UK Treasury told to do more to track value for money on gilt sales


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The UK Treasury must do more to ensure government debt is issued at the lowest possible cost to taxpayers ahead of a record year for gilt sales, a cross-party group of MPs has warned.

The House of Commons public accounts committee, in a report published on Tuesday, recommended officials set out plans for improvement after finding the Treasury was “not able to fully monitor” its performance in meeting its objectives “owing to a lack of quantifiable measures”.

The concerns about monitoring value for money in government bond sales come as the UK’s debt pile stands just short of its highest level on record at £2.6tn, after almost doubling over the past decade.

On Wednesday, chancellor Jeremy Hunt is expected to announce plans for record bond issuance, net of Bank of England sales and purchases, in the fiscal year starting in April. Economists at RBC Capital Markets estimate net issuance will rise by 12.7 per cent from the current financial year.

“With such huge sums being borrowed, the government needs to look at how it can evaluate its performance in managing borrowing,” said Dame Meg Hillier, chair of the committee. “Our report finds that the means of tracking success is . . . nebulous at best.”

The committee’s concerns relate to ensuring that the Treasury is not paying over the odds in interest costs, which could happen for instance if bond-dealing banks were colluding to distort the market.

The Treasury is responsible for the government’s policy on the issue, with a Debt Management Office operating at arm’s length from ministers holding the remit of “minimising financing costs over the long term, taking account of risk”.

The report, which marks the first time in seven years that the PAC has scrutinised the government’s debt management, also flagged concerns that the Treasury and DMO “lacked the information needed to better identify unlawful activity and understand the risks posed by international investors”, potentially reducing value for money from future bond sales.

In May 2023, the Competition and Markets Authority provisionally found that between 2009 and 2013 five major banks had illegally shared sensitive information in online chats, potentially affecting the DMO’s gilt auctions.

The report said the DMO needed to improve measures to monitor and minimise harmful behaviour, “given the alleged unlawful activity took place nearly 15 years ago and was not identified at the time”.

The committee also flagged that the Treasury, DMO and National Savings & Investments should set out the lessons they have learned from the financial crisis and coronavirus pandemic as the government faces a “huge number” of gilt repayments, estimated to peak at £140bn in 2024-25. The BoE is also selling £100bn of gilts in the second year of its bond sales programme.

In addition, MPs said the Treasury should set out more steps it could take to gather information on foreign holders, who own about one-quarter of UK debt and who are becoming increasingly important as UK pension fund demand wanes and gilt sales by the BoE add to supply.

However, speaking to the Financial Times in January, Sir Robert Stheeman, outgoing head of the Debt Management Office, said that even if it did have more information on its overseas gilt owners, “it’s not clear to me what benefit we would derive from that knowledge”.

Stheeman, who has overseen an eightfold rise in the UK’s debt pile over his 21 years in the role, will retire from the agency in June.

The PAC report also said the fact that other members of the DMO’s executive team were also approaching retirement highlighted the need for “a clear succession plan” where replacements are willing to stay in the post for long enough to develop sufficient expertise.

“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 report said.

The Treasury did not immediately respond to a request for comment.

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