This is what we know about the government loan to pay compensation to slave owners after the abolition of slavery in 1833
July 2, 2020
In recent weeks, following the Black Lives Matter protests, the history of slave trade and ownership in Britain has been at the center of public debate. Statues of former slave traders have been deleted and knocked down and various claims about the end of slavery have been widely sharing online.
The slave trade has been abolished in the British colonies in 1807, but slavery itself was not abolished until many years later.
In 1833, the British government adopted the law on the abolition of slavery, this law stipulated that freedom was to be granted to slaves in most British territories the following year (there was exceptions to this, for example in India). Freedom, however, did not mean that former slaves could travel, live and work freely. An apprenticeship system was put in place, which meant that most of the former slaves still had to work without pay for a number of years.
The law also fixes the amount of compensation to be paid to slave owners (a project by University College London examined exactly who received this money).
Freed slaves received no compensation.
The law said that this money was intended to “compensate persons currently entitled to the services of slaves to be emancipated and released under this law for the loss of these services”. This money would be collected through loans amounting to £ 20million, which would obviously be worth a lot more today.
How much more is it exactly is controversial. Normally you would only look at price inflation – how many more expensive things are to be bought over time, which in this case would make a £ 20million loan at the time worth around £ 2.4 billion today.
But people’s incomes have changed at a faster rate than prices over this long period, and the economy has grown at an even faster rate. In 1833, for example, the Total UK government spending was £ 48.8million, so the £ 20million was about 40% of that.
This is important because, for example, an investment made in the 1800s may appreciate much faster than general prices, so it would be worth much more now than inflation shows.
Depending on what you take into account, £ 20million at the time 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 big part of the money was lifted by a union run by bankers Nathan Mayer Rothschild and Moses Montefiore. Historian Dr Nicholas Draper told the Tax Justice Network (TJN) that the two men “ran a syndicate which underwrote the issuance of three new sets of securities to raise £ 15million: we don’t know how much they kept and how much they distributed or subscribed. An additional £ 5million was paid directly into government shares. ”
The TJN also sent Access to Information (FOI) requests to the Debt Management Office and bank of england in 2018 and found that neither organization had details of the loan terms or the banks and financial institutions involved.
Treasury said that he has no record of exactly how that money was repaid, but said in response to a 2018 FOI request: gilts.
A gilding is a type of link that the government can issue to raise funds. Essentially, an investor can buy a bond, which the government usually agrees to repay on a fixed date. Until then, the government pays interest regularly.
When was the money refunded?
The original £ 20million loan was eventually incorporated in another gilding which was to be repaid in 1957 at the earliest. It was then finally repaid in 2015 as part of the government’s debt restructuring.
However, this does not mean that all payments on the original loan would have been unpaid until 2015. Cash says that between 1833 and 1927, when the loan to fund the £ 20million was consolidated into another gilt, investors would have had the choice of either redeeming their loan (being paid off) or converting it.
The Treasury says it has no record of how many people chose to do so, nor of the amount of the original 1833 loan that was outstanding in 1927 when it was consolidated. Therefore, it is not known how much of this loan was repaid in 2015.
Update July 6, 2020
We originally described £ 20million in 1833 as being worth £ 2.4 billion at today’s prices. While this is correct, it is not the only way to measure how much the value of things has changed over the course of nearly two centuries. We’ve updated this article to show other possible approaches, which say £ 20million back then is worth much more than £ 2.4 billion today.
Correction July 21, 2020
We originally said the details of how the government raised the loan were unclear, but now we have included information about the banking syndicate that raised much of the loan money.