05-08-2025
It's time to come clean on what the Government actually owes
Today's fiscal climate is dominated by one overriding and impossible to escape fact: the Government owes so much money it may be impossible to borrow much more at affordable interest rates.
The last time we got close to this position was in 1976, when in October of that year, at the worst point of the funding crisis, the Government was forced to issue what was then a 'jumbo' gilt issue (£600m) with a maturity date of 1998 at an interest rate of 15.5pc. Imagine that interest rate today!
As you may recall, this was the same year the UK applied to the International Monetary Fund (IMF) for the largest loan requested at that time (although only half was actually drawn). In return, the Government agreed to IMF-imposed austerity. Clearly, this is consequential stuff.
Gilts are UK government bonds, which pay a fixed annual interest at the rate stated until they mature, at which point they are repaid in full. They are unconditionally guaranteed by the UK government – which has never defaulted on its debt promises – so have lent their name in a colloquial sense to their 'gold-plated' nature as high grade assets.
The name itself, however, comes from the original debt certificates issued by the Bank of England being literally 'gilt-edged'. The Government mostly covers its annual fiscal deficit by issuing gilts.
