The uk debt management office borrowing on behalf of government
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INTOSAI Public Debt Committee Meeting Lisbon, Portugal 21-22 June 2007. The UK Debt Management Office – Borrowing on behalf of Government. Mike Suffield – UK National Audit Office. The UK Debt Management Office. established on 1 April 1998 . an executive agency of the Treasury .

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INTOSAI Public Debt Committee Meeting

Lisbon, Portugal

21-22 June 2007

The UK Debt Management Office – Borrowing on behalf of Government

Mike Suffield – UK National Audit Office

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The UK Debt Management Office

  • established on 1 April 1998.

  • an executive agency of the Treasury.

  • borrows funds on behalf of government through the issue of gilts and Treasury bills

  • increased activity in recent years caused by government spending and ‘roll-over’ of existing government debt.

  • our review examined the DMO’s debt management activities and reporting arrangements.

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Aims of the review

  • to provide briefing for the Treasury Sub-Committee

  • to set out our conclusions and make recommendations

  • to deepen our understanding of debt management arrangements and practice

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Approach to the review

  • The main elements of our work were:

  • a survey of overseas debt managers

  • a survey of gilt (government bond) market participants

  • meetings with DMO and Treasury staff

  • work-shadowing within the DMO; and

  • attendance at key events

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Briefing the Treasury Sub-Committee

  • Parliamentary Select Committees scrutinise the activities of government bodies (hold hearings with senior staff)

  • the UK DMO falls within the remit of the Treasury Sub-Committee

  • Committee members are not debt management experts

  • NAO’s role was to provide members with high quality information to support their questioning of DMO management

  • enhanced accountability

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Conclusions & Recommendations (1)

  • the Treasury has overall responsibility for central government debt management. The DMO operates according to an annual remit agreed with the Treasury

  • the DMO’s activities are guided by the Government’s debt management strategy (predictability and transparency as the most effective way of minimising government borrowing costs)

  • no recognised way of quantifying whether predictability and transparency is the best approach

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Conclusions & Recommendations (2)

  • the UK’s primary debt management policy objective is:

  • “To minimise, over the long term, the costs of meeting the Government’s financing needs, taking into account risk, whilst ensuring that debt management policy is consistent with the aims of monetary policy”

  • the objective is similar to those used by the overseas debt managers in our survey and consistent with IMF/World Bank guidance

  • measuring performance against the debt management objective is not straightforward (no ‘magic number’)

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Conclusions & Recommendations (3)

  • The Treasury has stated that the debt management objective is achieved by:

    • pursuing an open, transparent and predictable gilts issuance policy

    • managing the maturity and nature of the Government’s borrowing

    • selling gilts that achieve a benchmark premium

    • developing a liquid and efficient gilts market

  • our review indicated that the DMO’s activities are consistent with the achievement of the above criteria

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    Conclusions & Recommendations (4)

    • no clear insight into the DMO’s contribution towards the primary debt management objective

    • the ‘Strategic Debt Analysis Model’ may enhance accountability in the future

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    Conclusions & Recommendations (5)

    • the DMO and the Treasury have agreed to take forward some specific actions to enhance performance reporting:

      • encompass key initiatives & developments within performance reporting

      • minimise the number of documents involved

      • provide details of where performance information can be found

      • Treasury to set out clearly what it requires from the DMO when conducting its debt management activities

      • revisit the factors identified as contributing to the achievement of the primary debt management objective

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    Deepening our understanding

    • work focussed previously on the audit of financial statements

    • better understanding of debt management and the issues facing the UK DMO and the Treasury

    • increased credibility with the DMO and the Treasury

    • closer ties with the Treasury Sub-Committee

    • good platform for future work

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    • have other PDC members completed similar reviews? (what were the outcomes?)

    • are the issues raised in our review of relevance for PDC Members?

    • how regularly do others conduct such reviews?

    • what would be useful areas for further scrutiny?