George Osborne is planning to take advantage of Britain’s historically-low interest rates by issuing so-called ‘super bonds’, which will not be repaid for 100 years or more…
A Treasury source said: “This is about locking in for the future the tangible benefits of the safe haven status we have today.
“The prize is lower debt interest payments for taxpayers for decades to come. It is a chance for our great-grandchildren to pay less than they could otherwise have expected to because of this Government’s fiscal credibility.”
Long-term debt will not lock in low interest rates for 100 years. Long-term interest rates will be determined by the expected future path of short-term interest rates plus a risk premium. Nobody will lock in any sort of free gift for current or future taxpayers because people are not mugs.
We know nothing about how productivity, geopolitics etc will shape up over the next 100 years (compare 1845 to 1945 or 1912 to 2012!), so I don’t really see how Osborne can honestly expect a meaningful change in funding costs from issuing such long bonds. This makes me think he is doing this as a propoganda tool
Look how extreme the situation is. Look at the crazy things we have to do!
I’m not sure government funding choices are the best outlook for propaganda exercises but there you go, Osborne’s always been a canny political operator.