"At the moment, interest on the vast majority of government borrowing is paid to banks, pension funds and other lenders, a significant proportion of which are based overseas. Interest paid on those borrowings varies, but can exceed 5%. While we are largely in the hands of these bond market bullies, we have our own bond market that is available to tap into."
"At the moment about 130bn is held in premium bonds, which pay out an equivalent interest rate of 3.6%, almost entirely to UK citizens. Almost half of that 130bn is in the hands of individuals holding the maximum of 50,000. If that maximum holding limit were to be increased, the government would receive a considerable influx of funds at the cost of a relatively low interest rate."
The majority of government interest on borrowing is paid to banks, pension funds and other lenders, with a substantial share based overseas. Interest rates on those borrowings can exceed 5%. Approximately 130bn is held in Premium Bonds, yielding an equivalent return of 3.6% and paid almost entirely to UK citizens. Nearly half of that stock is held by individuals at the 50,000 maximum. Raising the individual holding limit would redirect more domestic savings into government financing at a lower effective interest cost. Banks and building societies might object on competitive grounds, but the exchequer could gain additional funds without raising taxes.
Read at www.theguardian.com
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