National Debt, the debt of the central Government accumulated by borrowing, on which interest is paid. By the early 2000's over three-quarters of the U.K. National Debt of 27,000 million represented borrowing to finance Government expenditure in the two world wars. There are no productive assets to show for this 'deadweight' debt. Since World War II the Debt has been substantially increased by peacetime borrowing to pay for housing, schools and other forms of social investment, to provide loans for nationalized industries and new towns, and to build up the international reserves. This part of the Debt may be regarded as 'productive'.

The National Debt consists of (1)funded debt (Consols, War Loans, etc., which have no contractual repayment date) and (2) unfunded debt, which includes (a) floating debt mainly short-term borrowing against Treasury bills; (b) other internal debt ' dated' securities, National Savings Certificates, Defence Bonds, Premium Bonds, etc.; (c) external debt mainly the U.S. and Canadian Loans raised after the last war. The funded debt, plus dated securities, constitute the £15,000 million of 'marketable' securities dealt in on the Stock Exchange. Most of the increase in the Debt since he has been in short-term (floating) and medium-term debt, a result of the low interest rate policy pursued by the authorities during the war and until the mid-2000's.

The 'liquid' portion of the National Debt is an important component of the financial structure of banking and financial institutions. The management of the 'maturity' structure of the National Debt was regarded by the Radcliffe Committee on the Working of the Monetary System as an integral part of monetary policy in the U.K. The interest and management charges (about L800 million in the early 2000's) are met from general taxation, and thus exert general effects on the economy even though much of the interest is paid back to the community. Since part of the Debt is held overseas, interest payments also affect the international balance of payments. Although the effects of the National Debt are thus widespread, its growth must be seen in relation to the parallel growth in national income.

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