§ Sir Brandon Rhys Williamsasked the Chancellor of the Exchequer what is currently the annual cost of service of the national debt; and what would be the cost if the proportion of debt at present covered by index-linked stock were extended to cover the whole amount paying the same interest as index-linked stocks already in issue.
§ Mr. BrittanThe cost of servicing the national debt in the year 1981–82 was forecast in the Financial Statement and Budget Report to be £11,100 million, on a nominal amount of national debt outstanding at 31 March 1981 which is provisionally estimated to be £114 billion. From 1 April 1981 to 30 November 1981 the cost of servicing was £7,256 million.
It is impossible to estimate what the cost of servicing would be if the national debt were comprised exclusively of index-linked gilt-edged stock, or how the burden of cost over time would compare with the present position. By issuing index-linked rather than conventional gilt-edged stock the Government reduce their initial annual interest payments but their liability on redemption increases. It would not be practicable to convert the national debt to indexed gilts at once. If the transformation were effected gradually, there is no way of knowing what the yield in index-linked gilts would become, and thereby what nominal volume of stock bearing a 2 per cent. coupon would have to be issued to fund the early repayment of existing liabilities.