Source · Select Committees · Public Accounts Committee
Fifteenth Report - Managing government borrowing
Public Accounts Committee
HC 74
Published 5 March 2024
Recommendations
2
Accepted
Set out plan for building and retaining essential skills across Treasury, DMO and NS&I.
Recommendation
We are concerned that the Treasury, DMO and NS&I will not have the necessary skills, experience, and institutional knowledge needed to overcome the challenges they face now, and in the years to come. The DMO and NS&I are both specialist …
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Government Response Summary
The government agreed, stating the recommendation is implemented. NS&I plans to upskill its workforce by insourcing IT and service integration skills and growing commercial expertise, while the DMO has a developed resourcing strategy including succession planning.
HM Treasury
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4
Acknowledged
Set out key milestones and contingency plans to prevent further Rainbow Programme delays.
Recommendation
We are concerned that significant problems with NS&I’s procurement of its Rainbow Programme could leave limited flexibility or room for further delays. During the COVID-19 pandemic, the Treasury required NS&I to raise £35 billion from retail savers – more than …
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Government Response Summary
The government agreed, stating NS&I is working to formulate an integrated transition plan with key project milestones for its Rainbow Programme, which will be shared with the Committee when finalised. Expected costs for extending the Atos contract would be agreed upon extension, and contingency plans are commercially sensitive.
HM Treasury
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5
Accepted
Set out lessons learned from financial crisis and pandemic for government borrowing.
Recommendation
We are not convinced that the Treasury, DMO and NS&I have adequately captured the lessons learned during the financial crisis and pandemic to prepare them to deal with the challenges to come. Government borrowed vast amounts during both the financial …
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Government Response Summary
The government agreed, stating lessons from crises have improved preparedness, citing the Professionalising Crisis Management project and the development of crisis manuals. It noted the DMO's annual remit-setting acts as a lessons-learned process and NS&I's transformation programme is addressing operational lessons from the pandemic.
HM Treasury
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7
Accepted
Government's debt management objective lacks measurable success criteria and performance indicators.
Recommendation
In light of the government’s debt management objective being high-level and the lack of measurable success criteria or indicators to assess whether the objective was being met, the NAO recommended that the Treasury should consider ways to align and extend …
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Government Response Summary
The government accepts the recommendation and commits to examining international best practice, assessing quantitative and qualitative measures, and systematically reporting performance by Spring 2025 to improve debt management objective measurement.
HM Treasury
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8
Deferred
CMA provisionally found major banks broke competition laws affecting DMO gilt auctions.
Recommendation
In May 2023, the Competition and Markets Authority (CMA) provisionally found that five major banks broke competition laws on UK gilts. Each bank allegedly unlawfully shared competitively sensitive information relating to the buying and selling of UK government gilts. The …
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Government Response Summary
The government accepts the implicit recommendation and commits to writing to the Committee with the requested information within two months of the CMA's investigation concluding, but the target implementation date is TBD due to the CMA's open-ended timeline.
HM Treasury
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23
Accepted
NS&I upskilling workforce and receiving support to reduce reliance on consultants.
Recommendation
We asked NS&I whether it was working collaboratively with other parts of government to overcome some of the issues being faced on its Rainbow Programme. NS&I told us that it was receiving support from the Cabinet Office on “various complex …
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Government Response Summary
The government claims the recommendation is already implemented, detailing NS&I's plans to upskill and insource IT skills, the DMO's resourcing strategy, and HMT's recent grade de-merger to address skills shortages and retention.
HM Treasury
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Conclusions (17)
3
Conclusion
Acknowledged
The Treasury and the DMO lack the information needed to better identify unlawful activity and understand the risks posed by overseas investors, potentially reducing the value for money from future gilt sales. In May 2023, the Competition and Markets Authority (CMA) provisionally found that, between 2009 and 2013, five major …
Government Response Summary
The government agreed but stated it currently lacks visibility of underlying gilt owners. It committed to reviewing sovereign bond ownership data from other countries to learn from their approaches, rather than detailing immediate steps to address information gaps or change gilt selling processes.
1
Conclusion
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (the Treasury), the Debt Management Office (DMO), National Savings & Investments (NS&I) and the Office for Budget Responsibility (OBR) on the management of government borrowing.2
Government Response Summary
The government agreed to an implied recommendation regarding performance reporting, stating it will examine international best practice, assess prospective quantitative and qualitative measures, and will write to the Committee once this analysis is concluded.
6
Conclusion
Deferred
To deliver its remit, NS&I must balance the interests of savers by offering a fair return, and the interests of the taxpayer by minimising finance costs. At the same time, it must also maintain an appropriate competitive position in the retail savings market. When questioned on how it minimises the …
Government Response Summary
The government agrees with the implicit recommendation to improve performance measurement. It commits to examining international best practice and assessing quantitative and qualitative measures by Spring 2025, and will write to the Committee upon conclusion of this analysis.
9
Conclusion
Deferred
The DMO stressed that it expected all GEMMs to “adhere 100%” to all regulations and the applicable laws, but because the DMO is not itself a regulator it cannot police the behaviour of the GEMMs. It added that GEMMs, which the DMO appointed, have “exclusive bidding rights at auctions” and …
Government Response Summary
The government agrees with the implicit recommendation and commits that HMT and DMO will write to the Committee with information within two months of the Competition and Market Authority’s investigation conclusion, deferring any further actions until then.
10
Conclusion
Deferred
We asked the OBR whether any improvements could be made to government’s borrowing processes. The OBR expressed a desire for more information on the owners of UK gilts held overseas, which it said represented arounds 25% of all UK debt – the second highest in the G7. It explained that …
Government Response Summary
The government claims the recommendation is implemented, stating it currently lacks visibility of beneficial gilt owners. However, it commits to reviewing sovereign bond ownership data from other countries to learn from their approaches.
11
Conclusion
Deferred
We asked the Treasury how much it knew about the owners of UK debt held overseas. The Treasury recognised that it did not have a “very accurate picture” because gilts were a “traded commodity” and may be sold on. The DMO explained that it cannot know who the ultimate beneficial …
Government Response Summary
The government claims the recommendation is implemented, stating it currently lacks visibility of beneficial gilt owners. However, it commits to reviewing sovereign bond ownership data from other countries to learn from their approaches.
12
Conclusion
Accepted
Government borrowed vast amounts during both the financial crisis and the COVID-19 pandemic. The Treasury, on behalf of government, required the DMO to raise £486 billion during the pandemic, triple the original remit for 2020–21, while NS&I had a record target of £35 billion, revised upwards from £6 billion. The …
Government Response Summary
The government states the recommendation is implemented, detailing how it has captured lessons learned from previous crises, established a Professionalising Crisis Management project, and committed to learning from the pandemic response. It also notes NS&I's transformation programme will improve systems scalability.
13
Conclusion
Accepted
In November 2022, the Bank of England started to actively unwind its QE programme, a process also known as quantitative tightening, meaning for the first time it was selling gilts at the same time as the DMO. In the 12 months from September 2022, the Bank of England reduced the …
Government Response Summary
The government states the recommendation is implemented, detailing how it has captured lessons learned from previous crises, established a Professionalising Crisis Management project, and committed to learning from the pandemic response. It also notes NS&I's transformation programme will improve systems scalability.
14
Conclusion
Accepted
We asked the DMO what risks quantitative tightening will create for government borrowing. The DMO told us that in 2023–24, the net supply of gilts was “at a historical high”, which was a challenge for the market in terms of absorbing the higher supply and establishing the “right price”.22 The …
Government Response Summary
The government claims the recommendation is already implemented, citing ongoing initiatives like the Professionalising Crisis Management project, the annual DMO remit setting process, and NS&I's transformation programme as existing efforts to improve preparedness and learn lessons from past crises.
15
Conclusion
Not Addressed
The Treasury indemnifies the activities of the Bank of England’s Asset Purchase Facility. This means that the Treasury receives any profits from QE but is also liable for any losses. The OBR told us that until very recently, QE was making “quite considerable profit” for the Treasury – and that …
Government Response Summary
Although the committee's item was a conclusion, the government's response states it agrees with and has implemented a 'recommendation'. The response discusses general improvements in crisis management preparedness and NS&I's system transformation, but it does not directly address the observation about the £126 billion net loss from QE impacting the government’s objective for getting 'debt under control'.
16
Conclusion
Deferred
Not only does the government face growing pressure to borrow more in the future, but it also needs to ensure it can repay its current debts. The DMO issues gilts of varying length, ranging from one to more than 50 years. The period between a gilt being first issued and …
Government Response Summary
The government agrees with the implicit recommendation to improve performance measurement. It commits to examining international best practice and assessing quantitative and qualitative measures by Spring 2025, and will write to the Committee upon conclusion of this analysis.
17
Conclusion
Acknowledged
We asked the Treasury about the impact of the announcement of the government’s September 2022 Growth Plan (or “mini-budget”) on the cost of government borrowing. The Treasury explained that in the aftermath of the mini-budget, it required the DMO to raise an additional £72 billion. It added that markets were …
Government Response Summary
The government acknowledges the committee's findings regarding the mini-budget's market impact, stating it is committed to learning lessons from previous crisis episodes and has established projects to enhance preparedness for future financial stability events.
18
Conclusion
Acknowledged
In 2020–21, during the pandemic, the Treasury required NS&I to raise £35 billion from retail savers, which was nearly a sixfold increase in its original remit for that year. Since 2003–04, NS&I has only raised more than £15 billion on one occasion, which was in 2014–15 when it raised £18.2 …
Government Response Summary
The government acknowledges the committee's observations on NS&I's pandemic performance, stating it is learning lessons from crisis episodes and NS&I’s transformation programme will deliver the necessary systems scalability and robustness.
19
Conclusion
Acknowledged
However, the Rainbow Programme is already behind schedule. NS&I’s contract with Atos was due to expire in 2024, but delays to the Rainbow Programme resulted in NS&I extending the contract until April 2025. We asked NS&I about the reasons for this delay. In response, NS&I explained that one particular procurement …
Government Response Summary
The government acknowledges the committee's findings on the Rainbow Programme delays, stating it is working with new providers to formulate an integrated transition plan and improve governance, which it will share with the Committee upon completion.
20
Conclusion
Accepted
NS&I told us it had now successfully completed all the procurement stages and secured all the suppliers for the Rainbow Programme, meaning it was moving into the delivery phase. Despite meeting this milestone, NS&I still described the Rainbow Programme as a “big, complex programme” with many moving parts and challenges. …
Government Response Summary
The government states it agrees with and has implemented the 'recommendation', even though the original item was a conclusion. It confirms NS&I is actively working with its suppliers to formulate an integrated transition plan, which will be shared with the Committee, and is seeking a further contractual extension with Atos for contingency.
21
Conclusion
Accepted
Government borrowing is a complex process, requiring substantial experience and judgement.38 The DMO explained that it was set up as a “specialist organisation” with staff that have very specific skills which are “not normally found in the Treasury”. It added that the DMO is a “repository of specialist skills” available …
Government Response Summary
The government states it agrees with and has implemented the 'recommendation', despite the original item being a conclusion. It details plans for NS&I to upskill staff and grow expertise, the DMO's resourcing strategy, and several HM Treasury initiatives to improve staff retention and address skill shortages, including a recent pay uplift and grade restructuring.
22
Conclusion
Accepted
The DMO is entering a period of transition, with the current Chief Executive Officer (CEO) due to retire at the end of June 2024 after being in post for over 20 years. We noted that an advert had been placed for the role, and asked the Treasury what the timeframe …
Government Response Summary
The government states the recommendation is implemented, highlighting ongoing plans by NS&I to upskill, the DMO's developed resourcing strategy, and HM Treasury's recent pay uplift for staff to address retention and skills shortages.