I'm in a debate with my position being that the UK cannot repay its debt. I've been given this reason for why we can replay the debt but I don't understand it: "Suppose, for the sake of argument, that the interest on the face of a UK Government security is 10%. I invest 16p in these securities, and receive a gilt entitling me to 1.6p per annum until such time as the Treasury chooses to redeem it. Unless the British Treasury goes out of business, I can't lose any money, because even if the Treasury chooses to redeem the gilt it can only do so by repaying my 16p. The chances are that the Treasury will go on paying the 1.6p ad infinitum. As you can see, the most the Treasury can be held to is 1.6p even though it strictly speaking owes 16p. It is a little more complicated, however, because the Treasury can choose to issue gilt redeemable on a specific date. So, I lend 16p, receive 1.6p per annum, and am entitled to my 16p back in, say, ten years. So, at a certain date, the Treasury may have to find the money to redeem these gilts. However, it is quite open to the Treasury to do so by issuing more gilts on a similar basis. This is particularly true as, for example, pension funds are required to hold a certain proportion of their funds in gilts as these are a particularly safe form of investment. So, as a pension fund's gilts mature it will need to buy more to keep their proportions legal - this gives the Treasury a ready market for new gilts as old ones fall due for payment." Is this statement correct?
