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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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the uk debt management office borrowing on behalf of government

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
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.
aims of the review
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
approach to the review
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
briefing the treasury sub committee
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
conclusions recommendations 1
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
conclusions recommendations 2
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’)
conclusions recommendations 3
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
conclusions recommendations 4
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
conclusions recommendations 5
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
deepening our understanding
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
questions
Questions?
  • 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?
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