To: BBC News Online

Subject: Gordon Brown's borrowing plans.

What is the difference between government borrowing and government debt?

A: The short answer is a lot of money. Government debt is equivalent to the size of your overdraft (if you've got one) and the government's had a permanent overdraft for as long as anyone can remember. Currently it is £350bn in the red. Thats the equivalent of over £11,000 for every family in Britain. And again, just like an overdraft, the government has to pay interest on the debt. This year it will spend nearly £25bn interest on its debt.

Government borrowing is the extra debt it builds up each year and is the shortfall between tax revenues and public spending. It is also often called the government deficit or budget deficit.

Politicians always seem to want to cut and avoid government debt. Now suddenly it seems that it's OK. How does this happen?

Governments have always wanted to keep debt under control. And the present government is no different. One of its self imposed rules is not to let the burden of debt rise over the whole of an economic cycle.

But it is saying that if there is an economic downturn, it will borrow more temporarily and is happy to do so. It thinks it would be perverse to increase tax or cut spending when the economy is already in trouble.

Wouldn't Mrs Thatcher have insisted that public debt=inflation. Was she right?

Early in the 1980s Mrs Thatcher said high levels of debt led to inflation. She thought that if the government spent money it didn't have, it would lead to too much money chasing too few goods and prices would inevitably go up. This is certainly true in extreme circumstances but the Conservatives quietly dropped the policy in the mid 1980s, partly because they found they couldn't forecast borrowing or debt.

Why is it so hard to forecast borrowing?

Because borrowing is the difference between two huge numbers. Both tax revenues and public spending are more than £300bn so a small mistake in either can lead to a huge error in the borrowing forecast.

What about Gordon Brown pledging to stay within the Tories' spending limits?

This pledge, made before the last election, has been important in getting borrowing down since the election. It has meant two extremely tight years in the public services.

What is the 'Black Hole' William Hague goes on about?

The Conservatives claim that any economic downturn next year will blow a black hole in the public finances. Recently they have quoted a figure of £36bn. If the economy only has a small temporary downturn, they will quickly forget this attack on the Government, as it will not turn out to be true. But if, in a few years time, we find the economy is now in a boom, like that in the early 1990s, any downturn might be much bigger and longer. Then all bets are off.

Between 1988 and 1993, the public finances went from a surplus of 3% of the size of the economy to a deficit of 7%. In today's money that added up to a change of £85 billion.

So if Gordon Brown does borrow a lot, who is he going to borrow it from?

The simple answer is you and me. The government sells gilts (government bonds), which are promises to pay a sum of money in the future, say £100, and some interest on top of that. Last year the government sold £17.6bn gilts.

When will it get paid back?

Different gilts have different pay back dates. For example, gilts issued in the Second World War, will never be paid back. The government simply pays interest on the debt every year. But most gilts have a redemption date when they are paid back. So even if the government borrows nothing it will still have to sell some gilts because in the year it will have redeemed some gilts.

What will the spending go on?