This is what we know about the government loan to pay slave owners compensation after slavery was abolished in 1833

2 July 2020

In the last few weeks, following Black Lives Matter protests, Britain’s history of slave trading and ownership has been at the fore of public discussion. Statues of former slave traders have been removed and forcibly toppled and various claims about how the end of slavery came about have been widely shared online.

The slave trade was abolished in British colonies in 1807, but slavery itself wasn’t abolished until many years later.

In 1833 the British government passed the Slavery Abolition Act, this act set out that freedom should be granted to slaves in most British territories the following year (there were exceptions to this, for example in India). Freedom didn’t mean that former slaves could travel, live and work freely though. An apprenticeship system was put in place which meant that most former slaves still had to work without pay for a number of years.

The Act also set out the amount of compensation that should be paid to slave owners (a project by University College London has looked at exactly who received this money).

Freed slaves did not receive any compensation.

The Act said that this money was for “compensating the Persons at present entitled to the Services of the Slaves to be manumitted and set free by virtue of this Act for the Loss of such Services”.  This money would be raised through loans amounting to £20 million, which would obviously be worth a lot more today. 

How much more it is worth exactly is contentious. Normally you would just look at price inflation—how much more expensive things are to buy over time, which in this case would make a £20 million loan back then worth around £2.4 billion today.

But people’s incomes have changed at a faster rate than prices have over this long period, and the economy has grown at a faster rate still. In 1833, for example, the UK government’s total expenditure was £48.8 million, so the £20 million was around 40% of that. 

This matters because, for example, an investment made in the 1800s may appreciate much faster than general prices do, so it would be worth much more now than is shown by inflation.

Depending on what you take into account, £20 million back then could be worth around £17 billion today if you look at how people’s incomes have grown, or even over £100 billion if you look at the size of the economy per person.

What do we know about the loan?

A large proportion of the money was raised by a syndicate led by the bankers Nathan Mayer Rothschild and Moses Montefiore. Historian Dr Nicholas Draper told the Tax Justice Network (TJN) that the two men “led a syndicate underwriting the issue of three new series of securities to raise £15 million: we don’t know how much they retained and how much they distributed or sub-underwrote. A further £5 million was paid out directly in government stock.” 

The TJN also sent Freedom of Information (FOI) requests to the Debt Management Office and Bank of England in 2018 and found that neither organisation held details of the terms of the loan or the banks and financial institutions involved.

The Treasury has said that it doesn’t hold any records of exactly how this money was paid back, but said in response to an FOI request in 2018 that: “it is likely that this would have been through twice-yearly interest payments, similar to the current structure of gilts.”

A gilt is a type of bond which the government can issue to raise money. Essentially, an investor can buy a bond, which the government agrees to pay back usually on a fixed date. Until that time, the government makes regular interest payments.

When was the money paid back?

The original £20 million loan was eventually incorporated into another gilt that was set to be repaid in 1957 at the very earliest. It was then finally repaid in 2015 as part of government restructuring of its debt.

However, that doesn’t mean all payments on the original loan would have been outstanding until 2015. The Treasury says that between 1833 and 1927 when the loan to finance the £20 million was consolidated into another gilt, investors would have been offered the choice of redeeming their loan (being repaid) or converting it. 

The Treasury says it does not have any records of how many chose to do this, or of how much of the original 1833 loan was outstanding in 1927 when it was consolidated. Therefore, it’s not known how much of this loan was repaid in 2015.

Update 6 July 2020

We originally described £20 million in 1833 as worth £2.4 billion in today’s prices. While this is correct, it’s not the only way of measuring how the worth of things has changed over nearly two centuries. We’ve updated this article to show other possible approaches, which say £20 million back then is worth much more than £2.4 billion today.

Correction 21 July 2020

We originally said the details of how the government raised the loan were unclear, but we have now included information on the banking syndicate that raised a large proportion of the loan money.

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