Consols
Encyclopedia
Consol is a form of British government bond
(gilt
), dating originally from the 18th century. The first consols were originally issued in 1751. Consols are one of the rare examples of an actual perpetual bond
s: although they may be redeemed by the British government, this is unlikely to happen in the foreseeable future.
In 1752, the Chancellor of the Exchequer
and Prime Minister
Sir Henry Pelham
converted all outstanding issues of redeemable government stock into one bond, Consolidated 3.5% Annuities, in order to reduce the coupon rate
paid on the government debt.
In 1757, the coupon rate on the stock was reduced to 3%, leaving the stock as Consolidated 3% Annuities. The coupon rate remained at 3% until 1888. In 1888, the Chancellor of the Exchequer, George Joachim Goschen, converted the existing Consolidated 3% Annuities, along with Reduced 3% Annuities (issued in 1752) and New 3% Annuities (1855), into a new bond, 2¾% Consolidated Stock under the National Debt (Conversion) Act 1888 (Goschen’s Conversion). As part of the terms of the Act, the coupon rate of the stock was reduced to 2½% in 1903, and the stock given a first redemption date of 5 April 1923, after which point the stock could be redeemed at par value
by Act of Parliament
.
Consols still exist today: in their current form as 2½% Consolidated Stock (1923 or after), they remain a small part of the UK Government’s debt portfolio. As the bond has a low coupon, there is little incentive for the government to redeem it. Unlike most gilts, which pay coupons semi-annually, Consols pay coupons four times a year because of their age. As a result of their uncertain redemption dates, they are typically treated as a perpetual bond
.
Given their long history, references to Consols can be found in many places, including literature such as David Copperfield
by Charles Dickens
, Howards End
by E. M. Forster
, Vanity Fair by William Makepeace Thackeray
, Of Human Bondage
by William Somerset Maugham and The Forsyte Saga
by John Galsworthy
and in economics
.
Government bond
A government bond is a bond issued by a national government denominated in the country's own currency. Bonds are debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to a company or country...
(gilt
Gilts
Gilts are bonds issued by certain national governments. The term is of British origin, and originally referred to the debt securities issued by the Bank of England, which had a gilt edge. Hence, they are called gilt-edged securities, or gilts for short. The term is also sometimes used in Ireland...
), dating originally from the 18th century. The first consols were originally issued in 1751. Consols are one of the rare examples of an actual perpetual bond
Perpetual Bond
Perpetual Bond is a Big Finish Productions audiobook based on the long-running British science fiction television series Doctor Who.The Companion Chronicles "talking books" are each narrated by one of the Doctor's companions and feature a second, guest-star voice along with music and sound...
s: although they may be redeemed by the British government, this is unlikely to happen in the foreseeable future.
In 1752, the Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...
and Prime Minister
Prime minister
A prime minister is the most senior minister of cabinet in the executive branch of government in a parliamentary system. In many systems, the prime minister selects and may dismiss other members of the cabinet, and allocates posts to members within the government. In most systems, the prime...
Sir Henry Pelham
Henry Pelham
Henry Pelham was a British Whig statesman, who served as Prime Minister of Great Britain from 27 August 1743 until his death in 1754...
converted all outstanding issues of redeemable government stock into one bond, Consolidated 3.5% Annuities, in order to reduce the coupon rate
Coupon (bond)
A coupon payment on a bond is a periodic interest payment that the bondholder receives during the time between when the bond is issued and when it matures. Coupons are normally described in terms of the coupon rate, which is calculated by adding the total amount of coupons paid per year and...
paid on the government debt.
In 1757, the coupon rate on the stock was reduced to 3%, leaving the stock as Consolidated 3% Annuities. The coupon rate remained at 3% until 1888. In 1888, the Chancellor of the Exchequer, George Joachim Goschen, converted the existing Consolidated 3% Annuities, along with Reduced 3% Annuities (issued in 1752) and New 3% Annuities (1855), into a new bond, 2¾% Consolidated Stock under the National Debt (Conversion) Act 1888 (Goschen’s Conversion). As part of the terms of the Act, the coupon rate of the stock was reduced to 2½% in 1903, and the stock given a first redemption date of 5 April 1923, after which point the stock could be redeemed at par value
Par value
Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par , over par and under par ....
by Act of Parliament
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
.
Consols still exist today: in their current form as 2½% Consolidated Stock (1923 or after), they remain a small part of the UK Government’s debt portfolio. As the bond has a low coupon, there is little incentive for the government to redeem it. Unlike most gilts, which pay coupons semi-annually, Consols pay coupons four times a year because of their age. As a result of their uncertain redemption dates, they are typically treated as a perpetual bond
Perpetual Bond
Perpetual Bond is a Big Finish Productions audiobook based on the long-running British science fiction television series Doctor Who.The Companion Chronicles "talking books" are each narrated by one of the Doctor's companions and feature a second, guest-star voice along with music and sound...
.
Given their long history, references to Consols can be found in many places, including literature such as David Copperfield
David Copperfield (novel)
The Personal History, Adventures, Experience and Observation of David Copperfield the Younger of Blunderstone Rookery , commonly referred to as David Copperfield, is the eighth novel by Charles Dickens, first published as a novel in 1850. Like most of his works, it originally appeared in serial...
by Charles Dickens
Charles Dickens
Charles John Huffam Dickens was an English novelist, generally considered the greatest of the Victorian period. Dickens enjoyed a wider popularity and fame than had any previous author during his lifetime, and he remains popular, having been responsible for some of English literature's most iconic...
, Howards End
Howards End
Howards End is a novel by E. M. Forster, first published in 1910, which tells a story of class struggle in turn-of-the-century England. The main theme is the difficulties, troubles, and also the benefits of relationships between members of different social classes...
by E. M. Forster
E. M. Forster
Edward Morgan Forster OM, CH was an English novelist, short story writer, essayist and librettist. He is known best for his ironic and well-plotted novels examining class difference and hypocrisy in early 20th-century British society...
, Vanity Fair by William Makepeace Thackeray
William Makepeace Thackeray
William Makepeace Thackeray was an English novelist of the 19th century. He was famous for his satirical works, particularly Vanity Fair, a panoramic portrait of English society.-Biography:...
, Of Human Bondage
Of Human Bondage
Of Human Bondage is a novel by W. Somerset Maugham. It is generally agreed to be his masterpiece and to be strongly autobiographical in nature, although Maugham stated, "This is a novel, not an autobiography, though much in it is autobiographical, more is pure invention." Maugham, who had...
by William Somerset Maugham and The Forsyte Saga
The Forsyte Saga
The Forsyte Saga is a series of three novels and two interludes published between 1906 and 1921 by John Galsworthy. They chronicle the vicissitudes of the leading members of an upper-middle-class British family, similar to Galsworthy's own...
by John Galsworthy
John Galsworthy
John Galsworthy OM was an English novelist and playwright. Notable works include The Forsyte Saga and its sequels, A Modern Comedy and End of the Chapter...
and in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
.
| Year/Date | Description |
|---|---|
| 1751 | Consols first issued |
| 1752 | Consolidated 3.5% Annuities |
| 1752 | Reduced 3% Annuities |
| 1757 | Consolidated 3% Annuities |
| 1855 | New 3% Annuities |
| 1888 | National Debt (Conversion) Act 1888 (Goschen’s Conversion) |
| 1888 | 2¾% Consolidated Stock |
| 1903 | 2½% Consolidated Stock |
| 5 April 1923 | first redemption date |
| 1923 to present | 2½% Consolidated Stock |