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Government savings

The Government has traditionally used the savings of private individuals to fund its own borrowing.

Its main way of achieving this is to act as a financial institution in its own right and issue fixed interest

investments via the Bank of England. These investments pay a fixed level of interest at regular intervals over

a fixed (or variable) period of time. While they act as an investment to the individual buying them, returning

the original capital at the end of the term and interest at intervals during it, they function as a loan to the

Bank of England and hence the Government. Gilts are one of the best known types of this investment and are

covered in more detail in chapter 2.

The other Government financial institution is National Savings and Investments (established in 1861 as

the National Savings Bank). Savings and deposits into this institution are also used to fund Government

borrowing

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