Debt Management Remit 2010-2011 (Revisions)

Mark Hoban Excerpts

Monday 29th November 2010 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Government are today revising the Debt Management Office’s (DMO) 2010-11 financing remit to reflect revisions to the net financing requirement. The net financing requirement for 2010-11 has been revised upward—by £0.2 billion—from £162.5 billion at the June Budget to £162.7 billion. The revisions to the net financing requirement arise from the net effect of:

a reduction in the central Government net cash requirement (CGNCR) of £1.9 billion;

an increase in sterling financing for the official reserves of £2.0 billion; and

additional secondary gilt market purchases by the DMO of £0.1 billion.

The downward revision to the CGNCR is a reflection of revisions announced today by the Office for Budget Responsibility (OBR) to the fiscal aggregates, which have a consequential impact on the CGNCR. The revisions are set out in the OBR’s “Economic and fiscal outlook, November 2010”, published today.

The increased funding for the official reserves has been provided to meet potential calls under the UK’s IMF commitments. These commitments have recently expanded following parliamentary approval in July 2010 of the UK’s increased contribution to the IMF’s New Arrangements To Borrow. This delivered the UK’s share of the G20 agreement to treble the resources available to the IMF.

The increase in the net financing requirement of £0.2 billion will be met by an increase in the gilt issuance programme in 2010-11 of £0.2 billion. Gross gilt issuance for 2010-11 is now projected at £165.2 billion.

The planned Treasury bill stock as at 31 March 2011 is £60.8 billion—unchanged from the projection at the June 2010 Budget (and compares with levels as at: 31 March 2010—£63.3 billion; 31 March 2009—£44.0 billion).

As at the June 2010 Budget, the Government are confirming the net finance target for National Savings Investments to be a zero net contribution to financing, within a range of +/- £2 billion.

For 2010-11, gross gilt issuance of £165.2 billion is projected to be split as follows:

£52.7 billion of short maturity gilt issuance (31.9% of total);

£38.2 billion of medium maturity gilt issuance (23.1% of total);

£40.5 billion of long maturity gilt issuance (24.5% of total);

£33.8 billion of index-linked gilt issuance (20.5% of total);

This proportionate split is unchanged from that announced in June 2010.

Auctions will remain the Government’s primary method by which gilts are issued. The Government will continue to use supplementary methods—syndication, mini-tenders and the post-auction “top up” facility—to issue gilts in the remainder of 2010-11. For 2010-11, it is projected that:

£132.0 billion will be issued by pre-announced auctions (79.9% of total);

£26.2 billion will be issued by syndication (15.9% of total); and

£7.0 billion will be issued by mini-tender (4.2% of total).

Consistent with provisions in the DMO’s financing remit relating to the post-auction “top-up” facility, average auction sizes in the remainder of the year will be reduced but there will be no change to the number or timing of auctions scheduled for the remainder of 2010-11.

The Government are also publishing today a revised estimate of the fiscal impact of the spending review 2010, based on the OBR’s autumn forecast. Copies of this document have been deposited in the Libraries of both Houses and are available in the Vote Office and Printed Paper Office.