MPs voice value-for-money fears over ballooning government borrowing

Public Accounts Committee also flags concerns over loss of institutional knowledge at Debt Management Office
HM Treasury

By Jim Dunton

05 Mar 2024

Parliament's financial watchdog has called on HM Treasury to improve the way the management of government debt is tracked – and cautioned that a key part of the borrowing process is at risk of a skills exodus.

The Public Accounts Committee said the Treasury has no directly-measurable success criteria to assess whether its objective to "minimise, over the long term, the costs of meeting the government’s financing needs, taking into account risk, while ensuring that debt management policy is consistent with the aims of monetary policy” is being met.

A just-published report from the committee says the objective is "high-level and difficult to quantify" and that the lack of assessment criteria makes it "impossible to know" whether value for money is being secured from the government's approach.

The report notes that government borrowing managed via the Debt Management Office has ballooned from around £300bn in 2003 to £2.5tn last year, fuelled by the 2007-08 global financial crisis and the Covid-19 response.

Additionally, it flags that DMO chief executive Sir Robert Stheeman is due to retire this summer after 20 years in post, and that other senior staff at the HM Treasury executive agency are approaching retirement age.

MPs also expressed concerns about skills and experience at National Savings and Investments, which borrows money from the public on behalf of the government – but which fell short of the Treasury's significantly increased debt-raising target during the pandemic.

Among their recommendations, committee members called on the Treasury, DMO and NS&I to set out how they will improve performance-measurement of the debt-management objective, including an analysis of  international approaches and possible new metrics.

Another recommendation instructs the Treasury to set out its overarching plan for building and retaining skills and experience, including succession planning at DMO and upskilling the workforce at NS&I.

MPs also said the three organisations should detail the lessons they have learned from the financial crisis and pandemic, how those lessons were captured and the changes that have been made to the borrowing process as a result.

PAC chair Dame Meg Hillier said government spending had exceeded income in all but five of the past 53 years and that securing the "best possible value" for taxpayers was vital.

"Both the Debt Management Office and NS&I managed to successfully raise the funds needed to keep the UK functioning during the pandemic," she said. "Such borrowing was on the rise pre-pandemic, putting taxpayers on the hook for even more debt repayments and interest costs.

"It is of course essential that the best possible value is being derived for the taxpayer from borrowing. But our report finds that the means of tracking success in this regard is nebulous at best.

"With such huge sums being borrowed, the government needs to look at how it can evaluate its performance in managing borrowing."

Hillier added that the departure of Stheeman from the DMO was "a risk for the organisation", particularly with a number of other senior staff also approaching retirement.

Elsewhere, the PAC report found that HM Treasury and the DMO lack the necessary information to identify illegal activity such as the manipulation of government bond auctions and risks posed by overseas investors.

Last year the Competition and Markets Authority made a provisional finding that between 2009 and 2013 five major banks unlawfully shared competitively sensitive information that potentially impacted the DMO’s auctions of government bonds.

Overseas investors, meanwhile, hold around 25% of UK debt – the second-highest proporion of any G7 nation. PAC said there was a lack of consensus on the potential risk created by the situation, but added that the Office for Budget Responsibility believed overseas investors were more sensitive to market movements than domestic investors as they prioritise higher returns over longer-term investments.

Civil Service World sought an HM Treasury response to the report. It had not provided one at the time of publication.

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