Public support for 'defence bonds' aimed at increasing military spending would be contingent on financial incentives rather than solely on patriotic appeals, new research indicates. A survey by Hargreaves Lansdown suggests that individuals would be more inclined to invest in bonds supporting UK national security if these offerings included tax-free interest, a competitive rate of return, or exemption from inheritance tax.
War or defence bonds represent a mechanism where citizens lend money to the government to finance military expenditures in exchange for interest payments. This concept has emerged as a potential funding avenue following the government's recent announcement of a Defense Investment Plan, which promises an additional £15 billion over four years to deter potential aggression. However, the adequacy of this investment has sparked debate.
According to the research, only about one in ten members of the public expressed a willingness to invest in such bonds purely to support UK national security, a figure that rose to 15 percent among individuals who are already active investors. Furthermore, one in three respondents indicated a lack of trust in the government's ability to spend the funds effectively. A larger segment, 43 percent, stated they would require more information before making an investment decision.
The Hargreaves Lansdown survey, which polled 2,000 representative UK individuals and approximately 550 active investors, found that financial perks would significantly increase public interest in defence bonds. Tax-free interest income was the most sought-after incentive, with 31 percent of the general public stating it would make them more likely to consider investing. Competitive interest rates, comparable to other savings and bond products, attracted 29 percent of respondents, while 17 percent prioritized a clear explanation of how the funds would be utilized.
An incentive related to inheritance tax, such as the bond being excluded from an estate's inheritance tax calculation, would appeal to 13 percent of the public. However, 17 percent of respondents indicated that no incentive would persuade them to purchase a defence bond, and 35 percent were undecided.
Among active investors, a higher proportion expressed potential interest. For this group, 56 percent found tax-free interest appealing, 53 percent a competitive interest rate, and 24 percent highlighted inheritance tax benefits. Notably, 65 percent of investors open to defence bonds indicated they would use cash savings for the purchase, rather than reallocating funds from existing investments.
Anna Macdonald, investment strategy director at Hargreaves Lansdown, commented that while Britons are open to investing in national defence bonds, patriotic appeals alone are insufficient. She suggested that governments considering such a policy should explore incentives like more favorable tax treatment, noting that inheritance tax could be a potent tool. Macdonald also emphasized the need for clear communication regarding fund allocation, given the observed low trust in government spending efficiency. She added that national security bonds, if structured with appropriate incentives, could also encourage individuals to move funds from cash savings into investments, aligning with government objectives to increase public investment.