Consols

CONSOLS. An abbreviation of Consolidated Annuities, a form of British government stock which originated in 1751. Previous to the World War Consols formed the larger portion of the funded (for the uninitiated it may be explained that funded British debt usually covers that portion of the debt where redemp tion is entirely at the option of the Government) debt of the United Kingdom, but in the progress of the British national debt in the i 9th century it was deemed expedient instead of borrowing at various rates of interest according to the state of the market to offer a fixed rate of interest, usually 3% or 3% and lenders were given an advantage in the principal funded. Thus subscribers of £ i oo would sometimes receive f i 5o of 3% stock. In 1815, at the close of the French wars, a large loan was raised at as much as f 174 in 3% stock for Liao. This practice began in the reign of George II. when some portions of debts on which interest had been successfully reduced were consolidated into 3% Annuities and Consols as the annuities were called, and other stocks of nominal low interest rapidly increased under the same practice during the great wars. In times of peace, when money rates enabled portions of debt at a higher interest to be commuted into stock of lower interest, it was usually into Consols that the conversion was effected. In the earlier part of the i9th century, temporary revenue deficits were sometimes covered by an issue of Consols, while Exchequer bills when funded have taken the same form. Consols themselves, however, underwent a great conversion in 1888, when the existing Consols, and certain 3% annuities were consolidated into one stock, the rate of interest being reduced for 14 years to 2 a % per annum and thereafter to 21%. During the first 14-year period, owing to the great ease in the London money market, the 2 a % Consols touched the extraordinarily high level of 114, but as 1902 approached, with the reduction to 21% in interest, the price steadily declined.

Consols After 1914.

In 1914 previous to the World War, 21% Consols stood at about 743., the amount then outstanding being about L59o,000,000. During the war period (as shown under NATIONAL DEBT) British government borrowing in various forms completely overshadowed the total of 21% Consols, which became a comparatively small part of the British national debt. Moreover, in 1915 the Government issued a 41% War Loan, partly for cash, and partly in exchange for outstanding annuities and Consols, when the amount exchanged was reduced to L289,797,000, and at the beginning of 1928 the total amount outstanding of 21%. Consols and 24% and 21% annuities was roughly i3oo,000,000. At this latter date, the British national debt was still in a transition period as regards funded and unfunded debt, but it should be noted that in addition to 21% Consols, other British funded debt at March 31, 1927, consisted of L739,936,000 in 31% Conversion Loan, ii66,000,000 in new 4% Consols (created in 1927 through cash subscriptions to the amount of L32,6o2,000 and through the conversion of maturing short-dated bonds to the amount of ii33,782,000), and ir3,646,000, as expressed in debts to the banks of England and Ireland, bearing 21% interest, making the total funded debt LI,220,000,000. (See NATIONAL DEBT).

(A. W. K.)