Government to pay off WW1 debt

Chancellor George Osborne is to pay off the UK government's remaining debt from World War One, the Treasury has announced.

The government will repay the outstanding £1.9bn of debt from a 3.5% War Loan on 9 March 2015.

The move goes further than October's announcement that the government would pay off £218m of debts from World War One.

More than 120,000 investors hold War Loan bonds.

Issued by then Chancellor Neville Chamberlain in 1932, the War Loan was used to refinance government debt accumulated during World War One. It replaced an earlier bond which paid 5% to investors.

It is the first time the government has paid off a bond of this kind in 67 years. The Debt Management Office estimates the government has paid about £5.5bn in total interest on the 5% and 3.5% war loans respectively since 1917.

The government added it would look to remove all six of the other remaining undated gilts in its portfolio, including some debt originally issued in the 18th Century.

One of these bonds was issued by William Gladstone in 1853 to consolidate the capital stock of the South Sea Company, which was founded in 1711.

The South Sea Company collapsed during the South Sea Bubble financial crisis of 1720, leaving behind it a lot of debt.

Current low interest rates mean the Treasury will be able to refinance the £1.9bn debt with new bonds, saving up to £30m a year in interest payments, according to some estimates.

George Osborne said: "This is a moment for Britain to be proud of. We can, at last, pay off the debts Britain incurred to fight the First World War.

"It is a sign of our fiscal credibility and it's a good deal for this generation of taxpayers. It's also another fitting way to remember that extraordinary sacrifice of the past."