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Consols (originally short for consolidated annuities, but can now be taken to mean consolidated stock) is a name given to certain British government bonds (gilts) in the form of perpetual bonds redeemable at the option of the government. They were issued by the Bank of England. The first Consols were issued in 1751.
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 (interest rate) paid on the government debt.
In 1757, the annual interest 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 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). Under the Act, the interest 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.
Timeline of 2.5% Consolidated Stock
|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|
On 31 October 2014 the UK Government announced that it would redeem the 4% Consols in full in early 2015.
The 2½% Consolidated Stock (1923 or after) remains a (very) small part of the UK Government's debt portfolio. Although their market price jumped when the redemption of War Loan was announced in December 2014 (and the government announced that the Act of Parliament required to redeem Consols would be introduced) they still stand at a significant discount to par value, implying that there is no immediate likelihood of their being redeemed at par, although this may happen in future. (Although current market interest rates are extremely low compared to recent years, for very long-dated bonds they have until after the War Loan redemption announcement been above 2½%, so there has been no immediate financial incentive for the government to redeem these bonds.) Unlike most gilts, which pay interest half-yearly, Consols pay interest quarterly.
References in literature
Given their long history, references to Consols can be found in many places, including literature such as Pride and Prejudice by Jane Austen, 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.