HM Treasury News Release 36/98 19 March 1998 -------------------------------------------------------------- 1998-99 DEBT MANAGEMENT REPORT The Debt Management Report for 1998-99 which sets out the Government's debt management policy and gives details of the Government's borrowing programme for 1998-99 was published today by the Treasury. The report includes the remits for the UK Debt Management Office (DMO), which takes on responsibility for debt management from 1 April 1998, following the decision to transfer Government debt management responsibilities from the Bank of England to the Treasury. On publication of the report, Economic Secretary, Helen Liddell said: "This transfer of responsibility for debt management to the new UK Debt Management completes the separation between monetary policy and debt management policy, whilst ensuring that the Government's issuance policy remains one which is bases on openness, predictability and transparency. "Government economic policy will mean a move away from the large borrowing requirements seen in the last few years. Nevertheless there is continued emphasis in reducing the debt interest bill through policies which reduce gilt yields as well as the volume of borrowing. "The Debt Management Office will continue with reforms to achieve the Government's goal of improving the gilt market wherever possible, following in the standards set for them by the Bank of England. Reforms over the past year have included the upgrading of the Central Gilts Office and the launch of the strips market. This year we intend to start auction index-linked gilts, following recent consultation on the form of these auctions. This represents a further improvement in the predictability and transparency of the Government's debt issuance programme." The main features of the borrowing programme for 1998-99 are: The financing requirement in 1998-99 is forecast to be about 15.2 billion Pounds, made up of the central government borrowing requirement, plus gilt redemptions, less an adjustment to unwind the expected overshoot of gilt sales in 1997-98. The financing requirement will be met by assumed gross gilt sales of 14.2 billion Pounds and gross sales of national Savings products of around 12 billion Pounds. Taking account of expected repayments and accrued interest, the net national savings contribution to the financing requirement is assumed to be 1 billion Pounds. In 1998-99, given the lower level of gilts sales required, gilts issuance will be targeted to build up maturity in the new ultra long (30 years) benchmark stock and enable it to become strippable, and to sustain the move to index-linked auctions. This means a temporary increase in the proportions of index-linked issuance and, within conventionals, in the proportion of long maturity gilts. (Index-linked issuance and will account for 25 per cent of total gilts sales, compared to 20 per cent in 1997-98. Within conventionals, shorts, mediums and longs will be issued in portions of 25, 25, and 50 per cent respectively, compared with 35, 30 and 35 per cent in 1997-98.) The Government does not intend following this issuance mix for 1998-99 in future years, largely because of the lengthening of the portfolio that such a mix would imply. Auctions of index-linked gilts will start in October 1998. This will allow sufficient time before then for the DMO to establish a separate list of index-linked market makers. six auctions are scheduled in 1998-99, four for conventional gilts and two for index-linked. Each auction will be for one single stock. The auctions of conventional gilts will be for between 2-3 billion Pounds (nominal) of stock. The auctions of index-linked gilts will be for between 1/2-1 billion Pounds(cash) of stock. The DMO will not take over active cash management until October 1998 at the earliest. Details of the proposed cash management operations will be announced in due course, along with any extension or adjustment to the DMO remit that is necessary to cover those operations. For this 1998 March Budget, the remit for the Audit of the Budget Assumptions by the National Audit Office has been widened to include two further assumptions, one of which is that the funding assumptions which have been used to project central government debt interest are consistent with the forecast level of government borrowing and with current financing policy as set out in the Debt Management Report. NOTES TO EDITORS 1. A copy of the 1998-99 Debt Management Report is attached. As well as details of the 1998-99 borrowing programme, it includes information on: the size and structure of the national debt; the Government's borrowing programme in 1997-98, and development in the gilts market in 1997-98, and those expected in 1998-99. 2. The 1998-99 Debt Management Report is the fourth report in an annual series published in March of each year. 3. The National Audit Office Report on their Audit of Assumptions for the Budget has been published today as HC616. Copies are available from the Treasury Press Office, and from the National Audit Office. 4. If you have access to the Internet, you can find the Debt Management Report and news release and other Treasury material at http://www.hm-treasury.gov.uk.