Nov 09, 2006

UK Sells Bonds to Buy Vaccines

by Laura Starita

The British government recently unveiled a plan to sell bonds as part of an effort to vaccinate millions of children in the developing world against such illnesses as polio, measles, diphtheria and tetanus. The bonds - which offer a 5 percent return - are functioning somewhat like loan collateral: people buy them, giving the United Kingdom government a loan, which it plans to pay back in 10 years when the bond comes due using funds from future years’ aid budgets. Chancellor Gordon Brown argued:

“We want to spend the money now. If you can vaccinate 100% of children, then we avoid the risk of disease and contagion. If you can only vaccinate 10% of the children one year and 10% the next year and 10% in future years then you have still got a huge risk of disease.”

Critics of the plan are arguing it is an attempt to cut the official aid budget, but there is plenty of validation countering that view. The bonds themselves are attractive, offering a rate of return higher than US treasury bonds. The initiative is also being executed with the help of the Bill and Melinda Gates Foundation, and has the support of the country’s conservative leaders, who have added some words of advice to the discussion: “we must keep a very close eye on exactly how these funds are spent, and how effective they are.”

BBC: Brown Launches Vaccination Bonds