Lies, damned lies, George Osborne and First World War Debt

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The government has issued a press release today saying:

Government to pay off part of the nation’s First World War debt, as part of a redemption of bonds stretching as far back as the eighteenth century.

It continued:

The Chancellor of the Exchequer, George Osborne is today announcing that the government will pay off part of the nation’s First World War debt, as part of a redemption of bonds stretching as far back as the eighteenth century.

The Treasury will redeem £218m of debt from the 4% Consolidated Loan on 1 February 2015.

That's staggering, you'd think. Except all is a very long way from what it seems. Or to put it another way, George Osborne is lying through his back teeth.

First, no debt will be repaid as a result of this move. The UK has noi money to repay debt. It is borrowing more than £100 billion this year. So to say this debt is being repaid is straightforwardly untrue. It is being replaced with other debt.

Second, the "4% Consols” to which the press release refers are not war debt. They were issued in 1927 to replace war debt issued at 5% to reflect the fact that interest rates had fallen in the meantime. So they're not war debt at all. That's the second lie.

And the third lie? That's that this is somehow a part of a process of old debt repayment that reduces the burden of long term borrowing. It isn't any such thing. The simple fact is that the UK government can currently issue debt at 4% or less and so this is a simple exercise of substituting new, cheaper debt, for old debt, just as happened in 1927. If the 1927 debt was war debt, then so is the new debt going to be war debt as well. Or not, as the case may be.

It deeply irritates me that we have to suffer the nonsense that is said when simply making a financing decision. George Osborne dishonours those involved in the process, all along, by uttering it.