I read the article by Larry Elliott with interest and thought I could suggest one small act of rebellion that is easily in the chancellor’s hands and could raise substantial sums of money (Let France be a warning, Rachel Reeves: stand up to the bond market vigilantes, or they’ll come for Britain next, 11 September).
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.
UK banks and building societies might complain about unfair competition, but surely the need of the exchequer for additional funds (without raising taxes) comes first.
Phil Spence
Tenby, Pembrokeshire
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