The safest of all investments are those represented by the National Debt of this country, but the rate of interest or annual income derivable therefrom is small. The debt is nominally divided into three parts: The Funded Debt, the Unfunded Debt, Terminable Annuities.

The Funded Debt (1) is permanent; it is represented by Consols yielding interest at the rate of 2 1/2 per cent. per annum, or 2 10s. a year for every 100 of stock. The Government is not under obligation to redeem the principal at any fixed time, but power is reserved to pay off the loan at "par" (that is at the rate of 100 for every 100 stock, irrespective of its then selling value) in the year 1905. Another debt of comparatively small amount, bearing interest at 2 3/4 per cent. per annum, may also be paid off at "par" in 1905.

The great bulk of the National Debt, amounting to over five hundred millions sterling, is, represented by what, in Stock Exchange "parlance", is known as Goschen's Consols, so called from the Chancellor of the Exchequer of that name, to whom is due the conversion of the old "three per cents.," in the year 1888.

This stock bears interest at the rate of 2 3/4 per cent. per annum until the year 1903; from that date it is to be reduced to 2 1/2 per cent. until 1923, when the principal may be paid off at "par".

There is yet another fixed debt of about forty millions sterling called "Local Loans Stock," being money borrowed by the Government for the purpose of making advances to Corporations for local works. This stock may be redeemed at "par" in 1912.

The Unfunded Debt (2) consists of loans to the Government for temporary purposes. These loans are for various periods varying from seven days to as many years. They are represented by Exchequer Bills, Exchequer Bonds and Treasury Bills, which bear interest, according to the value of money at the time they are issued, from day to day. Due notice is given when a loan is to be paid off or renewed, and interest ceases on the day named for redemption.

Terminable Annuities

Terminable Annuities (3) may be regarded as a "Sinking Fund," or means by which a considerable portion of the National Debt is paid off every year and "The Funds" proportionately reduced.

Thus the Government is empowered to give an annuity for a certain number of years in exchange for permanent stock in the Funds. For instance, a holder of 1,000 2 3/4 per cent. stock is receiving 27 10s. a year in the shape of interest. The Government offers to pay double the amount of interest or 55, if the 1,000 stock is transferred to them, and to continue this 55 a year for twenty years and no longer.

At the expiration of that period the interest ceases and the principal sum of 1,000 is struck off the National Debt, which is in consequence reduced by that sum.