There is an article in the FT this morning suggesting that it should become much easier to invest in UK government bonds and that the almost deliberate lack of data supply to retail (household) investors that lets them choose the right bonds to save in seems like a deliberate attempt to stop them doing so.
I agree that it is absurd that trading in shares is made really easy in this country, but saving by owning a part of the UK national debt is made really hard. A tiny proportion of that so-called debt is owned by individuals as a result, which is one reason why it is so hard for people to understand that this so-called debt is just a savings arrangement.
This makes no sense to me. The government wants people to save with it, but makes it hard for the people who should be doing that saving - the people if the UK - to do so. So, three questions:
Would you save in UK government debt if it was made easier to do so?
- Yes (53%, 377 Votes)
- Maybe (32%, 230 Votes)
- I don't know but show me the answers anyway (10%, 70 Votes)
- No (5%, 35 Votes)
Total Voters: 712
Loading ...And:
Should UK government bonds be made available as a savings option by organisations such as High Street Banks?
- Yes (83%, 581 Votes)
- Maybe (9%, 60 Votes)
- I don't know, but show me the answer anyway (6%, 42 Votes)
- No (3%, 19 Votes)
Total Voters: 702
Loading ...And, then there is this one with a question too long for the polling software, but which would be in full if I could show it, 'Alternatively, should the UK government provide a website with a Q&A to determine saver's needs (income, duration, desire for capital gains, etc) and then suggest a portfolio of government bonds to suit that need, then making them available to buy?'
Should the UK government provide a bond buying and selling website?
- Yes (83%, 599 Votes)
- Maybe (9%, 64 Votes)
- I don't know but show me the answers anyway (5%, 34 Votes)
- No (3%, 23 Votes)
Total Voters: 720
Loading ...Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I cant read the FT article (paywall), but are you thinking along the lines of US Treasury Bonds?
Is there a UK equivalent?
Yes
They are called gilts, or bonds
There are trillions of them
If the government doesn’t do these things, what’s to stop banks or someone else doing it, maybe for a small premium?
I find it weird that they do not….
I think permitting High Street banks to skim off profit on making bonds available is absolutely not on.
If the bank was a government owned National Savings bank, or possibly community based savings & loans bank (or Green bank) then possibly but the controls would need to tight and locked in.
Noted
I last bought gilts back in the 1980s – via forms you could get in the post office. It was quite easy, perhaps it has become more difficult? My aim then was capital gains – but I can see the argument that people now want something secure and perhaps an alternative to bank deposit accounts. Can’t see anything wrong with a website – with the appropriate security measures.
I love the idea of being able to do this – even better if we know the debt is for investment in our country.
But that means that a service needs to be set up to facilitate it – almost like a National Investment Bank.
Don’t get me wrong – I’d love to see such an institution on the high street, internet or where ever but – phew! – this idea just does not exist in politics at all.
But it should!
Agreed…
I have answered ‘maybe’ to the last question because the thought running through my mind as I re4ad the question was ‘but would anyone be stupid enough to trust sych a website?’ Which says a lot about our government, I think!
I would
I’d love to buy some of these. I looked into it on the government website, but even buying National Savings Certificates was awkward.
Agreed….
“A tiny proportion of that so-called debt is owned by individuals as a result, which is one reason why it is so hard for people to understand that this so-called debt is just a savings arrangement.”
I think you’re a bit optimistic here, Richard.
I suggested on a forum for us ordinary elderly people, that, as they are from time to time very concerned about the size of the ‘national debt’, perhaps it would help to reduce it if the government summarily repaid to them all the money they had in Premium Bonds (which is a considerable sum I deduce from their accounts of their regular wins). None of them wanted their money back, even if it was part of the ‘national debt’. They were highly indignant at the thought of it.
An ability to join the dots isn’t a universal attribute…
🙂
I am presuming you have not banned comments so here goes.
As part of my research into MMT I looked at how to invest in gilts. As your article suggests it is actually very difficult to do so as an individual. I started this research in 2016 at which time the DMO website was saying that gilts could be bought either directly from them or from a Crown Post Office. Neither was true, and that has now been taken down.
I then asked my broker, A J Bell, whether they had any arrangements for buying gilts and they responded that they are not available through their website, but that if I advised them what bonds I wanted by phone they would buy them for me and add them to my portfolio. (Although I suspect that Hargreaves Lansdown does provide a facility through their website). Next, I stared researching gilts, but came up against something of a brick wall because although the LSE does quote gilt prices, the list is very hard to find and even when you do there are so many gilts on issue that it would take hours to work out which ones to have a punt at.
So I gave up at that point and bought some shares in BP (which have done very well), although one could fairly easily invest in a pooled bond instrument that includes gilts.
You may, of course, say I didn’t try hard enough, but you are absolutely right to say that the average human (like me) would find the process intimidating. I believe it is all part of the cosy arrangement that the government has with Gilt Edged Market Makers who are the only people that can buy gilts directly from the DMO, and then sell them on for a profit to the likes of pension providers. They even get the benefit of being provided with the reserves to buy the gilts by the Bank of England in the form of Repos which they pay back when they have completed the entire transaction.
Which stinks.
Thanks for confirming how hard it is.
I think You have hit on something here, Richard; and Mr Hargreaves argument is well made. Mr Hargreaves is right: “… it is all part of the cosy arrangement that the government has with Gilt Edged Market Makers who are the only people that can buy gilts directly from the DMO, and then sell them on for a profit to the likes of pension providers”. I have written about this, effectively closed club of insiders that the BoE pretends represents “the people”. The closed club simply squandered the opportunity that QE represented.
What I like about this proposal is that using this proposal brings the National debt down to an under stable, and ‘relatable’ proposition. It challenges neoliberals on their own ground – open the market for Gilts to the public. There is nothing like participation in the gilt market to de-mystify the gobblydook being spun by neoliberal chancers in the charmed circle of Government BoE, and dealers. This is neoliberals being forced to swallow their own medicine.
It underscores that debt is just savings (it just depends which side of a double entry you represent). It also exposes the deep incoherence of the neoliberal ideology that represents debt as bad when held by government; but business is wholly and totally dependent on it.
Finally, just to underscore the principles, this what Katherina Pastor writes on Debt: “If there is one asset that defines capitalism, it is debt – not any debt, but debt that can easily be transferred from one investor to another, and preferably debt that is convertible into state money at any time on behest of the holders, the creditors”. Nothing provides a safe asset investment for people better, or more securely convertible to state money (it is virtually state money), than government bonds or Gilts. They should be easily accessible to everyone; and without redundant middle-men inserting them selves to enforce extortionate fees to provide pre-selected access, as if there was a natural hierarchy of entitlement to state money.
“What I like about this proposal is that using this proposal brings the National debt down to an understandable, and ‘relatable’ proposition.”
My computer has the most atrocious, badly designed auto-correct in world history. I would be better off with the bloopers intact; they can be interpreted.
Nigel, isn’t buying BP shares part of this country’s problems now?
The irony of all this is that BP began life as a state created, state sponsored public-private partnership (Government-Burmah Oil), effectively as a British Middle East monopoly (The Anglo-Persian Oil Company, in which Persia was a very junior partner; but that is another story with a long and troubling history…..).
I think bond-containing funds (unit trusts) are available, and are as easy as share-containing funds to buy on one of the investment platforms though there is a lot less choice.
However I think you are right that individual bond issues are quite difficult for ordinary members of the public to buy. From US websites it would appear that it is quite common there for individuals to hold a “ladder” of bond issues with different expiry dates as part of a retirement account (their equivalent of SIPPs or DC pension funds) which will be used to provide pension income over a long period. It is odd that it is so difficult to do something similar here.
Agreed
As one of the authors of the Green New Deal, have you seen this?
The peasants are revolting. I presume , but it might be some of the trade Unions barons we hear about or even elected Labour people.
Tell the Labour Party ‘no more austerity” petition.
https://www.gndrising.org/campaigns/tell-labour-no-more-austerity-politics/?fbclid=IwAR10OwtiiuaeNR1CrJ8OIF0IDmckAlC03imDfR4H33DgseYQp_krfPCbVBs
Well good luck with the petition but personally I don’t think Starmer or Reeves give a damn about what ordinary people think! Attending Rupert Murdoch’s parties, Starmer being a member of the Trilateral Commission, and Starmer taking advice from Peter Mandleson and Tony Blair tell me that.
Having done a little research it is not just Labour movement as the Facebook post seemed to suggest.
It includes Ann Pettifor, Caroline Lucas, Clive Lewis, Wera Hobouse, Mahiri Black and others.
The ‘rising’ refers to under 35s. I can double that with a bit left over . My children recently passed that 35 mark but I have grandchildren.
Facebook informed me that a senior Lib Dem politician I know is also a member.
Signs of hope.
I talk to them…..
Are we asking the right question though?
I can see that it might be good to make Government Stock available to retail investors, however as we saw recently with the Truss Train Wreck it isnt a risk free investment.
So, might I suggest as I have done before, is that what is needed is for Government to come up with something to absorb funds that might otherwise be going into ‘socially detrimental’ investments eg Buy to Lets, Air BnB’s fast cars, whisky etc?
I suggest that that means things like Savings Certificates or fixed interest investments, the ability to buy some extra pension etc not necessarily Government Stock
NS&I do that
Gilts are risk free if you are prepared to hold onto them until maturity because the face value is guaranteed by the government. That’s why a lot of it is largely held by insurance and pension firms who normally only redeem them at maturity. There are, however, short-dated gilts that are redeemable in only a few years – even months. Which is what I was looking for. Short-dated gilts are priced accordingly because of that fact, so the yield isn’t that good.
The problem with the Truss-Quarteng debacle was that second hand gilts started to lose bid values, and pensions funds need to offload some of them in order to pay out the pensions. So they couldn’t do so and the Bank had to step in and buy them in order to provide sufficient reserves for the funds to meet their commitments.
I recall Truss being interviewed by Kunsberg, who brought up a chart showing the escalating yields on gilts which she (LK) said demonstarted the rise in the cost of government borrowing. LT countered that it wasn’t showing the cost of the interest, and she was quite right, but LK didn’t understand and moved swiftly on.
You correctly nite how these are always risk free
It is only the speculators who lose….
I did caveat that they are only risk-free if held to maturity. But if, as I showed, they need to be sold on the bond markets meanwhile the speculators may not be prepared to pay as much for them. Hence the increase in the yield, which is always quoted to maturity.
Mr Hargreaves is right. The Truss debacle was caused by pension funds involvement in LDI’s. The most interesting question on that matter, is why we have allowed derivatives to invade the pension fund sector without sufficient regulation to regulation to prevent such risks developing (still less potentially envelope the whole financial system within hours), and without anyone challenging government, BoE and FCA. It is a mystery, wrapped in an enigma, served up us a riddle.
Risibly, I might note here – the FCA issued this advice to LDI managers on 24th April, 2023; “FCA sets out recommendations for LDI managers” (https://www.fca.org.uk/news/press-releases/fca-sets-out-recommendations-ldi-managers).
You would be right if you thought you were looking at a stable door, hanging off its hinges. You would also be right if you wondered why the the BoE and government have allowed this state of affairs to happen. You will not receive an answer; at least one not designed to deceive.
I see ns&i have just raised the rate on their 3-year Green bond to 5.7% :
https://www.theguardian.com/money/2023/aug/26/ethical-savings-nsi-raises-rate-on-green-bond-to-57
The only reason I’m replying “maybe” instead of “Yes, please, go for it” is the reliance on Government websites.
Having just had to create a new government gateway ID & suffered their terminally idiotic & insecure “security system”, I despair of getting any sort of government IT that actually does the job it’s supposed to.
The plan to create a socially responsible bank suffers from a similar issue: do we really want to give the Post Office “organisation” new powers & responsibilities?
I’d say – not until it is renationalised & has paid its debts to post office staff. Until then – it can’t be trusted with its existing business, never mind adding to its responsibilities.
I agree that it can be obsessively secure…..
You have to write down all the passcodes
Way back in the 1960’s, I recall that the Sunday newspapers carried advertisements from local authorities offering two year (or maybe longer) bonds. If I recall, these were directed towards towards providing housing or enabling local authorities to finance mortgages. A small windfall prompted me to invest with Warrington Borough Council – It worked fine. Seems that this was possible until the 1980’s. I wonder what stopped the idea? A little fishing on the internet found this for me: https://www.theguardian.com/business/2009/feb/01/council-mortgages
Thatcher killed these bond issuers because she wanted control of the money supply.
I managed to buy gilts directly in my SIPP recently (with interactive investor). It wasn’t obvious how, or easy though – all the advice points you towards funds, which are not the same thing at all, even when composed entirely of government bonds. They are also on the secondary market too I guess, so presumably I am actually buying them from a market maker rather than the treasury directly?
Then you have to understand about how to buy them above or below par and how much it will affect the yield. This is very confusing for the average person, and could be made much simpler. I hope I did the right thing after reading up about it, but I still don’t feel very confident.
It is possible to search for TR28 for example, a gilt at 6% maturing in 2028 and then get the expected return. You have to be aware of the price though, and realise that you will get only £100 back when the gilt matures, so if you buy it for £105 then you need to deduct that from the interest it pays (coupon). The yield to maturity figures do include that for you, but obviously it depends on the current price when you buy them. In my case I bought them below par, and figured I will get at least 6% interest if I hold them to maturity. Which seems much less risky than buying shares to me.
There’s a list of them here.
https://www.dividenddata.co.uk/uk-gilts-prices-yields.py
It made me quite annoyed that the articles about buying government bonds seem to push you towards funds – there you are at the whim of the market to the prices and yields you’ll get. Trying to understand how index linked gilts work is even harder to understand, though you’d think they’d be really popular given the last couple of years.
Thanks
Your experience helps inform this debate.
Thanks for this information. I had thought to buy gilts but the registration process for the buying them direct involved proving my identity by sending original documents in the post to Computershare Investor Services PLC, who operate on behalf of the DMO, or providing copies certified by someone from a list involving persons who would either charge for the service, or are no longer among my circle of personal acquaintances – for example teachers but all the ones I know are now retired.
However it does seem as though I can buy through Interactive Investor so I may give it a go.
My independent financial advisor has never once mentioned the possibility of investing this way. I will ask her opinion next time we review.
Years ago (in the 1980s) I looked at investing in gilts and back then there was something called the National Savings Stock Register which made the process relatively easy although not all gilts were available through it and transactions were via post which potentially could be a problem. Unfortunately it was abolished in 1998 and since then it has become unduly difficult for the average person to participate in the gilt market.
Thanks – I thought I recalled that
Even some of the platforms make it hard ie you can’t trade online but have to phone up. Plus you have to calculate the yield yourself. When I’ve asked the broker what the yield is on the offer side I’m just greeted with silence or incomprehension so end up having to calculate it myself. I’m not sure they even understand how bonds work. Finally, why on earth does the DMO no longer publish gilt closing prices (and yields)? Absurd.
What an interesting debate; it opens an fascinating political policy area – one in which the political parties clearly have no policy ……. !
Hargreaves &Lansdown provide basic Gilts info. Just type H&L.gilts into Google.
Unfortunately broker commision /management fees can make gilts and gilt funds uncompetitive (for the small investor) relative to fixed deposit savings.
As J Warren says this is a fascinating debate. And it’s not so much about his stable door but a revolving one that is spinning like a catherine wheel.
Chris Gilbert. Thanks for that link. It wasn’t the one I used to access.
Somebody else said that buying BP shares is what is wrong with this country, but it doesn’t seem to be there now. And I do agree. In fact I sold mine when I realised they have links to Russia. But not before cashing in on 4 quarterly dividends and a huge rise in the share price. So guilty as charged.
From doing my late mother’s tax return, another indication of the government’s disdain for ordinary people investing in gilts: interest from them isn’t a ‘standard’ form of income that can just be entered, a supplementary sheet had to be obtained for it…
I do find this a most curious claim you’ve made. My experience goes right back to the sixties. Buying government securities has always been no different from buying shares. Apart from, at one time, the settlement dates. On the floor (when there was a floor) the gilt jobbers (when there were jobbers) pitches were no different to share jobbers. Intermingled with them. There was certainly no difference in conducting a transaction on the floor. And that continued right the way back through the broker to the client. If you wanted to buy direct from the government & by-pass the SE you could do it direct In exactly the same as applying for a share new issue or company bond issue. Complete the forms & send your money. For government paper that’s now presumably the DMO. Just looked at their site & it’s an identical process. Fill in the form. Send your money.
As for which particular bit of paper you should buy, as ever, caveat emptor. They can’t tell you what’s best for you. Only you know that. Or maybe you should get independent advice. There’s enough of it about. But they provide ample information to base your decision on. Trading now couldn’t be simpler. The on-line platform I use, buying government paper’s exactly the same as buying shares. Down to information on current & historic price moves.
So what’s your problem?
My problem is, as the FT notes, what you are saying is wrong.
Here is my problem ‘city slicker’; have you written the same rebuttal to the FT; or did you perhaps realise that they simply wouldn’t countenance publishing a cheap shot from a ridiculous, pseudonymous source – without the courage or confidence even to reveal his/her name?
Totally fair
I suspect he has never been near the City
Rather late to this thread…. been at sea for 3 days. Now north of Shetland and the first thing I do is get my fix of Funding the Future…. sad, but true.
It’s clear that the Authorities do not want to encourage retail investors into bonds. Most obviously this is seen in corporate bonds where minimum trade sizes are 100k. Gilts are easier but not easy and I am not sure why they are not made easier.
I don’t see a great conspiracy rather that the introduction of cheap online trading has coincided with the cult of equity… so nobody has really bothered. With 5pc rates and an uncertain economic future I suspect that might change.
My first thought is that NS&I should pay individuals the same rate the government (BoE) pays on reserves (less a bit for their trouble – 25bp??). This link should be automatic. This makes sense for all sorts of reasons.
Second, we need better gilt price transparency. This is easily mandated by the DMO. This on its own might encourage investors to take a look and force existing players to respond.
Third, why can’t NS&I provide a gilt dealing service?
All perfectly good suggestions and questions.
Thanks.
I hope you have a good trip.
North of Shetland? Did you sail round Cape Wrath? I am no sailor, and I wouldn’t do that without at least 20k tonnes underneath me; correction, I wouldn’t do that at any price …. gilt-edged or otherwise…..
If question 2 hadn’t been framed as buying “debt” I would have answered yes.
I know the all money is a debt.
I know that bonds/gilts are debt.
I know that our particular type of economy cannot exist without debt.
But debt is usually always presented in the media and viewed as a bad thing and something to avoid and reduce.
So even though I would personally buy the debt, I don’t think the general, lay public would. As soon as they see the word debt, I think it would set off a negative chain of thought which would probably put a lot of people off from buying the debt.
If it were called something else, I think the outcome would be different.
I don’t know what else to call it, but calling it debt triggered a negative visceral alarm bell inside me, in spite of what I rationally know about money / debt.
System 1 is a million times quicker than System 2.
What else might it be called to mitigate the chance of that happening?
Government Securities? National Investment Bonds?
Renaming your blog to Funding the Future made it sound way more interesting, accessible, appealing and inspiring, in general, than its former name.