Ministers could save billions of pounds and boost savers’ pensions by a switch to how the Government pays for the pandemic rescue package, according to research.
Consultant LCP claimed that the UK was “missing a trick” on how it financed borrowing plans by relying heavily on fixed-rate gilts, rather than opting for inflation-linked debt.
Next year, around 90pc of the expected £300bn of gilts will be fixed-rate, meaning investors are guaranteed a set return. For the remaining 10pc, payouts will vary depending on inflation – which is so low at present that the amount due is far less.
Which way do we think inflation is going to go? Not down, right? So the rational borrower would be cramming on the fixed rate debt and retiring as much as possible of the inflation linked….