<P> The Lord Treasurer Robert Harley established the South Sea Company in 1711 . Nominally, this was a trading company, but its main activity was the funding of government debt . In 1720, a bill was passed making the South Sea Company responsible for the entire national debt . This led to a frenzy of interest in the company, whose shares reached ten times their original issue price . A liquidity problem and collapse followed . The company was responsible for at least part of the national debt until it was abolished in 1850 . </P> <P> At the beginning of the 20th century the national debt stood at around 30 percent of GDP . However, during World War I the British Government was forced to borrow heavily in order to finance the war effort . The national debt increased from £ 650m in 1914 to £ 7.4 billion in 1919 . </P> <P> Britain borrowed heavily from the US during World War I, and many loans from this period remain in a curious state of limbo . In 1931, President Herbert Hoover announced a one - year moratorium on war loan repayments from all nations, due to the global economic crisis, but by 1934 Britain still owed the US $4.4 bn of World War I debt (about £ 866m at 1934 exchange rates). Adjusted for inflation, that would amount to around £ 40bn today, and if adjusted by the growth of British GDP, to about £ 225 billion . During the Great Depression Britain ceased payments on these loans, but outstanding bonds such as the War Loan were finally paid off in 2015 . </P> <P> By the mid-1920s, interest on government debt was absorbing 44% of all government expenditure, comfortably exceeding spending on defence until 1937 when, as war clouds drew near, re-armament began to get underway in earnest . </P>

When was britain's war debt paid off