Osborne Bond Extension ‘Intergenerational Theft,’ Tory Ally Says

U.K. Chancellor of the Exchequer George Osborne’s decision to extend a bond program offering preferential rates to retirees until after the May 7 general election is “intergenerational theft,” a lawmaker from his own Conservative Party said.

Phillip Lee, a member of the House of Commons, said the extension of the deadline on the bonds, which have already raised 7.5 billion pounds ($11.4 billion) from 610,000 people over the age of 65, demonstrates “something deeply awry” in British politics.

“In order to afford to offer such preferential rates to a specific section of the community, the exchequer has to borrow more money, a debt which will not be repaid by those benefiting from the bonds, but by future generations,” Lee said in a statement posted on his website. “Although the cost of this policy -- somewhere in the region of 350 million pounds -- is relatively modest, it sends the wrong message to the younger electorate.”

Osborne said Sunday that the securities, which were first offered last month and pay 2.8 percent interest on one-year securities and 4 percent interest on three-year debt, will be on sale until May 15. The central bank has held the key interest rate at 0.5 percent since March 2009 and the cost of borrowing for 10 years in the U.K. government bond market is about 1.6 percent, close to a record low.

The policy was also criticized by the Institute of Economic Affairs, a free-market research group closely allied to the policies of former Conservative Prime Minister Margaret Thatcher, which said the policy is a “gimmick” aimed at buying votes.

“Borrowing more expensively than the government needs to is effectively a direct subsidy to wealthy pensioners from the working-age population,” IEA Director General Mark Littlewood said in a statement. “It beggars belief that the government is prolonging such a foolish policy. It’s high time our politicians stopped buying votes with subsidies for the old and rich.”

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