100-year bond will not solve the problem of Britain’s high borrowing costs
14 March 2012
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Philip Booth responds to Government plans for 100-year bonds
Commenting on the idea of introducing 100-year bonds, Prof Philip Booth, Editorial Director at the Institute of Economic Affairs, said:
“It is the responsibility of the government to fund its borrowing as cheaply as possible. It is therefore right to consider issuing very-long-dated bonds, but a more urgent matter is to increase the issue of index-linked bonds.
“Currently index-linked bond yields are negative – in other words, as Milton Friedman once put it, investors are paying the government for the dubious privilege of lending it their money. Inexplicably, the last government reduced the issue of index-linked bonds. This decision should be reversed and the government should fund much more of its debt through index-linked bonds. That way, investors will be more confident that the government will not use inflation to reduce its borrowing obligations and the government will be able to fund its debt very, very cheaply.”
Notes to editors
To arrange an interview with Philip Booth, Editorial Director at the IEA, please contact Stephanie Lis, Director of Communications: 020 7799 8909, slis@iea.org.uk
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
“It is the responsibility of the government to fund its borrowing as cheaply as possible. It is therefore right to consider issuing very-long-dated bonds, but a more urgent matter is to increase the issue of index-linked bonds.
“Currently index-linked bond yields are negative – in other words, as Milton Friedman once put it, investors are paying the government for the dubious privilege of lending it their money. Inexplicably, the last government reduced the issue of index-linked bonds. This decision should be reversed and the government should fund much more of its debt through index-linked bonds. That way, investors will be more confident that the government will not use inflation to reduce its borrowing obligations and the government will be able to fund its debt very, very cheaply.”
Notes to editors
To arrange an interview with Philip Booth, Editorial Director at the IEA, please contact Stephanie Lis, Director of Communications: 020 7799 8909, slis@iea.org.uk
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
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