| Admin History | From the start of the war up until before the issue of the 3 1/2% War Loan, funds for the war had been provided by using Ways and Means Advances and by the issue of Treasury Bills. On the 7 Nov 1914 the Chancellor of the Exchequer Lloyd George presented to the House of Commons the first War Budget. This showed a deficit of £339,571,000, on the assumption that the war would last until the end of March 1915. Some new taxation was levied, but this was only expected to reduce the deficit by around £18m.
The lists for this loan opened on 17 Nov 1914 (the lists closed on 24 Nov, the full time permitted by the prospectus); the inscription was completed in May 1915.
The loan was priced at 95d for each £1 face value, with a nominal interest rate of 3 1/2%, and was available in minimum lots of £100 each. Investors could buy these securities outright or could pay for them in instalments spread over five months. The loan was redeemable at par on 1 Mar 1928, or at any time on or after 1 Mar 1925, after three months' notice being given by the Government. The yield was over 4%, assuming that the loan would be redeemed in 1928.
This loan was mostly aimed at banks and other financial institutions, with small investors not yet especially catered for. The 4 1/2% War Loan 1925-1945 (20A29/3) was the first loan where facilites were created for small investors to invest.
To make the issue successful, the Bank agreed to lend at 1% under Bank rate to any holder up to the full value of the loan at its issue price of 95, without margin, a proposal by Lord Cunliffe. The loan was extensively advertised.
The target amount to be raised was of £350,000,000. The loan, however, was undersubscribed (the total number of allotments was 97,635, of which 40,000 were for applications for £100); as a result the Bank had to subscribe £113,525,900. This would be the last war loan for which a target amount would be specified.
The 3 1/2% War Loan was issued in what was then the usual form of allotment letters and scrip, and under an elaborate correspondence system. Despite the fact that the loan was undersubscribed, this created a huge workload for Bank staff, because the system was not suited for processing loans of this size. The Bank managed to complete work on this loan largely without external assistance, an achievement which would not be repeated with later loans, relying on Bank staff from other departments to provide support, with the only exception of some temporary women clerks being rectruited externally.
Converted into (conversion information from Pember & Boyle):
4 1/2% War Loan 1925-1945
3 1/2% Conversion Loan |