This follows on from the last revision to the DMO’s financing remit for 2020-21, published on 16 July 2020, which laid out planned gilt sales of £385 billion up to end-November 2020. This update sets out plans for the remainder of 2020-21.
The financing arithmetic sets out the components of the government’s net financing requirement (NFR) and the contributions from various sources of financing. The updated financing arithmetic for 2020-21 is set out in Table 1.
The OBR’s forecast for the central government net cash requirement (excluding NRAM plc, Bradford and Bingley and Network Rail) (CGNCR (ex NRAM, B&B and NR)) in 2020-21 is £402.5 billion. This is the fiscal aggregate that determines gross debt sales and is derived from the Public Sector Net Borrowing (PSNB) forecast. The net financing requirement for the DMO in 2020-21 is £483.5 billion.
Planned gilt sales for the DMO will total £485.5 billion in 2020-21 and will be split by maturity and type as follows:
- £167.9 billion of short conventional gilts (34.6% of total issuance)
- £149.6 billion of medium conventional gilts (30.8% of total issuance)
- £134.9 billion of long conventional gilts (27.8% of total issuance)
- £33.2 billion of index-linked gilts (6.8% of total issuance)
HMT is also confirming today that NS&I’s net financing target for 2020-21 remains unchanged at £35 billion (+/-£5 billion). On 16 July 2020, this target was revised upwards from £6 billion (+/- £3 billion) to reflect the government’s increased funding requirements during the COVID-19 pandemic.
The funds raised from retail savers by NS&I are an important source of government financing. In the first six months of this financial year, NS&I raised £38.3 billion. With gilt yields currently at low levels, however, the government can currently raise finance more cost-effectively through gilt issuance.
Table 1: Financing arithmetic in 2020-21 (£ billion)
|Budget 2020||November 2020|
|CGNCR (ex NRAM, B&B and NR)(1)||65.3||402.5|
|Planned financing for the Official Reserves||0.0||0.0|
|Financing adjustment carried forward from previous financial years(2)||-0.8||18.4|
|Gross Financing Requirement||162.1||518.5|
|NS&I net financing||6.0||35.0|
|Other financing items(3)||0.0||0.0|
|Net Financing Requirement (NFR) for the DMO||156.1||483.5|
|DMO’s NFR will be financed through:|
|Gilt sales, through sales of:|
|– Short conventional gilts||51.0||167.9|
|– Medium conventional gilts||34.2||149.6|
|– Long conventional gilts||42.3||134.9|
|– Index-linked gilts||20.6||33.2|
|– Unallocated amount of gilts||8.0||0.0|
|Total gilt sales for debt financing||156.1||485.5|
|Total net contribution of Treasury bills for debt financing||0.0||-2.0|
|DMO net cash position||0.5||0.5|
|Figures may not sum due to rounding|
(1) Central Government Net Cash Requirement (excluding NRAM plc, Bradford and Bingley (B&B) and Network Rail (NR)).
(2) The £18.4 billion financing adjustment in 2020-21 carried forward from previous years reflects the 2019-20 outturn for CGNCR ex, as first published on 23 April 2020.
(3) Prior to the publication of the end-year outturn in April each year, this financing item will mainly comprise estimated revenue from coinage.