BRITISH BORROWING

Dominion, Volume 23, Issue 79, 27 December 1929, Page 11

BRITISH BORROWING

HIGH INTEREST ON LONGDATED LOAN

“From the point of view of the taxpayer there can be little cause for satisfaction in the reflection that 11 years after the end of the war, and for the first time since 1917, the British Government is compelled to issue' a long-dated loan, carrying interest a*' higlg as 5 per cent.,” the “Financial News” remarked, in commenting on the announcement of the British conversion loan. “Not since the blackest days of the war has the Government had to borrow on long-term at a nominal rate of interest of more than 4J per cent, and not for some seven or eight years has it had to concede a full 5 per cent, yield on a long-term stock. . . . It may be asked why the Government should go out of its way gratuitously to modify the redemption terms of the war loan in favour of the holders. The answer to that question would seem to be twofold. In the first place, the outstanding amount of the war loan is so huge that even to convert a slice of it without saving of interest into a loan of different maturity is worth something. And, secondly, as the 5 per cent, conversion loan does not. like the war loan, carry the privilege of payment of interest without deduction of income-tax at the source, the Government will hope to gain something by a reduction of the opportunities for tax evasion which the privilege has created. The gain accruing from this particular operation will, of course, be small, since the investor who escapes tax by holding war loan is unlikely to put his neck into the noose which the Chancellor is dangling so ostentatiously before him.'