National Debt
1061
₤215,200,000. At the same time the Government sold 4% Victory Bonds at 85%, subject to drawings at par almost immediately and acceptable at par in payment of death duties. These bonds produced ₤216,900,000. The failure of this operation compelled the Government to defer the question of funding any further portion of the floating debt (which rose to about 1,300 millions) for an indefinite period, especially as the demand for capital was exceedingly active, and funding could only be effected at a high cost, the Bank Rate being for over a year (from April 15 1920 to April 28 1921) 7 per cent. The approaching maturity of the short-term bonds issued during the war period, however, began to be a pressing problem in 1921, for the bonds, as they became very short, found their way to the banks and became potential floating debt. In April 1921 the Government decided to invite holders of 5% National War Bonds maturing in the years 1922 to 1925 to exchange their holdings for 312% conversion stock. Holders were offered ₤160 to ₤163 of new stock for every ₤100 bond, giving a yield in interest of ₤5 12s. od. to ₤5 14s. od. per cent., against ₤5 7s. 6d. on the bonds held. About ₤632,000,- 000 of bonds were affected by the offer, and if the whole had been converted the addition to the State's liabilities would have amounted to about 400 millions, and the addition to interest charges about 4 millions per annum. Applications for conversion amounted, however, to only about 160 millions. In July 1921 a further effort was made to convert the very short term bonds into eight-year Treasury Bonds bearing 512% interest. These bonds were offered at 97%. When the British 5% Loan was issued in 1917 a 4% “tax compounded loan” was coupled with it. It was an effort to meet an insistent public demand for a Government security exempt from the heavy rate of income tax. Another way of meeting this same demand was attempted in some degree by a departure from the practice of paying dividends less tax. The 5% War Loan, National War Bonds, and the Funding Loan all contained a provision that dividends should be paid without deduction, and that tax should be collected upon it in the holder’s annual return. The 4% Loan was not really a tax-free security. It was an issue, the interest on which was reduced to a figure which represented a compounding of income tax at the then maximum rate, namely, 5s. in the ₤1. The interest on the loan was not exempt from super-tax, and for the purpose of calculating liability to it, and also for the purpose of computing total income for purposes of exemption and abatement, it had to be assumed that the 4% interest was the net income after the deduction of income tax at the full normal rate of income tax prevailing. This meant that the holders of the 4% Loan were placed in about the same position as regards super-tax as holders of the 5% Loan, and in a worse position as regards exemption and abatement, for
| Issue | Amount of Issue | Price of Issue | Date of Issue | Cash credited to H.M. Exchequer |
|---|---|---|---|---|
| 312% War Loan, 1925-28 | ₤350,000,000 | 95% | Nov. 17-24 1914 | ₤331,798,408 |
| 3% Exchequer Bonds, 1920 | 50,000,000 | Tender ₤95 18s. 1d. average | March 5-10 1915 | 47,942,345 |
| 412% War Loan, 1925-45 | Unlimited | Par | June 21-July 10 1915 | 592,345,604 |
| 5% Exchequer Bonds, 1920 | Unlimited | Par | Dec. 17 1915-June 1 1916 | 237,829,469 |
| 5% Exchequer Bonds, 1919 | Unlimited | Par | June 2-Sept. 27 1916 | 34,262,604 |
| 5% Exchequer Bonds, 1921 | Unlimited | Par | June 2-Oct. 2 1916 | 62,495,527 |
| 6% Exchequer Bonds, 1920 | Unlimited | Par | Oct. 2-Dec. 30 1916 | 160,951,700 |
| 5% War Loan, 1929-47 | Unlimited | 95 % | Jan. 11 - Feb. 16. 16 1917 | 5% and 4% War Loans 941,476,710 |
| 4% War Loan, 1920-42 | Unlimited | Par | Jan. 11-Feb. 16 1917 | - |
| 5% Exchequer Bonds, 1922 | Unlimited | Par | April 13 - Sept. 22 1917 | 82,110,000 |
| National War Bonds - 1st Series | Unlimited | Par | Oct. 1 1917 - March 31 1918 | 616,193,692 |
| National War Bonds - 2nd Series | Unlimited | 5% Bonds Par 4% Bonds Apr. 1-22 Par Apr. 23-Sept. 30 101 1/2 % | April 1 - Sept. 30 1918 | 483,224,088 |
| National War Bonds - 3rd Series | Unlimited | 5% Bonds Par 4 % Bonds 101 1/2 % | Oct. 1 1918 - Jan. 18 1919 | 494,399,595 |
| National War Bonds - 4th Series | Unlimited | 5 % Bonds Par 4 % Bonds 101 1/2 % | June 12-July 12 1919 | 75,745,151 |
| 4% Funding Loan | Unlimited | 80 % | June 12 - July 12 1919 | 215,200,00 |
| 4 % Victory Bonds | Unlimited | 85 % | June 12 - July 12 1919 | 216,900,00 |
