One of the primary purposes of the Spring Statement last week was to establish the Government’s financing for the coming financial year. As our ICAEW chart of the week illustrates, the plan is to raise £145bn from investors during 2019-20.
The largest element of this will come from the sale of government securities to professional and institutional investors, with the Debt Management Office (DMO) given a remit to issue £118bn in new gilts and treasury bills. Its current plan is to issue £85bn in conventional (fixed-interest) gilts, £22bn in index-linked gilts and £4bn by increasing short-term treasury bills outstanding, leaving £7bn yet to be determined.
This should be complemented by £11bn in fundraising by National Savings & Investments, the state-owned savings bank that offers premium bonds and savings products direct to the public.
A further £16bn is expected to be raised from the sale of financial assets. This includes £10bn from the final tranche of Northern Rock and Bradford & Bingley mortgages and other securities acquired during the financial crisis, £3.6bn from sales of RBS shares, and £2.7bn from selling a portion of the student loan portfolio.
The total of £145bn raised from investors will be used to plug the £29bn shortfall between planned spending and taxes and other income (£840bn versus £811bn) as well as funding net lending of £17bn. The latter includes £19bn to be lent to students, £4bn in Help to Buy loans and £5bn in other loans, offset by repayments of £5bn and cash flow timing effects of £6bn.
This leaves a balance of £99bn that will be used to repay debts as they fall due during the course of the year, many of which were taken out during the financial crisis a decade ago.
In normal circumstances the work of the DMO and National Savings in funding the government goes on behind with the scenes, without any drama – even with the current significant economic and political uncertainties currently facing the UK.
For the unsung heroes at the DMO and National Savings this means continuing to labour in obscurity – just how they like it.