The UK Debt Management Office – Borrowing on behalf of Government - PowerPoint PPT Presentation

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

• 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.

• 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

• 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

• 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

• 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

• 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’)

• 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

• 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

• 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

• 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

• 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?