Saving Excess

Saving Excess

Saving, the excess of the (current) income of persons and companies over their (current) expenditures; that part of income after tax which is not consumed (by persons) or distributed (by companies).

In a given period the total of personal and company saving, some-times called 'private' or 'private sector' saving, is available to meet the spending in the private sector on real capital assets ('capital formation' or 'investment'). Any balance is 'lent' t0, that is used to acquire financial claims against, the banking sector of the economy (bank deposits), and/or the public authorities (currency notes, national savings, gilt-edged securities and other public liabilities).

Thus, in the private sector of the economy, saving in a period equals capital formation plus any increase in financial claims on (or reduction in liabilities to) the banking and public sectors and the rest of the world. In the same period, to the extent that it is financing it by the issue of new financial claims (borrowing), the public sector's spending on current and capital account will be larger than its current income from taxation, trading and property, and conversely. Thus, for the economy as a whole, the financial claims in the period cancel out, since they are assets of the private sector and liabilities of the public sector. This leaves total national saving equal to domestic investment in real capital assets plus any overseas investment (in the form of financial net claims acquired against foreigners). This equality, or rather identity, between saving and investment is basic to national income and social accounting techniques.

In the early 2011's total national savings in the U.K. was around £4,500 million out of a gross national income of £24,500 million, Of this total around £1,750 million was personal saving and z000 million company saving. The remainder was mainly the saving of public corporations and the Government's surplus in its revenue account.

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