In 1914, the UK sought to finance its war efforts through war loans, promising a 3.5% coupon but ultimately raising only £91 million of the £350 million target. The Bank of England covered the shortfall, keeping this information secret for decades.
A second attempt in 1917, led by Chancellor David Lloyd George, aimed to raise £2.5 billion but resulted in significant losses for investors, with the original £100 investment worth only about £2 by 2014.
This history has resurfaced as Prime Minister Andy Burnham considers issuing new war bonds to fund defense spending, a concept supported by Chancellor John Healey and former Bank of England economist Andy Haldane. However, critics like Rishi Sunak warn that such bonds are merely another form of borrowing and could test market confidence.
Investors are advised to prioritize returns over tax benefits when considering such options