Source · Select Committees · Public Accounts Committee

Fifteenth Report - Managing government borrowing

Public Accounts Committee HC 74 Published 5 March 2024

Report Status

Government responded

Conclusions & Recommendations

23 items (6 recs)

Source

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Government Response

AI assessment · 23 of 23 classified

Accepted 11

Acknowledged 5

Deferred 6

Not Addressed 1

Recommendations

4 results

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 … Read more 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 organisations, with distinctly different skills sets and experience to those normally found in the Treasury. The Treasury faces challenges in maintaining the appropriate expertise in its debt management functions to be able to adequately scrutinise and challenge the work of the DMO and NS&I, which can be affected by staff turnover levels. The DMO is entering a period of transition with the current CEO due to retire at the end of June 2024 after being in post for over 20 years. This role has a long and steep learning curve and benefits from having deep, specialist knowledge which can only be developed over time. The Treasury has started the process of finding a replacement but needs to ensure a successor is willing to be in post long enough to develop this expertise. The DMO’s small executive team has other key members nearing retirement, highlighting the need for a clear succession plan. The Treasury asserts that NS&I has been upskilling and increasing the size of its workforce to reduce reliance on contractors and make it a better IT customer as it delivers its Rainbow Programme. NS&I currently outsources its entire back- office and customer-facing operations to a single service provider and the Rainbow Programme, which is already significantly delayed owing to a poorly executed procurement process, will see it move to a multiple service provider model. Recommendation 2: The Treasury should set out, as part of the Treasury Minute response, its overarching plan for building and retaining skills and experience, which should include, but not limited to, the following: • How NS&I is upskilling its workforce to deliver its Rainbow Programme; 6 Managing government borrowing • Details of the DMO’s succession planning, in particular an asse Show less

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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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 … Read more 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 crisis that began in 2007, and the COVID-19 pandemic. The DMO raised £486 billion during the pandemic, triple its original financing requirement for 2020–21. Borrowing such large amounts created significant challenges for Treasury, the DMO and NS&I and they assert that they have learned important lessons from these experiences. NS&I was unable to deliver its remit during the pandemic, raising £23.8 billion against a target of £35 billion, but it is seeking to address some of the underlying causes through Rainbow Programme which will provide more scalability and resilience through better digital processes. The DMO did deliver its financing remit with help from the Bank of England’s quantitative easing (QE) programme, which acted as a guaranteed buyer of government debt (albeit not directly). In the future, quantitative easing may not necessarily be available to support the DMO in raising such vast amounts of money for government. The DMO now needs to address some of the legacy issues created from the large-scale borrowing during the pandemic. This includes repaying the huge number of gilts in the years to come, peaking in 2024–25 with the DMO needing to repay £140 billion of gilts on behalf of government alongside raising large sums of money as part of the annual borrowing process. How the DMO responds to these challenges will aid future decision making during the next crisis. Recommendation 5: The Treasury, DMO and NS&I should set out, as part of the Treasury Minute response, the lessons they have identified and learned from the financial crisis and pandemic, including the process whereby these lessons are captured and the changes that have been made to the borrowing process because of these lessons. 8 Managing governme Show less

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 … Read more

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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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 … Read more

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 (7)

Observations and findings

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.

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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.

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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

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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.

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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.

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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.

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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.

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