BRITISH NATIONAL DEBT That the national debt of Great Britain is of comparatively recent date is seen from the fact that at the time of the advent of William III. to the throne the total debt was only about i85,000 borrowed on tallies in anticipation of duties on French linens. The increase of debt during his reign was considerable, while the American War of 1775-1786 added about L120,100,000 and the great French wars lasting through the years 1793-1815 added a further L604,000,000 and in 1817 the British national debt reached its highest point for many years, the funded and unfunded debts together making up a total of £848,000,000. From that time a gradual diminution occurred as the result of a steady application of sinking funds and by 1894, and previous to the Boer War, the amount had been reduced to about L635,000,000. During the period of the Boer War, there was a further considerable addition to the national debt and although substantial repayments had been effected previous to the outbreak of the World War, the total deadweight debt at the beginning of 1914 was about L650,000,000. During the World War, the debt went up by leaps and bounds, not only because of the direct cost of the conflict to Great Britain, but because also of the extent to which she financed the cost of the war to her Allies and especially France and Russia. Two years after the conclusion of the war the maximum total of the British war debt was reached, the amount being about £7,830,000,000. The total declined rather moderately after the World War period to 17,413,000,0o0 in 1931. Thereafter it increased to £7,822,000, 000 in 1934 and remained practically unchanged through 1937. Increased armament outlays raised the public debt to a new high of £8,163,000,000 on March 31, 1939. The greater part of this debt was internal, but about £900,000,000 was on account of war indebtedness to the United States of America, and obligations to other countries made a total external debt of £1,032,000,000 in 1939. Of the national debt of Great Britain no less than £6,900, 000,000 is directly the result of the World War and striking evi dence is furnished not only of the cost of a great war but of the years of financial disturbance following, by the fact that ten years after the conclusion of peace only a comparatively small part of the total debt had been funded and twenty years later a new high level was recorded. The greater part of the reduction effected in the national debt in the post war decade took the form of the cancellation of floating debt. The actual floating debt had been reduced from £1,338,000,000 in 1919 to £716,000, 000 in 1928, but rose in the next decade to £920,000,000 in During the years 1920-28 inclusive something over £500,000,000 in sinking fund monies was applied to debt redemption in various forms and the explanation of why so small a reduction was accomplished in what is known as the total deadweight debt was due to the fact that many of the conversion operations were effected in lower interest yielding stocks, but offered at a dis count. A better idea, therefore, of the effect of the redemption of old debt and the funding operations is to be obtained by noting that whereas the annual service on the British debt apart from sinking funds for 1920–I was about £342,000,000 the amount required for 1928 was about £304,000,000 and only £230,000,000 for the fiscal year The World War Growth of British Debt.—Previous to the
World War, the national debt of Great Britain passed through many phases and was the subject of many conversion schemes, the last and most notable being the long remembered Goschen con version scheme of 1888. These phases and conversion operations, however, fade into insignificance when compared with the addi tions to, and changes in, the national debt, which occurred during the years of the World War, and the years immediately following. The first increase in the national debt after the outbreak of war assumed the form of large issues of Treasury bills, and these were destined to rise to a maximum level of about £1,300,000,000. The first long-dated loan was created during the latter part of 1914, and consisted of a 31 per cent war loan for 1350,000,00o. It was offered at the price of 95 per cent and at the time of issue the yield was regarded as fairly high for a British government stock. Much of it, however, was believed to have been taken up by the Bank of England, and it was found later that greater effort and more attractive terms were necessary to raise the huge sums re quired for the war. In the same (fiscal) year, short-term Ex chequer bonds for 150,000,00o were placed, while the issues in the next year included a 41- per cent war loan for £900,000,000, the operation, however, including some large conversions of old consols and outstanding annuities, and a part of the 31 per cent war loan issued in the previous year. In the year 1916, the issue of war savings certificates commenced, which were destined to add more than £300,000,000 to the national debt. The largest single loan operation, however, during the war was that effected in 1917, when the 5 per cent war loan was created to the amount of £2,067,218,744. Of that total, cash subscriptions represented the rest representing conversions of other loans. This loan which was destined to be the largest individual stock in the national debt, was not however a funding operation, the loan being definitely redeemable in 1947, the Government retaining the right to repay it in 1929 and thereafter. Its distinctive feature was the non-deduction at the source of income tax from the half yearly interest. In that same year, a 4 per cent war loan to the amount of .152,000.00o was created, of which, however, only £22,000,000 was cash subscriptions, the rest representing con version operations. In the same year, Exchequer bonds to the amount of £417,000,000 were created, and war certificate sales totalled over £100,000,000. Throughout the years of the World War, and up to and including the year 1920, the new sinking fund was entirely suspended. In 1918, the final year of the World War, national war bonds were sold to the amount of over £640,000,000 and Exchequer bonds for smaller amounts were placed. In that year, however, much of the borrowing was to re pay Treasury bills. In 1919, although the war was concluded, war expenditure continued, and short-term national war bonds, carry ing with them certain conversion rights, were issued to the amount of 11,045,000,00o.