Government does not have clear measures in place to assess the value for money of the £2.5 trillion of Government borrowing

5 March 2024

PAC unconvinced that lessons of financial crisis and pandemic have been adequately captured by Government
Information gaps in tackling unlawful activity or understanding risk from overseas investors

Government borrowing, via the Debt Management Office, has ballooned from around £300bn in 2003 to £2.5 trillion in 2023. In a report published today, the Public Accounts Committee (PAC) calls for improvements to how Government tracks how well it manages debt, as it is impossible to know whether the Government is securing value for money from its borrowing.

The Government’s debt management objective is “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”. The PAC’s report finds that the Treasury has no directly measurable success criteria to assess whether this already high-level and difficult to quantify objective is being met, meaning it is impossible to know whether it is securing value for money from its approach.

The Bank of England’s (BoE) quantitative easing (QE) programme, purchasing substantial numbers of government bonds, helped the Government borrow the large amounts of money it required. The legacy of large-scale pandemic borrowing now needs to be addressed, including a repayment of £140bn in 2024-25, alongside continuing to raise large sums as part of the annual borrowing process. The report further warns that unprecedented challenges will be created by the BoE’s unwinding of QE, as for the first time the BoE and Government will be selling bonds at the same time as each other.

The report identifies gaps in necessary information both to spot unlawful activity including the manipulation of Government bond auctions, and to understand the risks posed by overseas investors. There is limited information on the ultimate owners of UK debt held by overseas investors, which makes up around 25% of UK debt (the second highest in the G7) and a lack of consensus on the potential risk this creates.

With a number of retirements of key and experienced staff upcoming at the DMO, and significant delays to NS&I’s modernisation programme caused by a poorly executed procurement process, the PAC is concerned about a potential skills, experience and institutional knowledge deficit, and calls on the Treasury to set out its overarching plan for building and retaining skills and experience.

Chair's comment

Dame Meg Hillier MP, Chair of the Committee, said:

“When Government’s spending exceeds its income, as it has for all but a handful of years in the past half century, it must borrow. Both the Debt Management Office and NS&I, which borrow on behalf of Government, managed to successfully raise the funds needed to keep the UK functioning during the pandemic. Such borrowing was on the rise pre-pandemic, putting taxpayers on the hook for even more debt repayments and interest costs.

The Head of the DMO retires this year after over 20 years in post – leading the organisation effectively to borrow eye watering sums of money compared with 20 years ago. The loss of his experience is a risk for the organisation, especially with a number of his senior staff also approaching retirement.

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. This is the first time for seven years that the PAC has looked at government management of debt. With such huge sums being borrowed the government needs to look at how it can evaluate its performance in managing borrowing.. We look forward to hearing more in response to our report on how the Government will hold itself better accountable.”

Further information

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