Background A few years ago I was a student of an economic course about loans, debts, interests, NPV etc. The trainer mentioned "The UK took a loan to fund wars against Napoleon. This has no term, and only interests are being paid back. So this will never be ended." I could not believe it, but ok, this was not my scope of job.
Later I returned to this topic few months ago and tried to search about this loan. Unfortunately, there is lack of any detailed data in the Internet.
For example, this article only mentions (the context is that the Government wants to buy back the loans from the WW1):
Also included in the government buyback are: loans originally taken out to cover losses from the collapse of the South Sea Company in 1720, debt taken on to fund Britain's fight against Napoléon Bonaparte, and some that helped finance the Slavery Abolition Act of 1835.
These loans are unusual because they were issued as perpetual bonds. This means that they payed out interest but have no maturity date, in effect making them more like owning a stock that pays a dividend than a traditional bond. The government has the right but no obligation to pay off the debt.
This article is related to the same event, but providing no more information:
Some of the debt being repaid relates to the South Sea Bubble crisis of 1720, the Napoleonic and Crimean wars, the abolition of slavery and the Irish potato famine of the mid-18th century. (...)
In 1888, chancellor George Goschen converted bonds first issued in 1752 which were later 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.
The Wikipedia article has only one sentence:
Perhaps the oldest bonds still outstanding as a result of war are the British Consols, some of which are the result of the refinancing of debts incurred during the Napoleonic Wars.
Examples of perpetual bonds are consols issued by the UK Government.
It seems (maybe I am wrong) that before 1900 only the British government issued perpetual bonds. What stood behind this practice? Why was it better to issue a perpetual bond than "normal" loan?
At the moment the Government seems to be wanting to pay them off, of course financial market has changed, but I can't believe the economists of the era did not expect or at least suspect the things can change after 200 years. They left the door open (
The government has the right but no obligation to pay off the debt.), but I'm still wondering why was it considered better than not to pay it off as soon as possible.