Report published 26 January 2018. Government response published 1 March 2018.
Report and response published
Scope of the inquiry
Since the financial crisis of 2008, government debt and borrowing has increased at a faster rate. Although a recent National Audit Office report found that the Government has borrowed at a relatively low cost, questions still remain about managing the public finances over the years ahead.
In 2015–16, debts from government borrowing were £1,261 billion, roughly £47,000 for each household in the UK. Since 2009-10, borrowing has increased by 61% and the Government has paid out £222 billion in interest.
The Government borrows money by issuing bonds through the Debt Management Office (DMO), and by encouraging savers to invest in National Savings and Investments (NS&I). However, changes in government policy, paired with risks and uncertainty about government income and spending, have led to DMO being asked to raise an extra £21 billion over the last quarter of 2016–17. The proportion of government bonds linked to indexes has risen to 34% in 2017 from 24% in 2009—and the Office for Budget Responsibility predict that a 1% increase in inflation could increase these index-linked debts by £26 billion.
Although Treasury has begun to improve how it analyses risks associated with debts, this work is in its early stages. With potential uncertainty coming from EU departure and the winding down of quantitative easing, it will be important that Treasury monitors potential problems and strengthens forecasting.
The Public Accounts Committee will ask officials from HM Treasury, DMO and NS&I how they are managing risks associated with government borrowing, and what they are doing to make sure they can better forecast the government’s borrowing needs. The Committee will also ask about the overall health of the government’s balance sheet—the Whole of Government Accounts.