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 |
| Gilt redemptions | 97.6 | 97.6 |
| 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 |
| Less: | ||
| 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 |
| Total financing | 156.1 | 483.5 |
| 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.
