Britain 's First World War debt has finally be repaid in full – more than 100 years after the outbreak of the conflict . The Government repaid some £1.9billion still owed to more than 100,000 people who held 'War Bonds ' , issued in 1917 to help fund the military effort . George Osborne said he could pay off the debts because he can borrow the money cheaper elsewhere . More than 100 years after it started , the First World War debt has been paid off by the Coalition government . The Government was paying 3.5 per cent in interest to the 120,000 people who bought the bonds in 1917 . The Debt Management Office estimates that Britain has paid some £5.5 billion in total interest on the loans since 1917 . Current low interest rates mean the Government is able to pay off the debt with new bonds which pay a much lower rate of interest . Mr Osborne said : 'This is a moment for Britain to be proud of . We can , at last , pay off the debts Britain incurred to fight the First World War . 'It is a sign of our fiscal credibility and it 's a good deal for this generation of taxpayers . It 's also another fitting way to remember that extraordinary sacrifice of the past . ' British artilleryman in action during the Battle of the Somme in France in 1916 . British soldiers negotiating a shell-cratered landscape along the River Somme in late after the close of the Allied offensive . The debt repayment comes after the Government repaid £218million of debts from the First World War in October – the first time that the government paid off the war 's debts in 67 years . The Tories claim that Britain can borrow at such low interest rates because the Government has got a grip of the public finances and international investors know they will get their money back if they lend it to the UK . They claim the Labour Party 's spending plans would see billons added to the national debt . Treasury Secretary David Gauke said : 'There is a clear choice at this election : sticking with the competence and stability of David Cameron and the Conservatives ' long-term economic plan that 's securing a better future for Britain – the deficit has been halved , there are 1.85 million more people with the security of a regular wage and the economy is recovering from Labour 's Great Recession . British soldiers in a trench in France with paper hats from Christmas crackers while a sentry uses a mirror to keep watch on No Man 's Land . 'Or abandoning that plan for the SNP and Labour with hardworking taxpayers paying the price for the economic chaos that would result . ' The warning came after Labour 's shadow chancellor Ed Balls claimed George Osborne 's spending plans would mean £70billion of cuts – more than double the amount admitted by David Cameron and George Osborne . He said if the Tories were to keep to their promises to protect spending on health , schools and overseas aid , this would mean the Foreign Office and Department for Transport being shut down altogether . Mr Balls said the government 's cuts were 'so extreme that they would lead to the smallest police force since comparable records began , the smallest army since Cromwell and over a third of older people receiving social care losing their entitlement to it ' . He added : 'The Tories now have a choice . They can either say that these unprecedented , extreme and close-to- impossible cuts to our police , armed forces and social care are the true consequences of their spending plans , ' he said . 'Or they can confess that their plans are in fact impossible to achieve without breaking their promise to protect the NHS . 'If David Cameron and George Osborne can not spell out how their sums add up for non-protected departments in order to achieve their fiscal surplus , the British people can only conclude - and would be right to conclude - that alternative plans do exist : to cut NHS spending and introduce charging . 'David Cameron and George Osborne must come clean or the British people will draw their own conclusions . '
Government repaid £1.9billion still owed to more than 100,000 people . Debts can be repaid because the cash can be borrowed cheaper elsewhere . Debt Management Office estimates thew Britain has paid £5.5billion in interest .