§ 39. Mr. John Townend
asked the Chancellor of the Exchequer what financial and estimated planning provision is made for the potential increase in the redemption value of inflation-proof Treasury stock.
§ Mr. Hayhoe
The redemption value of an index-linked gilt-edged stock does not increase in real terms. The increase in the nominal redemption value of indexed gilts will be recorded as a component of the national debt in the accounts of the National Loans Fund each year. It is a component of debt interest in public expenditure. It does not contribute to the PSBR in years before the stocks fall to be redeemed, because the PSBR is constructed on a cash basis and the stocks have no redemption value as such ahead of their respective maturity dates. No explicit financial provision is made for the redemption of index linked stocks in the form of a sinking fund. It is not current practice to establish sinking funds for Government liabilities.