MPs' Committee Doubts Government Plan To Manage "Phenomenal" National Debt
Bringing down national debt is one of Rishi Sunak's five pledges (Alamy)
5 min read
A new report by the influential Public Accounts Committee has questioned whether ministers have clear measures in place to assess the value for money of the “phenomenal” £2.6 trillion of Government borrowing.
The Public Accounts Committee (PAC) published a report on Tuesday warning that the government has not adequately learned lessons from the financial crisis and pandemic, with huge gaps remaining in how the Treasury and the Debt Management Office (DMO) track and measure government borrowing.
Reducing national debt was one of Prime Minister Rishi Sunak’s five key pledges at the start of 2023. However, government borrowing has ballooned from around £300bn in 2003 to £2.6 trillion by the end of 2023. The new PAC report found that the Treasury has no directly measurable success criteria to meet its own objectives and assess whether it is securing value for money from its approach to managing this debt.
The report urged the Treasury to set out its plan to improve performance measurement against the debt management objective, including analytical comparisons to approaches taken elsewhere in the world.
Chancellor Jeremy Hunt told the BBC over the weekend that he will not use further government borrowing to fund tax cuts in the Spring Budget, which he will deliver on Wednesday. But with government borrowing already at an all-time high, PAC chair and Labour MP Meg Hillier told PoliticsHome that the taxpayer was “on the hook” for any borrowing and it was more important than ever for the government to ensure it was managing it properly.
“When the Budget happens it's pulling rabbits out of the hat, but what we look at a lot every year is the whole of government accounts, the real balance sheet of government: this is what funds the balance sheets of government, so how this is done is important,” she said.
Hillier explained how there were spikes in government borrowing in 2008 following the financial crisis and in 2020 in response to the Covid-19 pandemic. The government, she argued, has failed to properly look at how the payback of these debts has been managed in the years since.
“What we're not doing is really evaluating afterwards over time… some of these gilts are over a couple of decades or longer,” she said.
“They need to actually be measuring the value for money and making sure that they've got metrics to see if they're getting value compared with others. They just don’t do enough comparisons.
“The top level wording of what the objective is on government borrowing could mean all things to all people. We think they should be doing more international comparisons and looking across the piece to see if they can set up tighter criteria for value for money.”
The Labour MP said that although it was challenging to carry out this kind of analysis over the longer term, the “phenomenal amounts of payback for the British taxpayer” meant there was a need for further assurances that the government was at least trying to improve the way debt is managed.
“We don't know what the consequences are for the public but nor does the public, nor does the Treasury, that’s the problem,” she said.
“With organisations like this the danger is just because it's a bit difficult and challenging doesn't mean you can't apply rules to looking at government spending across the piece.”
With a general election expected by the end of this year – and Labour polling way ahead of the Conservatives – Hillier also warned that the Treasury needed to ensure it was resilient to “upset or change” across more than one area.
“Almost everything's a three legged stool: in this case, that would be politicians, the specialists and the department responsible,” she said.
“If you had all three changing at the same time, that could be very complicated. When you've got lots of things moving, you use that institutional memory and knowledge… and with something in an area as complex as this, getting it right and having the ability to make the right judgement calls is reliant on experience.”
The PAC was concerned about a potential skills, experience and institutional knowledge deficit in the DMO, with the Chief Executive Officer of the DMO Robert Stheeman due to retire this year. The report recommended the Treasury should set out its overarching plan for building and retaining skills and experience across the institution.
“To have somebody in there for a short period of time on a normal civil service rotation would be quite risky, this is one of those jobs in government where you need a specialist who wants to stay for a really, really long period of time,” Hillier said.
“I’ve been on the committee nearly 13 years and we've been pushing all that time for more skills and specialist skills in the civil service. The problem is when you go for specialist skills, you are recruiting against the private sector, so it’s a challenge.”
Despite rising national debt, debt management has until now been barely talked about in Parliament. The Debt Management Office has only been mentioned in Parliament four times since Sunak became prime minister in 2022, according to Hansard. Hillier therefore feels that PAC will have to “push” the government further.
The committee is expecting a response from the Treasury in the summer and Hillier told PoliticsHome that they would continue to raise it in the future and would want to look at the issue of debt management again when some of the debt from the pandemic is “beginning to crystallise” and will have to be paid back. She added that re-evaluation will also be needed to assess the work of whoever succeeds Stheeman in the top role at the DMO.
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