Why did Britain decide to issue perpetual bonds during Napoleonic era?

Why did Britain decide to issue perpetual bonds during Napoleonic era?

1. They needed money to pay for war expenses.
2. It was possible to sell the bonds without the promise to pay back the principle. Cheap year by year! Smart but unwise, see Greece today.
3. Interest could be lowered at will, so no reason ever to pay back.
4. Year by year there never was a politically viable reason to pay back the principle. And this was a profitable loan without blame attached. And governments are addicted to loans after all. During the Great Depression there was no money to do it.

Only now these days deflation returns. Wake-up call for all loan owners!

references:

https://en.wikipedia.org/wiki/Consol_(bond) http://www.theguardian.com/news/datablog/2011/jan/13/interest-rates-uk-since-1694

As the wikipedia article on consols mentions, Britain actually started issuing these perpetual bonds in 1751. So their use during the Napoleonic Wars some fifty or so years later was far from unprecedented. As noted in the comments, the attractiveness of this style of loan (to the borrower) was a combination of the low interest rate and putting the management of the loan in the hands of the borrower (who could decide if and when to pay off the debt). The latter was important because during the 18th Century Britain was frequently at war. A fixed-term loan always had the potential to fall due during a period of conflict when repaying (or refinancing) could have crippling consequences.

In considering how and why Britain could manage to arrange these perpetual bonds, it's important to consider the role of the Bank of England. This institution had expanded to become, essentially, a part of the government of Britain. It was the Bank of England that performed the task of raising and paying the interest on government loans.

From "The Foundations of British Maritime Ascendancy: Resources, Logistics and the State, 1755-1815" by Roger Morriss (Cambridge UP, 2011),

The security provided by the integration of the Bank and state functions permitted the British government to raise very large sums at relatively low rates of interest. Much of the money was raised by subscription to irredeemable interest bearing bonds or stock on London's capital market. The investments formed a long-term loan to the government. Their annual scale grew from £8.5 million to more than £20 million between 1756 and 1815. As a proportion of total expenditure, they rose from 37.5 per cent to 39.9 per cent at the end of the War of American Independence, then declined during the Napoleonic War to 26.6 per cent.

In respect of selling the bonds, he says,

Central to the state's success in raising loans was the group of City [of London] business men known as the "moneyed interest". In 1757 they represented Dutch and Jewish interest; and the directors of the Bank of England, the South Sea Company, the East India Company and the insurance companies. Less central, but important, was a range of bankers, government contractors and other business men.

Initially a large part of the money raised came from overseas (chiefly from the Dutch). However, due to the changing political situation by the time of the Napoleonic War, the money from the Dutch had mostly dried up. However,

...by then Britain's domestic economy was generating wealth. Surplus business capital provided the core of investment in government debt...When country banks came into existence, they remitted surplus funds to London which were made available to the state through the purchase of consols and securities. As the economy grew, money for loans to government always seemed available: In December 1796 a "loyalty loan" of £18,000,000 was subscribed in four days.

In contrast, the French took a different path with regard to their economy up to the Napoleonic period;

France, during the Seven Years' War, adopted the same financial method as Britain and Holland in paying for hostilities predominantly with loans: government borrowing met 59 per cent of French war expenses, taxes only 29 per cent. However, the French Monarchy managed its debt less wisely, opting to fund it with short-term annuities with high-interest rates rather than using long or perpetual loans at lower rates. It therefore increased the cost in interest and the amount of the peacetime debt to be serviced...After the War of American Independence, despite similar amounts of revenue and expenditure, the British were able to service a much larger debt (£240 million in 1787) than the French (£201 million in 1788) on lower interest rates (3.7 per cent) than the French (6-6.5 per cent)