Commenting on the UK chancellor’s plans to launch an “Osborne bond”, Professor Philip Booth of Cass Business School, said:
“It is the responsibility of the government to fund its borrowing as cheaply as possible. It is therefore right to consider issuing very-long-dated bonds, but a more urgent matter is to increase the issue of index-linked bonds.
“Currently index-linked bond yields are negative - in other words, as Milton Friedman once put it, investors are paying the government for the dubious privilege of lending it their money. Inexplicably, the last government reduced the issue of index-linked bonds. This decision should be reversed and the government should fund much more of its debt through index-linked bonds. That way, investors will be more confident that the government will not use inflation to reduce its borrowing obligations and the government will be able to fund its debt very, very cheaply.”