Memorandum by HM Treasury, UK Debt Management
Office, National Savings, and National Investment and Loans Office
SECTION 1. INTRODUCTION
The Sub-Committee has invited written submissions
on the management of the Government's cash and debt requirements.
It is specifically looking at the work of the four bodies which
are jointly submitting this Memorandum.
2. The invitation to submit evidence mentioned
the following issues:
(i) Whether the new framework for managing
cash and debt established since 1997 will be coherent and effective
and whether any further changes are needed.
(ii) Whether the Government has sought an
appropriate balance between gilts and National Savings products
in financing debt.
(iii) How appropriate and attractive the
products offered by the DMO and National Savings are, to the needs
of government and the relevant consumers.
(iv) How transparent the system is by which
the Government's cash and debt requirements are managed, and what
improvements in transparency could be made to facilitate parliamentary
scrutiny.
(v) How the Treasury carries out its monitoring
role and how this could be improved.
(vi) What impact the privatisation of the
former Paymaster Agency and the National Savings partnership with
Siemens Business Services has had on the services provided by
these departments.
3. The main text of this Memorandum provides
an overview of the framework for the government's debt and cash
management established since 1997, which builds on previous reforms
introduced from 1995. This includes background on the structure
of government debt and the wider government fiscal policy framework
that governs government borrowing (section 2); the largest borrowing
instruments, gilts and National Savings products (sections 3 and
4), debt management policy and the recent institutional changes
(sections 5, 6 and 7) and the process and parts of government
involved in debt management, and the monitoring and reporting
arrangements (sections 8 and 9).
4. The new framework for debt and cash management
has been carefully planned and we believe it will be coherent
and effective. We have no reason to believe that further changes
to the basic framework will be needed, however the operation of
the system will be closely monitored and the agencies involved
subjected to regular review.
5. The memorandum addresses the other specific
issues set out in paragraph 2 above as follows. Sections 3 and
4 explain the main features of gilts and National Savings products,
and how these relate to the government's financing needs and the
markets in which the DMO and National Savings operate. Paragraphs
21-24 explain the system which operates to establish the balance
between these products. Annexes A and B contain further details
of gilts and National Savings products, and the management of
them.
6. Sections 8 and 9 explain the system by
which the Government's cash and debt requirements are managed,
including the forms of reporting and accountability, and the methods
by which the Treasury carries out its monitoring role. These sections
explain how the debt and cash management plans are pre-announced
and published to provide transparency and facilitate parliamentary
scrutiny.
7. National Savings partnership with Siemens
Business Services and the privatisation of the former Paymaster
Agency are covered in Annexes C and D.
8. This Memorandum tries to provide a clear
picture of the process and arrangements without burdening the
explanation with too much detail. Inevitably, the process of giving
a coherent account may mean that some points of detail which may
interest the Sub-Committee are not addressed in the main text
or even the annexes. We have, therefore, provided a glossary of
terms and organisations which may not be immediately familiar.
We are also making available to the Sub-Committee the following
publications which go into considerable detail should the Sub-Committee
require further explanation. These are:
National Savings Framework Document.
DMO Framework Document (Revised Version: October
1999).
Gilts: An Investor's Guide.
National Savings Guide for Independent Financial
Advisors.
DMO Annual Report and Accounts.
NS Annual Report and Accounts.
Debt Management Review July 1995.
Debt Management Report March 1999.
Consolidated Fund and National Loans Fund Accounts
and Supplementary Statements for 1997-98.
Monthly statistics on Public Sector Finances:
A Methodological Guide Debt Management—Theory and Practice.
Treasury Occasional Paper No 10.
SECTION 2. BACKGROUND
9. The Government finances its net cash
requirement through a combination of gilt sales, National Savings
products, Treasury bills and an overdraft with the Bank of England
(known as the Ways and Means balance). Although the Government's
cash financing requirement is currently quite small (the November
Pre-Budget forecast of the Central Government Net Cash Requirement
for 1999-2000 is £1.1 billion), Central Government gross
debt—ie the accumulated stock of its debt—is currently
£392 billion (at end March 1999). The cost of servicing this
debt, in terms of Central Government debt interest expenditure,
is forecast to be £26 billion in 1999-2000.
10. Government policy is that borrowing
to finance its cash requirement is done in sterling. Borrowing
in foreign currency has only been used as a means of financing
the foreign currency reserves. Table 1 below shows the total stock
of sterling debt and how this is split between different instruments.
Chart 1 illustrates the proportions of the various sterling borrowing
instruments.
Table 1
CENTRAL GOVE RNMENT GROSS DEBT
| Stock held outside CG at 31.3.99
|
| Instrument | Nominal £ billion
|
| Conventional Gilts | 220.0 |
| Index Linked Gilts | 62.3 |
| Undated Gilts | 3.1 |
| National Savings | 63.6 |
| Treasury Bills | 4.7 |
| Ways and Means | 15.4 |
| Other sterling | 11.4 |
| Total sterling debt | 380.6
|
| Foreign currency debt | 11.8
|
| Total debt | 392.4
|
Chart 1. Composition of sterling debt (as shown in
Table 1)
11. These various debt instruments are generally issued
for different purposes. Governments tend to issue gilts and National
Savings products to finance the annual cash requirement,
and to issue Treasury bills and vary overnight borrowing (the
Government's "Ways and Means" borrowing from the Bank
of England) to cope with in-year fluctuations in cash requirements.
In practice, however, it is never possible to forecast the cash
requirement completely accurately and these short-term instruments
also therefore take the strain of forecasting errors. However,
the effects of the forecasting errors on short-term debt tend
to be unwound in the following financial year. Hence, taking one
year with the next, long-term debt is issued to finance the annual
net cash requirement, and short-term debt to finance in-year fluctuations.
However this general distinction does not form a binding rule—the
Government may also choose to adjust the level of short-term debt
in its annual issuance plans if it wishes to change the amount
of short-term debt in its overall portfolio. (The Government has,
for instance, made such an adjustment in its financing plans for
1999-2000, to prepare for the DMO's new cash management operations.
This is explained in paragraph 40 below.)
12. The Government's new macroeconomic framework, which
is designed to ensure macroeconomic stability, has had a profoundly
beneficial effect upon debt interest costs. The new fiscal framework
has been constructed to deliver sound public finances. This is
based on two strict rules: the golden rule (that over the economic
cycle the government borrows only to invest and not to fund current
spending) and the sustainable investment rule which ensures that
public debt is kept at stable and prudent levels in relation to
national income. The new monetary arrangements have been successful
in reducing both inflation and inflationary expectations. This
has been reflected in reduced borrowing costs, which has benefited
the public sector, like the rest of the economy. But the way the
government conducts its debt management is also an important determinant
of the cost.
SECTION 3. GILTS
13. Gilts are government bonds which provide the purchaser
with a regular income (the annual "coupon", usually
paid in two six-monthly payments), and return the principal value
on redemption. Because they are government backed and the UK government
has never failed to meet its debt obligations, they have a low
default risk. When a stock is first issued the coupon is usually
set close to the current interest rate. So a gilt first issued
in the early 80s might have a coupon of 12-15 per cent compared
with 6 per cent for a gilt issued now. Stocks are usually referred
to simply by their coupon and maturity date. Hence "8 per
cent 2009" refers to Treasury stock maturing in 2009 with
an 8 per cent coupon.
14. The range of gilts on offer and the structure of
the gilts market is described in detail in Annex A. Broadly there
are two types of government bond: conventional gilts which entitle
the holder to a fixed nominal coupon and Index-Linked Gilts (IGs)
where the coupon payments and the principal are linked to the
headline Retail Price Index. The Government has also in the past
issued floating rate gilts, where the coupon varies according
to current interest rates, and undated stocks, where the government
can choose the redemption date. Bonds are issued at a variety
of maturities. Chart 2 overleaf shows how oustanding gilts of
all types are split by maturity.
(Chart 2. Maturities in CG gilt portfolio at 31.3.99)
15. In recent years the Government has tended to issue
long, medium and short gilts in roughly equal proportions. Within
the last two years of much lower issuance, the limited number
of auctions has made it difficult to stick to these precise proportions
each year. The Government has recently tended to issue more longer
term gilts to reflect the increased demand for them from pension
funds. A further explanation of the factors underlying government
issuance policy is given in paragraph 27 below.
16. There is an active secondary market in gilts where
prices fluctuate such that the yield on the gilt reflects market
interest rates generally. With the cash flows fixed, the price
of the bond rises as the yield falls. The secondary market is
of less immediate concern to the Government as issuer than the
terms on which it issues new debt. But clearly the yield in the
secondary market will be closely related to the yield which the
Government achieves on any new issue of gilts and so the Government
has an incentive to promote liquidity and efficiency in the secondary
market, and to design and sell its gilt products in ways which
make them most attractive to end-investors. The main reforms which
have been introduced to make them attractive to investors are
covered briefly in the section on debt management policy below
(paragraphs 30-34) and in more detail in Annex A.
17. The main players in the gilt market is illustrated
in Chart 3, overleaf. The market in gilts is centred on a group
of firms known as "Gilt-Edged Market Makers" (GEMMs).
Chart 3
Debt management organisation and relationships: wholesale
markets
The GEMMs deal continuously with the major professional
investors like pension and insurance funds across the entire list
of gilts. The GEMMs make the market by fulfilling their obligation
to quote continuously buying and selling prices on each stock
to any potential investor. In return for fulfilling this, and
other obligations, the GEMMs have certain privileges when it comes
to auctions (see Annex A). The DMO sell gilts at auctions mainly
to GEMMs. However, the DMO hold regular consultations with both
GEMMs and end-investors and are concerned with the whole gilt
market, both in terms of its efficiency, and the attractiveness
of gilt products. GEMMs and end-investors are also invited to
annual consultation meetings with a Treasury Minister, to help
inform the annual debt management plans, and they are invited
to comment to the Treasury directly on the DMO's performance.
SECTION 4. NATIONAL
SAVINGS
18. Around 20 per cent of the government's outstanding
stock of borrowing has been met through the sale of National Savings
products. National Savings products comprise a wide range of retail
savings instruments, including deposit facilities (Ordinary Account
and Investment Account) available through Post Office counters,
fixed rate products (Capital Bonds, Fixed Rate Savings Bonds,
Savings Certificates and Pensioners Bonds), and variable rate
bonds (Income Bonds). Some instruments pay interest gross and
are taxable; some are tax free (though the rate offered takes
account of this). Some are designed to produce a monthly income,
others are medium-term for accumulating investments. National
Savings offers a cash ISA and a unique, highly popular product
in Premium Bonds.
19. With the ample supply of retail savings products
from the private sector, the rationale of National Savings is
to help finance the government's net cash requirement, and to
do so cost-effectively. Where governments have decided to encourage
saving through tax concessions, they have done so across the savings
market through PEPs, TESSAs and now ISAs rather than any subsidised
National Savings product.
20. Although National Savings has a secondary objective
to promote Government savings policy, this has tended to be manifest
in the style of its funding. For example, National Savings introduced
an ISA in order to enhance its product range and competitive position,
supporting its primary financing task. But the design of the ISA
took full account of the Government's objectives for ISAs: the
National Savings ISA meets the CAT standard, caters for a variety
of needs (lump sums, regular savings, occasional deposits), is
straightforward and has very wide access, including through the
Post Office. More generally, the Government requires National
Savings to operate "in a manner which benefits both Government
and personal savers—now and in future". This means,
in practice, that National Savings works to a set of core values:
security, integrity, straightforwardness and a "human face"
(see Annex B). These values underpin a product range which addresses
a wide variety of savings needs, offers fair value, and offers
a high standard of service. In this way National Savings supports
savers both directly and, by encouraging choice and competition,
indirectly. National Savings is also undertaking further work
to identify whether there are other ways in which those who do
not currently save might be encouraged to do so.
21. National Savings' aim is to add value to financing
part of the national debt at an overall cost marginally less than
through gilts. To achieve this, its products are priced in such
a way that it would cost the Exchequer marginally less than the
equivalent gilt or short term borrowing rate once the administrative
costs of National Savings and any tax advantages are included.
Thus a fixed rate National Savings Certificate will normally be
priced in such a way that the rate offered is a little less than
a 5 year conventional gilt yield, after covering the administrative
cost and allowing for the fact that the Certificate is tax free.
Similarly, the interest offered on the Ordinary Account will be
a little less than the short term variable rate at which the government
might have to borrow, again taking into account the cost of providing
the facility. The rate offered on any particular product, and
the overall reduction in debt interest which can be achieved,
depend upon a number of factors including rates offered by competitors
for similar products. In 1998-99, through its operations, National
Savings produced a saving to the Exchequer of about £100
million compared with equivalent financing through gilts, after
covering all administrative costs and the cost of tax foregone.
22. The amount of government financing done through National
Savings is determined by this pricing policy. Rather than an explicit
decision being made as to how much to finance through gilts and
how much through National Savings, based on relative costs, the
framework ensures that National Savings will not be more expensive
than gilt sales. Estimates are then made of how much sales are
likely to result on this basis. These estimates are used to construct
the assumption about National Savings net financing contribution
which is then input into the financing arithmetic which determines
the level of gilt sales for the coming year. (This process of
setting the gilt sales level is described further in paragraphs
50-52 below). This assumption for National Savings net financing
contribution forms part of the remit which is set for National
Savings and published in the Debt Management Report each year.
23. However, that does not mean that the amount of government
financing provided by National Savings is entirely demand-led.
National Savings require an indication of how much financing they
are expected to do in order to plan their business over the medium-term.
In order to provide the basis for efficient operations and business
planning, the Treasury has indicated that it is not intending
at present to ask for major shifts in National Savings contributions.
Even in the event of declining government financing requirements,
National Savings should plan on the basis of at least maintaining
its real level of deposits (ie keeping deposits level after adjusting
for inflation). The gilts market is better placed to cope with
changing financing requirements than is the retail arm through
National Savings. Imposing a stop/go policy on National Savings
could have detrimental effects on its ability to fund, and if
its reputation was run down, it may be very costly to build up
again. It is therefore asked to retain the potential to increase
funding, should the need arise.
24. Nevertheless, National Savings must continue to provide
the Government with a useful service, in terms of fulfilling its
objectives, and the agency will be reviewed in 2000 (in line with
the regular review process for an Executive Agency). Unlike the
DMO, the remit set does not restrict the maturity mix of National
Savings products. Whilst National Savings accounts for 20 per
cent of central government debt, or less this is not a major concern.
However, financing through National Savings raises the proportion
of short-term debt within the government's whole debt portfolio,
since National Savings products are either at variable rates,
or of fixed rates of interest of up to five years.
SECTION 5. DEBT
MANAGEMENT POLICY
Objective
25. The Government's debt management objective is:
"To minimise over the long-term the cost of meeting the
government's financing needs, taking into account risk, whilst
ensuring that debt management policy is consistent with the objectives
of monetary policy."
26. The emphasis on long-term means that the Government
tries to minimise the net present value of debt costs rather than
the debt interest bill in the current year, or over the short-term
horizon over which it normally presents its public expenditure
and fiscal policy plans in the Budget. Given the long-term nature
of many of the debt instruments and the importance of an issuer's
reputation in debt markets, any tendency to concentrate just on
the next few years could have potentially very damaging consequences
in future years.
27 The reference to risk in the objective means the Government
does not simply choose a strategy which minimises the expected
average debt cost but tries to ensure that the chosen one is robust
against different economic outturns. The main way in which the
government can influence the composition of its debt portfolio
is through the strategy for new issuance which it adopts each
year. This sets the proportions of index-linked and conventional
gilts and the pattern of issuance across different maturities.
Except where there are clear institutional preferences (eg recently,
when the maturing of pension funds increased their demand for
long gilts), the government is rarely in a position to know for
certain that issuing one sort of gilt will prove cheaper than
another. The government seldom has any better information about
the future path of interest rates or inflation than the market,
which will quickly price any information into the relative structure
of gilt yields. So rather than trying to beat the market by outguessing
how the economy will behave, a more fruitful strategy will usually
be for the government to select a portfolio which will protect
it against as wide a range of risks as possible. Thus issuing
long maturity conventional gilts exposes the government to the
risk of locking into interest rates which then fall by more than
is expected; whereas concentrating issuance on gilts with short
maturities exposes it to the risk of having to refinance large
amounts of the portfolio when interest rates are temporarily very
high. Index-linked issuance has reduced UK debt costs over the
past couple of decades mainly because governments have controlled
inflation more successfully than the market anticipated when they
bought indexed gilts. Investors may also pay a premium for index-linked
gilts because they provide a valuable hedge against inflation.
These are all the kind of considerations which have to be brought
to bear on the annual decision on the structure of gilts to issue.
The Treasury is taking forward a programme of research to identify
what systematic analysis can inform its debt management strategy.
A working paper on this was published earlier in the year as a
Treasury occasional paper. [1]
28. The reference to monetary policy means that the Treasury
and DMO will not undermine the Bank's delivery of the inflation
target (eg by "printing money" to finance the cash requirement;
or by the DMO cash management operations obstructing the Bank's
money market operations). This constraint on debt management reflects
the new arrangements between the Bank and the DMO, following the
announcement in 1997 of the separation of responsibilities for
implementing the Government's monetary and debt management obectives
(which is discussed in paragraph 35 below). However the revision
to the debt management objective to take account of that separation
was only minor. The 1995 review of debt management policy (discussed
in paragraph 30 below) acknowledged that debt management no longer
played a major role in reinforcing monetary policy. Further background
on this issue is discussed in an article entitled "Government
debt structure and monetary conditions" in the Bank of England's
November 1999 edition of the Quarterly Bulletin.
29. To a large extent the cost of the Government's debt
financing reflects prevailing interest rates in the market, both
currently and in the past when debt was issued. But there is still
scope for Government debt management policy to affect overall
cost. Given the size of the Government's debt even small reductions
to the rate achieved can potentially yield large savings. Thus
lowering gilt yields by one hundreth of one per cent (or a "basis
point" in the market jargon) would, once it feeds through
across the whole of the debt portfolio, save the Government £30
million a year. Recent reforms (since 1995, see below) have therefore
tried to reduce debt interest costs by improving the method of
issuance, and the efficiency of the gilt market.
1995 DEBT MANAGEMENT
REVIEW
30. The Treasury and the Bank of England conducted a
major review of debt management policy which reported in 1995.
The review heralded the move away from the hitherto highly discretionary
policy which the authorities had adopted on debt issuance. The
review rejected the argument that the use of discretion was beneficial
to the government because it enabled it to borrow the right sort
of debt when the price was right. But there is no reason to believe
that the government is able to beat the market in this way. Indeed
the use of discretion could be costly for the government because
market participants will charge the government a premium for the
uncertainty over its issuance policy. Therefore the policy advocated
by the review was one of promoting efficient, liquid and well-informed
markets which encouraged the international investor to participate,
with the premium for liquidity shared between issuer and investor.
It therefore recommended a programme of annual published remits,
setting out in advance what the government planned to issue in
terms of maturity and type of gilt, and a pre-announced auction
calender with a concentration on sale through auction, rather
than through taps. ("Taps" are sales of small amounts
of gilts in an unscheduled way, at very short notice.)
31. Other reforms since 1995 have also improved the attractiveness
of UK gilts. A key strategy has been to concentrate gilts issuance
in specific maturities which form large and highly liquid "benchmark"
issues and attract a significant premium. Although there are about
50 issues of conventional gilts in the market, at any one time
the Government will tend to be issuing only three: one of a short-term
maturity of around five years, a medium-term maturity of around
10 years and a long maturity gilt which we are currently issuing
with a redemption date of 2028. Once a new stock has been created,
the Government will tend to reissue it at subsequent auctions
whilst it still falls in the benchmark range. The same gilts sold
at different auctions become indistinguishable—a concept
known as fungibility. But after a year or so, stocks will have
moved out of their benchmark range, so a stock that was originally
issued as a five year plus stock will after a couple of years
become less than four years and will have lost its characteristic
of benchmark status. At that point the Government would tend to
issue a new five year benchmark.
32. The gilt repo market was introduced in January 1996.
A "gilt repo" is a sale and repurchase agreement under
which one market participant agrees to buy a gilt from someone
else in the market, and sell it back to them at an agreed date
for an agreed price. This facility makes it easier for GEMMs to
meet their obligations to deliver gilts. It also enables investors
to borrow money against gilts security, or to borrow stock for
hedging purposes. From the Government's perspective, increasing
the attractiveness of gilts to investors should reduce the yield
on gilts and reduce the debt interest bill.
33. A strips market for gilts was introduced in 1997.
This allows someone who holds a gilt (which is an entitlement
to coupon payments and repayment of the principal) to trade each
coupon and the principal separately. This is another feature which
increases the attractiveness of gilts and hence reduces the yields
and the government's overall debt interest bill. Nearly all conventional
gilts issued since 1994 are strippable. Prior to that date stocks
were issued with a variety of coupon dates. Strippable stocks
have uniform coupon dates of 7 June and 7 December, so that, when
stripped, the coupons derived from different stocks become fungible,
(ie indistinguishable and can be traded without distinction),
thereby improving liquidity in the strips market.
34. The Government has also simplified the tax treatment
of gilts, in order to improve the efficiency of the gilts market,
and make gilts more attractive to foreign investors. The most
significant tax reforms have included the streamlining of the
corporate tax system for bonds and gilts in 1995-96, and the payment
of all gilt coupons gross of tax from 1997-98. (When foreign investors
are paid coupons gross of tax, the idea is not to allow them to
avoid tax but to avoid complicated inter-country tax arrangements).
SECTION 6. RECENT
INSTITUTIONAL CHANGES
35. Unitl April 1998 the Bank of England acted as the
Government's agent for selling gilts and managing the gilts market.
As part of the announcement which gave responsibility for setting
interest rates to the Bank of England in 1997, the Chancellor
decided that responsibility for government debt and cash management
should pass to the Treasury. This separated the responsibility
for monetary policy from debt and cash management. This was done
to eliminate any market concerns that the debt and cash operations
might use inside knowledge about future interest rate changes,
and to ensure that the debt and cash management operations and
the monetary policy operations were accountable separately, and
delivered clear separate objectives.
36. Following a consultation exercise in July 1997, Treasury
Ministers decided to set up a new executive agency of the Treasury—the
United Kingdom Debt Management Office (DMO)—to carry out
debt and cash management operations. The DMO came into existence
on 1 April 1998, and took over responsibility for debt management
from the Bank of England on that date. As is normal for an executive
agency, its relationship with the core Treasury is defined in
a framework document. The basic structure is for Treasury Ministers,
advised by core Treasury officials, to set the policy framework
and an annual gilts remit and leave the delivery and detailed
decisions to the DMO, within the term of the remit. (Hence the
DMO decides on such details as which stock to auction and when).
The Bank of England has retained responsibility for gilts registration,
and is also the DMO's agent for gilt settlement.
37. Although the transfer of debt management operations
from the Bank to the DMO involved considerable organisational
change, the transfer was relatively straightforward because there
was no change in approach to the basic policy or the way operations
were conducted. However the position has been very different for
cash management. Previously, the change in the government's daily
cash position has been met by varying the size of the government's
Ways and Means borrowing from the Bank of England, and the Bank
also managed the effect of the government's short-term cash transactions
on the banking system as part of their monetary operations. (This
is explained in more detail below.) In taking over this responsibility,
the DMO have had to establish their own new set of operations
to actively manage the government's cash position, and to separate
these new operations from the Bank's money market operations.
This has involved extensive consultation, and planning, both in
terms of the policy of how the operations will work, and the actual
implementation of new systems. The necessary policy and new systems
are now in place, and the DMO will assume responsibility for managing
the Government's short-term cash transactions with the banking
system from April 2000, following a transitional period.
SECTION 7. CASH
MANAGEMENT
Separating cash management out from the Bank's money market
operations
38. The arrangements for balancing the government's daily
cash position are summarised in Chart 4 on page 16, both now,
before the separation of cash management from the Bank's money
market operations, and in the future (from April 2000), after
the start of the DMO's separate cash management operations. The
current position, before the separation, is that the Bank's money
market operations are geared towards delivering the Monetary Policy
Committee's decisions on the level of short-term interest rates,
whilst offsetting the effect of the Government's short-term interest
cash transactions with the banking system. If the Government's
short-term cash transactions do not of themselves create a daily
shortage in the money markets, then the Bank creates a shortage
by draining liquidity through the sale of Treasury bills. Hence,
although Treasury bills are a government debt instrument, the
Bank's monetary considerations determine the level of the weekly
tender. Having created the shortage, the Bank is in a position
to relieve it by lending money to the market at its chosen interest
rates. The Bank, acting as the banker for the government, provides
the market with sufficient funds to cover its daily cash needs,
such that any variation in expenditure or revenue not met by longer
term debt instruments, results in a change in the level of the
Government's Ways and Means borrowing from the Bank.
39. When the DMO start their new, separate cash management
arrangements, they will take on the responsibility of managing
the aggregate cash flows of government (borrowing short-term on
days when the government is a net spender, lending out money on
days when revenues are pouring in) in the most cost-effective
way without worrying about the effects on monetary policy operations.
The Bank of England on the other hand will be assured that the
Government's has financed its own net cash position, and will
pursue its monetary policy independently of what happens across
the government's books. The DMO will use Treasury bills as a means
of short-term borrowing, deciding on what length of bill to issue,
using information on the likely seasonal pattern of the government's
cash flows. However the Bank will also continue to need to drain
the market of liquidity through the sale of bills, and thus create
the money market shortage. One way of doing this would have been
for the Bank to issue its own bills, but the Bank and Treasury
have agreed that to have bills which were issued by both the Treasury
and the Bank competing in the market would cause confusion and
reduce liquidity. The DMO have therefore announced that they will
issue additional Treasury bills at the Bank's request, depositing
an equivalent sum out of the proceeds with the Bank. This element
of the DMO acting for the Bank will be completely transparent
such that the market will know, as it does now, precisely what
the Bank is doing in terms of draining the market.
Table 2
PREVIOUS AND NEW ARRANGEMENTS FOR CASH MANAGEMENT
BEFORE
Bank of England Responsibility
Bank money market operations balance flows in and out of
banking sector (including central government cash flows)
and relieve daily money market shortage.
Change in Ways and Means borrowing from Bank balances central
government accounts at Bank.
Bank issue Treasury bills, as NLF liabilities, to create
future money market shortage.
Treasury Responsibility
EFA forecast daily central government cash flows to inform
Bank daily money market operations.
AFTER
Bank of England Responsibility
Bank money market operations balance cash flows in and out
of banking sector (excluding central government cash flows)
and relieve daily money market shortages
Level of Ways and Means borrowing from Bank frozen, no
longer varied each day to balance central government accounts
Treasury Responsibility
DMO issue (more) Treasury Bills, as DMA liabilities, to
smooth future central government cash flows, plus pre-announced
amount for Bank, to create future money market shortage.
DMO daily cash management operations balance central government
accounts at Bank of England
EFA forecast daily central government cash flows to inform
DMA cash management operations
40. Following consultation on its proposals for the new
cash management operations, the DMO has announced that it will
use Treasury bills as the main instrument for smoothing the government's
cash flow. The government financing plans for 1999-2000 have accordingly
increased planned Treasury bill issuance, to prepare for the start
of the DMO's cash management operations in April 2000. The DMO
has also announced that it will use a combination of money market
tenders and bilateral dealings with cash management counterparties
to neutralise the remaining net daily cash flows.
41. As a consequence of the DMO taking on cash management,
the government will cease to use the Ways and Means balance with
the Bank of England as a means of day to day cash management.
This means that the level of Ways and Means will no longer vary
on a daily basis: after the transition to the DMO's cash management
operations is completed, the level will remain constant. The Government
has also announced that it will then consider paying Ways and
Means off. The Ways and Means facility is a special opt out from
Stage II of EMU which in general outlaws government borrowing
from its central bank. If the UK were to decide to join Stage
III of EMU, the Government would have to cease borrowing from
the Bank via Ways and Means.
Management of cash within government
42. Government cash flows, whether of expenditure, revenue,
interest payments or borrowing are based around two central funds:
the Consolidated Fund and the National Loans Fund. Like all the
main central government accounts these are held at the Bank of
England. Chart 5 overleaf shows in simplified form how the various
accounts involved in cash management relate to one another. In
outline, government revenue from taxation and other sources is
collected daily into the Consolidated Fund. Payments out of the
Consolidated Fund to finance central government's spending are
authorised by Parliament either through Supply Services in the
form of Votes or Standing Services. Virtually all of this spending
is channelled through accounts held by government departments
at the Office of HM Paymaster General, which in turn banks at
the Bank of England.
43. The National Loans Fund (NLF) is the government's
borrowing account. One of its functions is to lend the authorised
bodies such as nationalised industries and (through the Public
Works Loan Board) to local authorities. The NLF is the fund which
formally borrows money for the government. Hence the proceeds
of gilt sales by the Debt Management Office and deposits with
National Savings are transferred to the NLF. Small sums are also
borrowed from other external sources (eg via taxpayers purchasing
certificates of tax deposit) and the NLF also borrows in foreign
currency to finance and hedge the foreign currency reserves.
Chart 4
MAIN CENTRAL GOVERNMENT ACCOUNTS AND CASH FLOWS AFTER
INTRODUCTION OF DAILY CASH MANAGEMENT
44. A system is in place known as the Exchequer Pyramid,
to ensure that any cash balances which remain in government accounts
at the Bank of England at the end of each day are channelled into
the main central government accounts to reduce the government's
cash borrowing needs to a minimum. If the Consolidated Fund has
a surplus at the end of the daily operation this is automatically
transferred to the NLF to reduce its borrowing needs. If, on the
other hand, the Consolidated Fund is in deficit this is automatically
financed by a transfer from the NLF. The NLF will then borrow
overnight any remaining cash deposits held in any government accounts
(including the accounts held by government departments at the
Office of HM Paymaster General).
45. When the DMO start to manage central government's
daily cash requirements actively, the DMO's objective will be
to undertake market borrowing or lending during each day to balance
the remaining position on the NLF, after the operation of the
Exchequer Pyramid sweeps up cash into the central funds as described
above. To achieve this objective the DMO will need reliable forecasts
of each day's significant cash flows in and out of central government,
and up to date monitoring information on actual cash flows as
they occur. For cash management purposes the flows that matter
are those which cross the boundary between the Exchequer Pyramid
accounts at the Bank of England and accounts elsewhere (ie cross
the outer black line in Chart 5 on page 18).
Forecasting and monitoring cash flows
46. At present the responsibility for forecasting and
monitoring central government cash flows is split between the
Treasury's Exchequer Funds and Accounts Team (EFA) and the Bank
of England. The Bank is involved for two reasons: firstly, because
central government cash flows are currently an important element
of the Bank's money market management operations and, secondly,
because its own operations give rise to some of the relevant flows.
Each week, EFA produce daily forecasts of these flows for the
following 15-19 weeks to help the Bank to plan their operations.
The forecasts are based on a mixture of firm information, forecasts
from other departments and analysis of past trends.
47. Throughout the day, EFA also monitor cash flows as
they occur and update the forecasts of the eventual outturn. This
requires a considerable collaborative effort involving OPG, a
number of government departments and the Bank of England reporting
actual cash flows during the day to EFA. EFA then has to make
estimates of cash flows still to be made later in the day before
reporting its forecast outturn periodically to the Bank, who must
then adjust their market dealing operations accordingly, after
taking account of the remaining flows for which they are responsible.
48. When the DMO take on cash management, government
cash flows will cease to be a component of the Bank's money market
operations; government cash flow forecasting and monitoring will
then be split between EFA and the DMO.
49. Accurate forecasts will be very important to the
success of cash management by the DMO, and EFA have been seeking
to involve departments more actively in the forecasts. A scheme
is currently being piloted which will give departments incentives
to improve the forecasting and management of their cash flows.
SECTION 8. THE
ANNUAL PROCESS
FOR PLANNING
GOVERNMENT FINANCING
The financing arithmetic
50. At or shortly after the Budget each Spring, the Government
publishes its remit to both the DMO and National Savings, setting
out what is expected of them to meet its financing needs over
the coming year. These are published in the Debt Management Report.
The key to the planning process is the financing arithmetic; an
example of which is set out in Table 2 overleaf. This starts with
the Central Government Net Cash Requirement, which is derived
as part of the Budget forecast. The net cash requirement is not
the main focus for the fiscal policy position of the Government,
where the key concepts are the current balance and net borrowing,
both of which are accruals based concepts. But for the purposes
of working out the government's financing needs, a cash based
measure is required. Hence the Central Government Net Cash Requirement
(formally known as the Central Government Borrowing Requirement)
is the key concept for planning the government's financing. A
number of adjustments need to be made to the Central Government
Net Cash Requirement however, in order to arrive at the gilts
sales for the coming year.
Table 3
THE 1999-2000 FINANCING REQUIREMENT (£ BILLION)
| Central Government Net Cash Requirement (forecast)
| 6.2 |
| plus expected net financing for foreign currency reserves
| 2.4 |
| plus expected gilt redemptions | 14.8
|
| plus residual unwinding excess gilt sales from previous financial year
| -2.3 |
| Financing Requirement |
|
| Less net financing from: |
|
| National Savings | 0.1
|
| Certificates of Tax Deposit | 0.0
|
| increase in Treasury bills and other short-term debt for cash management
| 3.6 |
| Gross gilt sales required | 17.3
|
| of which: | |
| Short conventionals (3-7 years) |
5.0 |
| Medium conventionals (7-15 years)
| 3.0 |
| Long conventionals (>15 years)
| 5.8 |
| Index-linked gilts | 3.5
|
Source: 1999-2000 Debt Management Report. Figures may
not sum due to rounding.
51. First, any change to the Government's holdings of
foreign currency, except in so far as it is achieved through changes
in foreign currency borrowing, will affect the equation. If the
government sells foreign currency and buys sterling, that reduces
the amount of sterling required through gilt sales. Second, each
year some gilts will fall due for redemption. This means additional
gilt sales will be required to refinance them. Third, the policy
is usually to reverse any over-financing or under-financing from
gilt sales in the previous year which has arisen because the outturn
is different from the forecast on which the last gilts remit was
based. Fourth, some of the financing needs will be met by changes
in the net borrowing through National Savings. Fifth, occasionally
other forms of central government borrowing come into the equation
(eg sales of additional Treasury bills needed for the DMO's cash
management operations). After taking into account each of these
factors, the financing arithmetic derives the figure for gilt
sales needed over the coming year.
52. Having set the overall level of gilt sales required,
the DMO remit also lays down how much to issue through conventional
rather than index linked gilts, whether to issue any floating
rate gilts, and the maturity mix. In setting the proportions within
the remit the Government takes account of market views. The Economic
Secretary hosts two meetings a few weeks before the remit is set,
one seeking the views of investors and the other those of the
GEMMs. Together with market views the Government considers what
portfolio would best deliver its policy of financing at least
cost, having due regard to the risk it runs in terms of different
scenarios of economic conditions. Finally, the remit sets out
an auction calender for the coming year. This helps allow the
investor to plan ahead and delivers the transparency and pre-commitment
policy described in paragraph 30 above.
The annual process
53. The auction calendar, set out prior to the start
of the year, gives fixed dates for auctions but does not specify
which stock will be issued at each auction. Shortly before the
beginning of each quarter the DMO will announce the maturity range
(and usually the actual stock) to be issued at each of the auctions
due in that quarter. The annual process is illustrated in Chart
6, overleaf. The DMO consults the market (both investors and GEMMs
separately) prior to each quarterly announcement. The DMO then
announce the amount to be auctioned (and the precise stock if
not already announced) on the Tuesday in the week preceding the
actual auction.
54. Although the financing remits are set before the
beginning of the financial year, a revised forecast mid-year,
usually at the time of the Pre-Budget Report in November, triggers
a review of the financing programme. If necessary, the financing
arithmetic will be revised in the light of any change in the forecast
of the Central Government Net Cash Requirement and any other relevant
factors, and Treasury Ministers will amend DMO and NS remits.
55. The financing arithmetic for the current year will
usually also be revised at the end of the year, with the Budget
in March, when the final forecast for the Central Government Net
Cash Requirement is made for the year just ending. However at
this final stage of the year, most National Savings products and
gilts have already been sold and any remaining gilt sales are
pre-committed and cannot be changed. This means that the short-term
cash management financing instruments have to bear the brunt of
the change in the forecast for the net cash requirement, and this
temporary financing is usually unwound in the following year's
financing plans.
Chart 5
REVISIONS TO FINANCING PLANS THROUGH THE YEAR
SECTION 9. ACCOUNTING
AND REPORTING
ARRANGEMENTS
56. The agencies, departments and Treasury items which
are involved in the management of government debt are all listed
in the box overleaf, with a brief summary of the role which each
of them plays. This section of the memorandum focuses first on
the accounting and reporting arrangements for each part of the
debt management operations, and how the accounts interrelate.
The end of this section covers how the outputs from the various
debt management operations are brought together, consistent with
the measurement of the Central Government Net Cash Requirement,
and presented within the financing arithmetic (covered in Section
8 above).
Central Funds
57. The two key central government funds: the Consolidated
Fund and National Loans Fund (NLF) are key to understanding the
accounting arrangements for government debt and cash management.
Departmental expenditure is authorised by Parliament through Votes
(Supply Estimates) and these draw upon the Consolidated Fund.
The process of consolidation goes back to Gladstone's reform,
which replaced the system of taxes earmarked for specific purposes.
The NLF was set up by the National Loans Act of 1968. It became
the fund which formally borrowed money for the Government. Thus
gilts, National Savings products, Treasury bills and the Ways
and Means overdraft are all liabilities of the NLF. Each year
the accounts of the Consolidated Fund and the NLF and supporting
data in the form of Supplementary Statement are presented to Parliament.
The Permanent Secretary to the Treasury, Sir Andrew Turnbull,
is the Accounting Officer for both the Consolidated Fund and the
NLF.
58. The Exchequer Funds and Accounts (EFA) team in the
Treasury are responsible for managing the Consolidated Fund and
National Loans Fund, and forecasting government cash flows. They
report directly to Sir Andrew Turnbull on accounting issues. EFA
also have close dealings with National Savings and the DMO, reflecting
their responsibility for managing the NLF.
Table 4
DEBT MANAGEMENT ORGANISATION: WHO DOES WHAT
| Debt and Reserves Management |
|
| Treasury team (DRM) | Advises Ministers on:
|
| — debt management policy, plans and organisation:
|
| — DMO and National Savings remits;
|
| — publication of Debt Management Report.
|
| Exchequer Funds and Accounts |
|
| Treasury team (EFA) | Advises Ministers and the Treasury Accounting Officer on:
|
| — operation of and accounts for Consolidated Fund and NLF;
|
| — co-ordination of central government banking arrangements;
|
| — forecasts of cash flows in government bank accounts.
|
| National Savings | |
| An Executive Agency and Government department. Reports directly to Treasury Ministers.
| Sells National Savings products which contribute to financing the government's net cash requirement.
|
| UK Debt Management Office (DMO) |
|
| An Executive Agency of the Treasury. | — Sells and conducts other operations in gilts:
|
| — oversees the gilts market;
|
| Reports directly to Treasury Ministers, |
— deals in government debt for CRND; |
| and Treasury Accounting Officer; | — cash management;
|
| liaises with DRM. | — accounts for Debt Management Account.
|
| National Investment and Loans Office (NILO)
| Includes: |
| Public Works and Loan Board (PWLB), who administer loans to Local Authorities from the NLF;
|
| A separate department under the Chancellor of the Exchequer.
| Office of HM Paymaster General (OPG), who carry out core responsibility for service delivery of all OPG functions; and
|
| National Debt Office (NDO) who administer accounts, including investment of deposits.
|
| The Bank of England | Provides services to DMO for:
|
| — gilt registration and settlement;
|
| — back office function for gilts;
|
| — banking. |
| Provides services to DRM for:
|
| — management of UK foreign currency borrowing and Treasury foreign exchange reserves.
|
| Provides banking services and cash monitoring services to EFA and DMO, and banking services to OPG.
|
59. Debt interest (whether for gilts coupons, National
Savings products or other forms of borrowing) is a charge on the
National Loans Fund[2],
with recourse to the Consolidated Fund. The Consolidated Fund
reimburses the National Loans Fund for the debt interest it cannot
meet from its own interest receipts on its lending, without this
being subject to Parliamentary Vote. It is one of the standing
services allowed for in legislation.
60. Although National Savings products are formally liabilities
of the NLF[3], it is a
National Savings responsibility to account for the transactions
and reconcile their customer records with their liabilities to
the NLF. National Savings are required to produce a White Paper
account for both the Ordinary Account and the Investment Account,
and is now on a voluntary basis planning to produce accounts covering
all the other products, following agreement with the NAO. These
product accounts are all quite separate from the National Savings
Vote, which bears its administrative expenditure but not the debt
interest paid.
National Investments and Loans Office
61. Some 200 years ago, concerned at the growing size
of the national debt, William Pitt established the Commissioners
for the Reduction of the National Debt (CRND), who were to reduce
debt through the use of sinking funds. The Commissioners have
never been abolished and the secretariat to the CRND, called the
National Debt Office, is part of the National Investments and
Loans Office (NILO). NILO is a separate department under the Chancellor
of the Exchequer. However, despite their name the CRND play a
relatively minor role in debt management policy and operations.
NILO has three functions. It services the Public Works Loans Board
which makes loans out of the NLF to local authorities. It runs
the Office of HM Paymaster General (OPG) which is responsible
for providing banking services to government. (The role of OPG
and the privatisation of Paymaster Agency are dealt with in more
detail in Annex D.) NILO also acts, through the National Debt
Office, as the investment manager for a number of central government
(and related) funds which are required to invest deposits in gilts
or other government securities rather than on the open market.
Whereas most receipts are returned by departments to the Consolidated
Fund (apart from appropriations-in-aid) and expenditure out of
the Consolidated Fund is authorised through Votes, there are a
number of funds where these requirements do not apply. The National
Insurance Fund, for instance, receives national insurance contributions
and pays out contributory benefits. Its working balances are invested
in gilts with NILO acting as investment manager. Similar arrangements
for holding deposits are in place for the National Lottery Distribution
Fund, court funds, the Insolvency Service and several others.
NILO's sale and purchase of gilts for these funds is conducted
through the DMO. NILO is permitted to buy some gilts at each auction,
but where it cannot get sufficient gilts from these sources it
can ask for a special creation of non-market stock to be made
from the National Loans Fund. Such "NILO only" stock
can only be sold back to the DMO who will if necessary cancel
it.
62. The other role that NILO had until recently, was
to hold the gilt-edged official operations account (GOOA). This
account was set up in 1993 to act as a warehousing account for
gilts. A combination of the Maastricht Treaty and tax arrangements
meant that neither the Treasury nor the Bank of England could
hold this warehousing account. So all official transactions in
gilts, including primary issuance and any secondary market dealing,
was done on this account. A week before any auction, gilts were
sold from the NLF to the GOOA and the auction proceeds paid by
purchasers into the GOOA. Any secondary market purchases or sales
by originally the Bank and then DMO were done on the GOOA account.
The head of NILO was the Accounting Officer for the GOOA and the
annual accounts were presented to Parliament.
63. When the DMO took over responsibilities from the
Bank, this enabled the Government to set up a new account to replace
the GOOA (tax changes a few years earlier removing the second
reason for the establishment of the GOOA). The Finance Act 1998
amended the National Loans Act to provide for the establishment
of the Debt Management Account (DMA). This was created by Order
on 15 November 1999. The remaining holdings of the GOOA were sold
to the DMA and the GOOA has now been closed. Final accounts will
be presented to Parliament for its transactions in 1999.
Debt Management Account
64. The DMA, however, will not simply take over the gilts
transactions previously done on the GOOA. It will also be the
account which records the DMO's cash management operations. In
future Treasury bills will be issued by the DMO and will become
liabilities of the DMA. Any lending by the DMA to the market,
in periods when the government has excess cash, will be an asset
of the DMA. Clearly, the DMA will have a close relationship with
the NLF: sizeable and frequent flows will exist between the two.
Essentially the DMA's role is to meet the financing needs of the
NLF, both in terms of long-term requirements (debt management)
and short-term and day-to-day cash needs (cash management). The
Chief Executive of the DMO is the Accounting Officer for the DMA
and accounts will be presented to Parliament in the normal way.
However, gilts will remain the liabilities of the NLF. The DMA
will be involved in primary issuance and occasionally in a small
amount of secondary market gilt transactions. The responsibility
for paying gilt coupons and redeeming debt on maturity will fall
to the NLF, with Registrar's Department of the Bank of England
acting as the Treasury's agent.
Bank of England
65. The Bank of England still provide the registration
and settlement functions to the gilts markets, and banking services
to DMO. Bank Registrars also offers a brokerage service for private
individuals who wish to buy and sell gilts. This is a service
which previously was provided by the National Savings Stock Register
(NSSR). In order to reduce costs, the gilts registration system
was restructured with effect from July 1998, and the NSSR and
Bank Registrars were brought together under the responsibility
of the Bank of England.
66. Secondary market transactions in gilts normally take
place between two private sector parties. The settlement process
is provided by the Central Gilts Office, formerly of the Bank
of England but now owned by CRESTCo, and due to be merged with
the equities settlement system, CREST. The DMO has responsibility
to monitor the gilts market, and occasionally this will involve
transactions with it, but in the main secondary market gilt transactions
take place totally outside Government accounts.
Relationships with Treasury: accountability
67. Both National Savings and NILO are separate Government
Departments from the Treasury, but ones which report to Treasury
Ministers. The Accounting Officer responsibility rests with the
heads of those Departments and not with the Accounting Officer
for the Treasury. The DMO on the other hand is part of the Treasury.
Its administrative expenditure is borne on the Treasury Vote and
in legal terms anything which legislation authorises or requires
the Treasury to do, may be carried out by the DMO if delegated
to it. The Accounting Officer for the Treasury has designated
the Chief Executive of the DMO as Agency Accounting Officer for
the DMO and has designated him as Accounting Officer for the Debt
Management Account.
68. As Executive Agencies both the DMO and National Savings
follow the standard model involving a framework document, corporate
and business plans for setting of Agency targets, quinquennial
prior options reviews and annual agency reports and accounts.
The key role of both agencies is to help deliver the Government's
debt management policy and annual remit, which is set by the Treasury.
These arrangements give a common structure to the relationships
between the Treasury and both agencies. Treasury Ministers are
advised by the Treasury team responsible for Debt and Reserves
Management in setting the aims, objectives and the overall framework
for both DMO and National Savings. Both agencies supply the Treasury
with regular monitoring reports on financing progress. Certain
actions need to be approved by the Treasury (Treasury Ministers
have to authorise National Savings rates, though in practice these
follow very much from the remit). The DMO would have to come to
the Treasury if it sought to act in a way which altered the annual
remit.
Consolidating the Government cash accounts and determining
the net financing requirement
69. With several agencies, departments and accounts involved
in debt management, it is clearly very important to assemble consolidated
accounts to determine the level of net cash financing required.
In terms of the formal constitution of the government accounts,
government cash flows, including financing, are consolidated and
controlled through the two central government accounts, the NLF
and the Consolidated Fund. In terms of overall cash accounting,
the government accounts are consolidated through the Central Government
Net Cash Requirement, which determines the level of net cash financing
required.
70. The Central Government Net Cash Requirement consolidates
cash flows across all government accounts. Since these government
accounts are balanced, these cash flows net out to zero. The measure
of the central government net cash requirement is produced by
classifying these cash flows as determinants, which together determine
the level of net cash requirement, or as financing items, which
provide the net financing. Reconciliation between the Central
Government Net Cash Requirement and the Consolidated Fund and
NLF accounts is audited each year by the National Audit Office.
The split between determinants and financing items follows international
conventions for national accounts statistics, wherever practical
given the cash nature of the measure. The concepts of Government
Net Borrowing and the Central Government Net Cash Requirement
are explained further in the government publication "Monthly
Statistics on Public Sector Finances: A Methodological Guide",
which also explains the relationship between them.
Treasury monitoring and reporting
71. The government presents the annual Debt Management
Report to Parliament in March each year. This report on the government's
debt portfolio, debt management policy, developments in the gilts
market and National Savings, the debt management programme for
the current year, and the annual forward plans and remits for
the DMO and National Savings. The Government is committed to the
principles of transparency and predictability in promulgating
its debt management plans and policy, both as required by the
Code for Fiscal Stability, and in the context of market efficiency.
Transparency in debt issuance plans and policy improves the efficiency
of the market, which then produces the best price for government
debt.
72. The government announces updated financing plans
with every published Treasury economic forecast, based on the
latest forecast for the Central Government Net Cash Requirement.
Tables which show the main financing plans are included in the
main budgetary publications. If details of revisions to remits
cannot be covered in the budgetary publications then they are
announced separately to Parliament, for instance through an answer
to a Parliamentary Question. The DMO also announce revisions to
remits separately to the market, after these have been announced
to the House.
73. National Savings and the DMO report monthly to Treasury
Ministers on their performance against their remits, and developments
in the retail and gilts market, respectively. The DMO also report
the outcome of gilt auctions and other gilt management excercises
directly the results are known.
74. DMO and National Savings also publish various reports
aimed at their customers in the market. The DMO, for instance,
publish an Annual Gilts review and a quarterly update. However,
this is not designed as a report to Parliament, its main audience
being the gilts market itself. It tends to be of a rather technical
nature.
75. Outturn statistics for Central Government Net Borrowing
and the Central Government Net Cash Requirement are published
by the ONS and Treasury in the monthly document "Public Sector
Finances first release". Table 1.2A in the ONS publication
"Financial Statistics" gives a breakdown of the monthly
statistics for the Central Government Net Cash Requirement by
financing instrument.
76. National Savings and DMO, as Executive Agencies,
are required to produce annual agency reports which are laid before
Parliament. These report on their own administrative expenditure,
their progress against targets etc. The accounts for the Consolidated
Fund and the NLF, and National Savings are presented to Parliament
annually. From 2001, the accounts of the Debt Management Account
will also be presented to Parliament.
November 1999
1
"Debt Management Theory in Practice" by Donna Leong;
Treasury Working Paper No 10; April 1999. This paper is being
made available to the Sub-Committee separately. Back
2 Except for the National Savings Ordinary Account deposits which
are invested in the National Savings Bank Fund, managed by NILO. Back
3 Except for the National Savings Ordinary Account deposits which
are invested in the National Savings Bank Fund, managed by NILO. Back
| 
