Britain: An official handbook > 1993

PUBLIC FINANCE
of default. Gilt-edged stock is marketable and
is widely traded. Individuals may also make
transactions through post offices in stocks
included on the National Savings Stock
Register. Pension funds and life insurance
companies have the largest holdings. On
behalf of the Government, the Bank of
England issues both conventional and indexed
stock (on which principal and interest are
linked to the movement in the Retail Prices
Index). Issues are mostly by auction or fixed
price ‘tap’ sales.
An important additional source of
government finance is the range of National
Savings products, which are non-marketable
and are designed to attract personal savings.
The chief products (see p 263) are Income
Bonds, National Savings Certificates (which
may be index-linked), the Investment
Account, Capital Bonds and a Children’s
Bonus Bond. A new product—the First
Option Bond, designed to appeal to
taxpayers—was launched in July 1992.
Other central government debt instruments
are Treasury bills and certificates of tax
deposit. Sterling Treasury bills are sold at a
weekly tender; the majority have a maturity
of three months. The Government has also
issued bills denominated and payable in
European Currency Units (ECUs) since 1988
and longer-dated ECU notes since January
1992. The proceeds have been added to the
official foreign exchange reserves as opposed
to being used to finance public expenditure.
The bulk of public corporations’
borrowing is funded by central government,
although their temporary borrowing needs are
met largely from the market, usually under
Treasury guarantee. That part of local
authority borrowing met by central
government is supplied by authorisation of
Parliament through the Public Works Loan
Board from the National Loans Fund. The
Board remains an independent body even
though it is merged for administrative
purposes with the former National Debt
Office, forming the National Investment and
Loans Office. Local authorities may also
borrow directly from the market, both short¬
term and long-term, through a range of
instruments. Some public corporations and
local authorities borrow on occasion, under
special statutory power and with Treasury
consent, in foreign currencies.
Net Public Sector Debt
Public sector borrowing, or debt repayment,
each year represents an addition to, or
subtraction from, the net debt of the public
sector. This debt is the consolidated debt of
the public sector less its holdings of liquid
assets. At the end of March 1991
consolidated debt amounted to 194,000
million. Central government accounted for
nearly 97 per cent, local authorities for almost
3 per cent and public corporations for under
0 5 per cent. With consolidated liquid assets
amounting to £40,000 million, net public
sector debt was £154,000 million. Central
government accounted for nearly 79 per cent
of consolidated liquid assets, local authorities
for 18 per cent and public corporations for
about 3 per cent.
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