this is probably a stupid question but...

[pud1]

were do the goverment borrow money from. we hear about this deficit but who do we owe it too. it it actual borrowed money

Most of the money UK govt. owes is in the form of gilts. Private individuals can buy gilts (they have low returns and are considered a very safe investment, usually), but vast majority of gilts and similar products ("debt instruments") are bought by large international financial institutions like banks. Sometimes even other governments buy gilts -- I believe that China has purchased a lot of US govt. gilts. Occasionally China talks about liquidating their US gilts, which causes ripples of panic in financial markets across the world, because a sudden large gilt dump like that would make it difficult for the US govt. to sell more (hence borrow more) at the price (interest rate) they want to sell them for.

I have US govt. gilts, so the US govt. owes part of its debt to me .

More info:

Simple economics page.

Yahoo.Answers.

Since I have some money with National Savings, the govt is also borrowing money from ME.