IT chaos threatens Britain’s ability to raise crucial debt, MPS warn

AGEING IT systems and a shortage of top staff risk threatening Britain’s ability to borrow hundreds of billions of pounds a year to fund tax cuts and government spending, MPS have warned.

A report by the public accounts committee raised concerns that the departure of key staff and “significant delays” in updating IT systems meant that illegal activity in government bond auctions risked going undetected.

It comes at a critical moment as Jeremy Hunt, the Chancellor, prepares to set out plans to cut taxes in tomorrow’s Budget. The Treasury is on track to borrow around £113bn this financial year. At the same time, the Bank of England is selling down its stockpile of bonds bought through quantitative easing (QE) in the financial crisis and the pandemic. It means investors in financial markets will have to buy around £280bn of gilts over 2024 – a record outside the pandemic – if the Government is to succeed in funding itself.

The report said the looming departure of Sir Robert Stheeman, the chief executive of the Debt Management Office (DMO), which sells the bonds, posed a risk. Sir Robert is due to retire in June after two decades in the role, with a replacement yet to be found.

Dame Meg Hillier, the chairman of the public accounts committee, said:

“The loss of his experience is a risk, especially with a number of his senior staff also approaching retirement.

“Our concern is that if you have a rotational civil servant role who is there for three years and moves on, that is not what you want in this job.

“You want someone who has real experience in the markets and will commit to the long-term.”

Markets can require sensitive handling at a time of heavy borrowing. The debacle around Liz Truss’s mini-budget and the market chaos that followed were in part blamed on the Government’s failure to properly understand the situation in stressed financial markets. At the same time, National Savings and Investments (NS&I), which raises money from the public, struggled to ramp up its operations in the pandemic because of its creaking IT system.

It raised a record £23.8bn during Covid, but missed the Treasury’s target to bring in £35bn towards covering the national debt because its outsourced IT system could not handle the extra demand. MPS have demanded NS&I send it regular updates on the scheme in the hope it will be better placed to handle future surges in borrowing. “We want to hold their feet to the fire,” said Dame Meg.

“You have got old fashioned, clunky systems in the Government compared with what is happening in the private sector. In this case, when you get a new credit card it all runs on an app, you can manage it on your phone – I cannot do that with NS&I.”

Other risks include a reliance on foreign investors to fund an increasing share of the £2.5trillion national debt, as the Bank of England is selling bonds instead of buying them, and final salary pension schemes are no longer reliable investors in long-term gilts.

The Office for Budget Responsibility has warned overseas investors may be more sensitive to moves in prices and so potentially be a less reliable source of funding, though the DMO disagrees and says diversity of investors is important.

The MPS have called on the Treasury to carry out an assessment of the effect of foreign investors on the stability of the market to settle the argument.

Meanwhile, the committee warned the interest bill on the national debt is to come in at more than £100bn this year.

NS&I said: “We have made significant progress over the past year in delivering our transformation programme.”

£113bn Expected Treasury borrowing this financial year. The interest bill on the national debt is forecast to be £100bn