminence in the amount of the funded debt. See further under National Debt: United Kingdom.