BRENDA Knopf (Letters, April 1) is puzzled about the deficit and the National Debt.
My understanding is that the deficit is the annual excess of Government expenditure above income.
Each year the deficit adds to the National Debt.
The National Debt is owed to the Bank of England in the form of government bonds that are sold to investors. Interest is paid to investors.
The investors include pension funds. Eg the fund that pays my own occupational pension has 14.8 per cent of its fund invested in government bonds.
If the Government reneged on its debt, as has happened fairly recently in Argentina, then the investors would lose both their investment and the interest on this investment.
Consequently a proportion of money would be unavailable to honour pension payments.
This is partly the reason why future pension arrangements tend to be less generous than past ones. This is the cause of current industrial unrest, particularly in the public services.
In May voters will be choosing between policies that tend to either increase or decrease the National Debt.
RICHARD EVANS, Southampton
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