Update to 2020-21 government financing remit

26th November 2020

Following the publication of the Office for Budget Responsibility's (OBR's) Economic and Fiscal Outlook (EFO), the UK Debt Management Office's (DMO's) 2020-21 financing remit has been revised.

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