The myth of the UK’s debt to slave owners being finally repaid in 2015

This is a claim that appears in the media and social media repeatedly, yet it is simply not true.

In 1833 the Slavery Abolition Bill was passed. The Act banned slavery in most of the British Empire. At the time it was felt that, as slave ownership was previously legal, it would be correct to compensate former slave owners for their confiscated property. George Robinson, Peelite MP for Poole stated “If the people of England were sincerely and zealously anxious for the accomplishment of the great object of the abolition of slavery, they should cheerfully pay that amount of compensation which was justly due for the sacrifice thereby occasioned to the properties and fortunes of individuals.”

The progress to ban slavery was not an immediate one from ‘slavery is fine’ to ‘slavery is evil and everyone who owns slaves is evil’. That is a perception that we have in 2020, but it would not have been held at the time.

The debate over the Slavery Abolition Bill took place in Parliament, but an MP proposing not to compensate slave owners was drowned out by dissenters, and his motion to pay no compensation was rejected by an overwhelming majority.

The Act provided for the sum of up to £20 million to be borrowed. It has been reported that this sum was 40% of government spending. While this is true, the sum was not paid from normal spending as it was a one-off item.

In fact, in 1835 most government spending went towards debt interest, and the government was very much smaller than today. Total government spending in 1835 was £48.9 million, of which £12.6m went toward defence, £28.5m to interest payments, with £8.8m covering everything else. Thus more than 58.3% of public spending was on interest payments.

The total public debt was £774.9 million, and GDP was £549 million. Public debt was therefore 141% of GDP, and public spending was 8.9% of GDP, while interest alone cost 5.2% of GDP

In 2020, the government was expected to spend £847.6 billion, of which £51.7 billion was debt interest. GDP was £2.23 trillion. So overall spending had grown to 38% of GDP, but public sector interest payments were only 2.3% of GDP, and an even less significant part of public spending. And in 2020 public debt was 80% of GDP.

The terms of the largest part of the Slavery Abolition Act Loan were set and reported to Parliament in July/August 1835. The sum of £20 million had been allowed by Parliament, but only £15 million was initially borrowed, as for various administrative reasons, the sums payable to slave owners in Mauritius (£2.1 million), Barbados (£1.72 million), and the Cape of Good Hope (£1.2 million) was not yet payable.

Hence the main loan was of £15 million, which was broken down into::

• £11.25 million of 3% Consolidated Annuities (consols).
  These bonds had been introduced in the 18th Century, when the government consolidated various forms of debt paying 3% into one bond, hence the name. A single bond had a face value of £100, which paid £3 per year, in equal payments every six months, forever, or until the government repaid the face value.
  The market value of a 3% consol was £90 ½ , so the total value of these bonds was £10,181,250.
  The first payment was due on 5 July 1835.
• £3.75 million worth of 3% Reduced Annuities would be issued.
  Reduceds worked the same as Consols, but originally had been issued as the consolidation of 3.5% debt, with the reduction of interest to 3%, hence the name Reduced.
  Logistically they were popular because the interest was paid on 5 April and 10 October instead of 5 July and 5 January, so investors could receive interest four times a year by holding both.
  The Reduceds were trading at £91, so the value of these was £3,412,500.
• An 1860 Long Annuity that paid out a total of £101,875 per year, split between those financing the loan.
  At the time there was not a diversity of limited term bonds that would pay income for a fixed period of time. The 1860 Long Annuity had first been issued in 1780, and would pay out income biannually up to, but not including, 1860, in April and October. The first payment from this issue was April 1835.
  The then value of an 1860 Long Annuity was 16 5/8 × the annual coupon. That made the market value of this Long Annuity £1,630,000.

As we can see, the government received £15 million from lenders, and in return agreed to pay £551,875 per year for 25 years, and then £450,000 per year after that, forever. In addition, the open market value of the debt that the government issued totalled £15,223,750, which made the cost of financing around 1.5%.

Meanwhile, the £5 million payable for slave owners in Barbados, Mauritius and the Cape of Good Hope was later borrowed using Reduced 3 1/2% perpetual annuities. This was a smaller sum of money and relatively simpler to borrow. These annuities were refinanced in 1844 to Reduced 3 1/4%, which in 1854 would revert to Reduced 3%.

The 1860 Long Annuity was no longer paid after 1859, so by that time the ‘slaveholder debt’ of £20 million in face value was in the form of 3% Reduceds and 3% Consols, which may then have been identifiable as ‘slaveholder debt’ from their issue date.

In 1888 the National Debt (Conversion) Act was passed. This combined the Reduceds and Consols into ‘2​ 3⁄4% Consolidated Stock’, to reduce further in 1903 to 2 1/2%.

Thus any government debts issued in 1835/1836 to pay slaveholders no longer existed in its original form after 1888, and would not be distinguishable from any other form of government debt.

This means that the ‘Slavery Loan’ was either:

• paid off in 1888, or
• it wasn’t paid off, and this was merely ‘refinancing’.

However, by 1914 the government had only £620 million of debt, 24.5% of GDP as compared to £790.9 million in 1837.

So it is reasonable to say that of the original £20 million loan, roughly £15 million remained in 1914, and this was then 0.2% of public spending.

World War 1 put an end to decades of austerity, and public debt rocketed, as did inflation.

In 1927 Winston Churchill refinanced the perpetual loans again. The coupon, following high inflation, was now 4%. This debt, which rolled up all existing perpetual loans, was repayable no earlier than 1957, however it never needed to be repaid. This has been mis-reported in some sources as having been re-financed in 1957. It was not, it was 1927, to be repaid 1957 or later.

This loan turned out to be a good deal for the government over many of the following decades, as high inflation and interest rates meant we could not borrow money that cheaply. However, following the 2008 financial crisis, interest rates fell to levels not seen for decades. The government currently pays an average of just over 2% interest on its debt, and in 2015 the 1927 consol, which itself was a refinancing from 1888 and that from centuries of previous debt, was paid off.

Someone in the Treasury social media department tweeted that the taxpayer had ‘just paid off the slavery loan in 2015’. However this was not true in any possible sense. The government’s borrowing is over £2 trillion, and any lingering 19th century debt, if identifiable, was not then paid off, but merely financed more cheaply. The original debts had been refinanced in either 1844 or 1888, depending on where the slaves had been owned, and were no longer identifiable after those dates.

So we could argue that we are still paying off the debt, except that we are not ‘paying it off’, since the government does not plan to pay off the national debt ever! Today, if we consider the government’s average cost of debt of 2.3%, and the £15 million outstanding debt (paid down to 1914), we are paying around £350,000 per year, or about half a penny a year per capita for the debt incurred to pay off slave owners.

A more reasonable observation would be that slave owners were paid for their slaves and then employed them at a low cost, continuing to profit from them, and that the amounts of money paid to them was very large in some cases, allowing them to purchase land and other things their descendants will still be benefiting from today.

However this is more about the lingering wealth of the descendants of slave owners, and the holders of government debt today are more likely to be pension funds than the descendants of slave owners.

What is the source of the misinformation?

The original source of the misinformation is a statement made on 31 October 2014.

George Osborne, then Chancellor, stated “I am delighted to be able to announce today that we will repay part of the country’s First World War Debts. We are only able to take this action today thanks to the difficult decisions that this government has taken to get a grip on the public finances.”

This was misleading, as discussed above, in that the “repayment” is more like a “refinancing”. In 2014 interest rates were low, so it seemed sensible to repay perpetual debts and instead reborrow the same money more cheaply on fixed dated loans.

The perpetuals redeemed in 2015 were a total of £2.59 billion:

• £218.4 million of 4% Consols issued 19/1/1927 to pay off 4% & 5% National War Bonds (issued in 1917 and repayable 1927) and Treasury Bonds, redeemed 1/2/2015.
• £1938.6 million of 3 ½% War Loan, issued 1/12/1932 to refinance a 5% War Loan from 1917, redeemed 9/3/2015
• £15.6 million of 3 ½% Conversion Loan, issued 1/4/1921 to refinance 1922–1925 due 5% National War Bonds, redeemed 1/4/2015
• £34.6 million of 3 % Treasury Stock, issued in 1946 to finance the nationalisation of the Bank of England, redeemed 8/5/2015
• £220.9 million of 2 ½% Treasury Stock, issued in 1946 for general spending, redeemed 5/7/2015
• £0.7 million of 2 ¾% Annuities, issued in 1884 to refinance New 3% Annuities, Reduced 3% Annuities and Consolidated 3% Annuities, redeemed 5/7/2015.
• £162.1 million of 2 ½% Consols, issued in 1888 to refinance 3% Consol 1752, 3% Reduceds 1752, and New 3% Annuities 1855, redeemed 5/7/2015.
• £0.9 million of 2 ½% Annuities, issued in 1853 to refinance South Sea Stock, Old South Sea 3% Annuities, New South Sea 3% Annuities, Bank 3% Annuities (1726) and 3% Annuities (1751), redeemed 5/7/2015.

It is worth noting that the government issued at least £100 billion in gilts in 2015, and the redemption of the perpetuals was out of this general gilt issue programme — it is not possible to say that the perpetuals are now represented by, say, a 3% 2068 gilt.

In addition, none of the perpetuals existed had actually been issued to pay for WW1 itself — they were earlier refinancing (at lower rates) of actual WW1 debts, so this was again a refinancing exercise.

Unfortunately, the Treasury put out a statement:

In addition to the war bonds, some of the debt being repaid in redeeming 4% Consols dates as far back as the eighteenth century. In 1853, then Chancellor Gladstone consolidated, among other things, the capital stock of the South Sea Company originating in 1711, which had collapsed in the infamous South Sea Bubble financial crisis of 1720. And in 1888, Chancellor George Goschen converted bonds first issued in 1752 and subsequently used to finance the Napoleonic and Crimean Wars, the Slavery Abolition Act (1835) and the Irish Distress Loan (1847). This debt will be repaid through the redemption of the 4% Consols.

This led people to state, e.g., here on Reddit “Britain borrowed to pay off the slave owners — and finally paid the debt for it in 2014. Which means that living Brits helped pay for the ending of the slave trade with their taxes”.

This claim was subject to a FOI request to HM Treasury in January 2018.

They stated:

The Slavery Abolition Act (1835) Loan was rolled over into the Government’s gilt programme, ultimately into an undated gilt, the 4% Consolidated Loan (1957 or after). The term ‘undated’ refers to the fact that this gilt was issued with an earliest potential redemption date of 1957, but it was not compulsory for the gilt to be redeemed at this date. The 4% Consolidated Loan was redeemed on 1 February 2015, as part of the Government’s decision to modernise the gilt portfolio by redeeming all remaining undated gilts.

Money borrowed to fund the Slavery Abolition Act (1835) was therefore fully repaid in 2015. The long gap between this money being borrowed and its repayment was due to the type of financial instrument that was used, rather than the amount of money borrowed.

They then tweeted their reply to this FOI, and this misinformation has since been repeated thousands of times, e.g., by Dawn Butler in Parliament on October 2024:

As detailed above, this is not true — we will never pay off our national debt, so it is meaningless to talk of things in this way.