Welcome to the Treasury Committee on Wednesday 11 February 2026. We are here to look at the work of the Treasury. I am delighted to welcome two panels. We have a second panel from the Debt Management Office, but for our first panel we have: Jim O’Neil, the second permanent secretary at His Majesty’s Treasury; James Bowler, the permanent secretary at the Treasury; Beth Russell, another second permanent secretary at the Treasury; and Gwyneth Nurse, director general for financial services at the Treasury. Welcome to you all. Last year we were in Darlington—welcome to London, Ms Russell. I ask John Grady whether he has a declaration.

I am chair of the APPG on Qatar, which will be relevant to the second hearing of this session.

Thank you. Mr Bowler, you have had a long career in the civil service, and we hear that the civil service is looking through all papers related to Lord Mandelson right back to the early years of the last Labour Government. Did you ever work with or for Lord Mandelson?

Thanks, Chair. I was not working directly for Lord Mandelson. I was a civil servant throughout the entirety of the last Labour Government, and the closest I worked with Lord Mandelson was when I was in No. 10—the Cabinet Office—working for Gordon Brown in his private office from 2008 to 2010, when I think Lord Mandelson was Business Secretary. Do you want me to say anything—

I was just wondering if you had any awareness of what has been alleged. It is not sub judice because there has been no arrest.

It is probably worth saying that the Met police have launched a criminal investigation over alleged misconduct in public office. I and the Treasury will provide the Metropolitan police with whatever information they ask for and engage as appropriate. Cabinet Office are leading on that. No, I haven’t got anything further to say.

Okay, thank you. It will run its course with the Metropolitan police. The last time you were in front of us, we were talking about the Budget, and a real focus was the two leaks. I will start by talking about the leak of information from the Treasury to the Financial Times. The Chancellor herself was very clear that it was a leak. You have conducted a leak inquiry, which has been published, and you did not find your leaker. Can you tell us more about why you failed to find the person who leaked the information?

Yes. First, the security around the run-up to the Budget was not good enough, specifically—on the leak you refer to—the OBR’s IT set-up and wider briefings. We conducted a leak inquiry into a story that ran in the Financial Times on, I think, 14 November. We are clear that it was a leak, but it was not actually clear that it came from the Treasury. On Monday, we published an overview of the security review. Frustratingly, the inquiry did not find the exact source of that leak—it is a source of frustration to me personally—but it did look at all the elements of how that leak came to pass. The review had a set of recommendations for us, which we are accepting. In particular, it asked us to look at the size of our compartments as to who knows what, and it suggested they were probably too large. It asked us to look at cross-border exchange of information when we send any market-sensitive information outside the Treasury.

When you say “cross-border”, do you mean the Treasury?

Outside the Department, to other Departments. Sorry, not cross-border; it is a Treasury border.

Is that just a sign of the Treasury’s sense of its own importance, having a national border?

Certainly not. We are part of the team. We have taken, as set out in the security review, a number of quite stern steps to tighten security a fair bit on the back of that. While it is frustrating that the review did not identify an exact source, there is a large benefit from having had the review and the reactions we have taken.

How close did you get to finding that out?

The inquiry was conducted by the Cabinet Office security net, so it was rightly not conducted by ourselves. I have seen their report, and it gives no sense of that, but they clearly got to the bottom of the reality of what the journalists knew and, potentially, how they stood their story up, but without identifying an exact source. The benefit of having the leak inquiry is that a wide number of people inside the Treasury would have been investigated—Ministers, special advisers and officials—

To be clear, was that all Ministers in the Treasury?

It would have been those with knowledge of the particular event.

Special advisers similarly?

Yes.

And officials?

Yes.

Including you?

Not me, actually. I do not know whether I am deemed to have not shot myself in the foot. They have investigated it widely and, in itself, that has a deterrent effect. More to the point—I want to put this on the record, Chair, and I hope it comes through in the review we published—we are determined to learn from the situations that happened in the Budget and to tighten our handling of market-sensitive information. I am happy to go into more detail on that point.

Did you engage the FCA in the course of your investigations?

We have been in discussion with the FCA throughout, and we sent them the findings of both the investigation by the National Cyber Security Centre into the OBR’s IT leak and the wider form. They have the information they need, and we are happy to continue to engage.

The National Cyber Security Centre was dealing with the OBR leak.

That is right.

But what about the Treasury leak, or the leak of information that came from somewhere in Government?

That has gone to the FCA, yes.

It has gone to the FCA. When did you engage with them about that?

We have been engaging with them throughout the process. We were engaging with them before and in the pronouncements we made before Christmas. They requested to see the product of what we had done, and we have given that to them. Obviously, they are independent from us, and they can take their own views as to what they want to do going forward.

Okay. Do you know how often you and your officials met with them during the investigation? Not the OBR; the one—

The FCA?

Yes. Just to be clear, this is not about the OBR investigation; it is about the Treasury or other parts of Government—

I think, to be clear, we iterated with the FCA, who I think wrote to you before Christmas.

Indeed.

They said that they wanted to see the product of our review, and we have sent them the product of our review. Any action they might want to take lies with them. It has not been a hugely iterative process, because we have just finished the review and sent it to them.

You highlight that the FCA wrote to us, which they did on 3 December last year. To be clear, their letter, part way through, says, “First, our role. We are the competent authority in the UK for market abuse. This includes the offences of unlawful disclosure of inside information and market manipulation (as described in Articles 10 and 12 of the UK Market Abuse Regulation).” Further, it says, “We support public bodies by helping them understand how to consider whether information they hold amounts to inside information and how they should handle this. We publish guidance to assist and provide training”. The letter then highlights the concerns raised with them from the autumn Budget 2025, which include, “briefings by Ministers and Government officials were misleading and may have amounted to market manipulation…Inappropriate placing of market sensitive or inside information into the public domain through Government briefings or leaks”. It then highlights, “The early release of the Office for Budget Responsibility” information. The Cabinet Office did their work. At which point did the FCA give permission for that to happen without their engagement?

Sorry, I am probably not explaining myself there. The National Cyber Security Centre looked at the OBR’s thing and has reported. The Cabinet Office did a leak inquiry, and then the wider report sets out what we are going to do about things more generally. To your point, the FCA can help public bodies, including the Treasury—and it does—set out how it can best set itself up to do that. So we have sent the report to the FCA, and I think that their engagement will follow.

The report mentions the Bank of England but not the FCA. Is there any reason for that?

There is an important reason—two important reasons, but one that the FCA will be interested in. We looked to learn from how the Bank of England handle their market-sensitive information to see if there is a case where we can up our game on that, so we did so. Secondly, we are working with the Bank of England on a protocol whereby—I think this is important for future things—were an error to be made in future akin to the OBR’s IT error, the Bank of England and I are keen that we are clear that there is a protocol on what you do in that—

That is slightly different from what I was asking. The Bank was mentioned in the report, and the FCA was not, yet the FCA have a very clear role in handling market-sensitive information, as I just read out from their own letter. You were talking to the Bank but not to the FCA—

Sorry, yes. I think the FCA are going to consume our report and give a view on it. If they have sensible things that they feel we should be doing and we are not, we will gladly—

Are you expecting that the FCA will now conduct an inquiry—we may need to ask them—into market-sensitive information?

That is entirely up to them.

Can I come in on this point? Essentially, what happened is that the FCA relied on the work being done in this Treasury review before they made a judgment on whether they would do anything. If the essence of the outcome of this endeavour over the last few months is, “We’ve got near to it, but we haven’t really identified who did what,” clearly they will not be able to do anything with it, will they? There was an in-built—

No, sorry, I don’t think that is right. To start with, they are looking at several things, as you listed. There is the OBR IT leak, where we have been very, very specific forensically about exactly what happened and the implications. Again, the information is there for you and everyone else to see, and we published the report in full. The leak inquiry was done by the Cabinet Office, and they have set out the things there. We have no qualms in sharing any of that with the FCA. More generally—I think this is where the FCA will be helpful—we have set out in the report how we intend to tighten, really rather significantly, how we handle market-sensitive information. The FCA are independent from us and can take a view as to what they feel they need to do or not do.

I think we would all recognise that what happened in the run-up to the Budget was, to put it charitably, a very unusual process. There has been a lack of clarity over who was responsible for that, and the consequences of the outputs of the reports that have come out of this review clearly inevitably mean that there is no identifiable person. Regardless of what processes have been tightened up for the future, it seems inevitable now that the FCA will not be able to do anything because they will not have anyone who has been identified to deal with in relation to what actually happened with the leak. In the end, if you do not identify who did the leak, you have got nowhere.

Look, you have been in government, Mr Glen. Unfortunately, I do not think it is that different in some respects with this thing. I would say—

You think that what happened with the FT before the Budget has happened previously?

Let me make my point. I think this is quite important: the last time there was a major challenge to the Budget was in 2013. That was when the entirety of the Budget was released on embargo to the Evening Standard. The then permanent secretary, Nick Macpherson, did a report. The report that we have done this time finds that a whole set of things have changed since 2013 that have required us to push the balance on security much further still, and that is about how communications and the media work. You will see in the NCSC report that there was an automated attempt, 520 times, to access the OBR report. We are operating in a world with social media, where we are being asked questions instantaneously and minute by minute. I think that has changed, and I would also say that when it comes to things like the OBR forecast, which has been discussed, under successive Governments, there has been far too much chat and speculation about that.

If I may say, I am not asserting that when I was in government, everything was done correctly. What I am saying is that the circumstances leading up to the last Budget, where it was widely expected that there was going to be a significant change in tax policy, which was then reversed, involved some information leaving the Treasury in some form. The net consequence of what has been reviewed through this leak inquiry is that, in essence, nobody individually will be found responsible for that. What I am trying to understand is this: inevitably, the FCA will not be able to do anything with that.

I take your point, and I have tried to point out that I would love to have found an individual or individuals concerned on that. A review was undertaken, and that was its conclusion. It is not the case that nothing will therefore happen. There will be a very significant tightening of how we are going to do our business. That is going to be quite onerous for the Treasury. There are trade-offs in that. You will know that, as a Minister, you need the best advice. You need to understand that, and when you shorten and shorten and shorten the pool of people who know something, you are in danger of trading off a bit on that. I have spent most of my time focusing on that balance and how to tighten security versus making sure that Ministers get the best advice possible. We give some examples of how we would do that.

But that is the aftermath. You have explained that very clearly, so just going back to—

What we are stuck with is the fact that I did not do the inquiry myself. It was done in totally the proper form, and I do not have an individual to find. I wish I did.

A lot of things have been scattered out there, so let us just go back to the inquiry itself. To be clear, the letter from the chief executive of the FCA, Nikhil Rathi, on 3 December 2025, said: “We have requested details of this work”—that is, the inquiry that the Chief Secretary and the Chancellor have announced—“and that the outcome, including of the inquiry into any leak of market sensitive or inside information relating to the Budget, is shared with us so we can consider as appropriate.” The “details of this work” sounds like they are referring to the work of the inquiry. Did they get that information about the inquiry from the Cabinet Office?

I think the Treasury shared it with them.

Okay. So that was back around the same time.

No, sorry—a whole process has very recently concluded and now has been sent across to the FCA.

So you didn’t involve them in December?

We talked at length to them in December in responding to that letter and setting this up. Then we went away and did these investigations, and now we are engaging the FCA again.

Okay. You made decisions about the investigation into the release of market information, and you are saying that you did consult the competent authority, the FCA, at the beginning—just to be really clear for the record.

Sorry, I don’t seem to be able to nail this. The FCA wrote to you, I think, saying what their role is. They said we should then go away and do these investigations, as we have set out, which they agreed with, I think. We have done those, and we have sent the output of those.

They asked, though, for “details of this work and that the outcome, including of the inquiry…is shared with us so we can consider as appropriate.” So they were not asking just for the outcomes.

We have shared the outcome, and we will share any details they wish.

But you didn’t share it earlier on.

No, because it has only just concluded.

No, I mean the process—about what you were going to do.

No, we engaged them at the start and at the end.

On the process, you have said that you were not included. Who else was not included? We have talked about Ministers. Was the Chancellor included?

It is done by the Cabinet Office. I am not supposed to give details of exactly how they work, because that might prejudice their abilities to do this in future, but everyone who had access to the information they thought relevant was part of that thing, and that was quite a wide group of people.

Were you surprised that you were not interviewed?

Yes, I was, a bit.

Okay. Have you been interviewed for leak inquiries in the past?

Many, many times.

And they just decided that you were not in scope?

As you might imagine, I do not investigate myself.

So you don’t know anyone else who got special treatment?

Well, I do not know whether it is special or not, but no. The way these things work is that a Cabinet Office national security team does this inquiry and reports back to me and the Cabinet Secretary. It is worth saying that the Chancellor initiated the leak inquiry—asked for it—herself.

Indeed, as did the Chief Secretary on the Floor of the House. Do you think there is an issue here with one bit of Government checking on another bit of Government? Was any consideration given to bringing in the Metropolitan police? The FCA was not involved at that point.

That can be a decision that is taken out of the Cabinet Office. I think the principle that you do not investigate yourself is quite important, for obvious reasons.

Okay. We may want to consider having the Cabinet Office in on this, maybe for a private briefing.

I have a couple of follow-up questions. Do you understand the mechanism by which this information was leaked? Was it electronically? Was it in person?

They have looked into that and reported back, and they have not found who it was or how it was leaked, but I do not have any more details than you do.

That would suggest that in the Treasury, or in the pool of people who had access to this information, there are evidential gaps that meant you were unable to trace how it was leaked—so people deleted messages, did not keep a proper diary of what they were up to or whatever.

That might well be the case. There is obviously some wider guidance—

Mr Bowler, with respect, it must be, because we have this serious leak and we cannot trace who leaked it or by what mechanism, so this is a fairly difficult inquiry. With that in mind, and with your review, what are the Treasury and the Government doing to make sure that, next time around, there is a better audit trail and things can be reviewed, so we have more chance of identifying who is leaking this information? Look at it from my constituents’ point of view: if I worked in a hospital, say, I would have to respect patient confidentiality, but I might also be worried about things like defence, and I would rather the Government were not sieve-like in this context. What steps are being taken to get a better audit trail?

I am glad you asked that. We are going to have a completely discrete way of treating market-sensitive information—a new classification for it. The IT we will now use around that will be entirely traceable.

What about people’s phones? Will they have to safeguard their messages during market-sensitive periods so that they can be inspected?

They are inspected. There is general guidance on that, which does not come from me. What we have put in place in the Treasury will be entirely traceable on market-sensitive information so that, importantly, any information that you have you will not be able to forward, print or send across a departmental boundary unless you have—

I could take a picture on my phone and WhatsApp it to a journalist, couldn’t I? Will people have to keep their messages during market-sensitive periods?

We have taken significant and severe steps to increase the security. Am I sitting before the Committee going, “We have now eliminated the ability for people to engage in this”? No, I am not. I do not know what the IT would need to be to stop you taking a photo.

In financial services, as I am sure Ms Nurse would concur, there are really strict rules about what device you use and how you keep a record of information. It sounds like you are saying it is really difficult—

There are those sets of rules for civil servants and the Government as well.

On personal phones as well?

Yes, and investigations are not limited to private phones. I am just saying that I have done what I have done from a Treasury point of view, and there are wider rules around that. As it has taken quite a lot of time to design it, and as it will be quite onerous and quite a big change, I want to stress that how we intend to use market-sensitive information and the IT we will put around it is the stiffest that I am aware of and will make things very different. It will also be absolutely clear that you can trace who looked at what information when, which I think has perhaps been lacking to date. That is very important, particularly if you are trying to signal in on who said what to whom at a particular time. That is really quite a big step forward.

It is a big step forward, but the Passport Office has been doing it for years. It has a whole system. If someone looks up James Bowler’s passport five times in a month, because it is probably not likely that they need to do that—

Some of the IT we are using has not been available for years. I do not know what IT the Passport Office has been using.

It was doing that a very long time ago.

One last question. Evidently, you have been looking at this closely, but we have identified some concerns that there may still be gaps. Have you consulted with experts in the MOD about the safeguarding of confidential information?

We have consulted national security people inside the Cabinet Office, who themselves speak to the MOD and are the Government’s experts on handling nationally secure information. We have tried to get the best advice that we can. You are seeing the product of that. I did an oversight—

Has that advice been followed to the very letter, or are there any elements of it that have been discounted?

No elements have been discounted. A very big part of what we did in the review was use the National Cyber Security Centre, which both did the review into the OBR IT leaks and sat on an overarching board on the review itself. It is the UK’s expert in cyber-security.

We will move on to the OBR. We want to focus on the bit that came from Government first.

Yes.

I think there will have to be some judgment as to what is and is not. As part of the review, we have explicitly reviewed what we should count, in Budget terms, as market-sensitive. These are the so-called Macpherson principles that sit there; we have set out what that is and how it applies to a Budget. There will still be some judgment, but there is clarity as to what we mean on that.

I want to be realistic with the Committee: for too long there has been way too much speculation and chatter in the run-up to a Budget. I have defined in the report where it is totally fine to be setting out what you may or may not do in the Budget, but I have also defined what you absolutely should not be doing. I think that for too long, under successive Governments, that has been too loosely applied. The straight answer to your question is “Yes, there has been, and this is not a one-off incident.”

It says explicitly in the review that we cannot reduce the risk to zero, so I do not want to suggest otherwise. I have been in front of this Committee a number of times on Budget security over the years. Do I think that this is the last time we will see it? I am afraid not. What we have done is make the way we handle information, and how we go about finding that information, significantly harder. In doing so, I have to strike a balance, with my Department able to deliver a Budget and Ministers getting the best advice they possibly can, but going tight on security to be able to do that. We used an example in the report. One of the really good features of the Budget over many years is our distributional analysis; I am using it as an example to illustrate my balance point. In the distributional analysis, you have to know every single policy in the Budget and then look at its impact on different income distributions. We will have to judge when and how many people see all the policies in a Budget, which will all be compartmentalised to much smaller named lists, to be able to do that analysis. My judgment is that we have to and should continue to do that analysis. If I went really tight on security, we would just stop doing it. I think that would be to the detriment of the Budget process. I hope you are seeing the balance that we have to strike, which I think is quite an interesting one. My judgment is that since 2013, because of the now industrial-scale interest from the media, social media and all its forms in what we do, I am now making security quite a bit stiffer. But I need to get to a place that is not so onerous on staff, on what we can do to give Ministers the best advice to do the best policy, and on the Department being able to deliver its Budget.

I think we have got that point clearly. Thank you.

Yes, indeed. All of this will cover not just media focus, but handling market-sensitive information properly, for all those reasons. Your issue is more relevant to the OBR IT leak, in terms of when people get information.

We will get on to the OBR in a moment. To be clear, you presumably had knowledge of the whole content of the Budget, including the potential change on income tax policy.

I had knowledge of what the options were in the Budget right the way through.

So you knew that there was a discussion going on about income tax policy, just ahead of that leak to the FT?

Yes. I, and an increasingly small number of people, will see the elements of any Budget as it emerges.

You seem as bemused as us that you were not interviewed for the leak inquiry.

As I say, that is not in my gift. I would gladly have co-operated.

Do you think it undermines the leak inquiry that you weren’t?

I cannot really answer as to why that was the case. Maybe it was because I instigated it—I don’t know.

In every other leak inquiry that you have instigated over many years—

In 30 years of doing this, yes.

Have you always been interviewed before?

No, not in every single leak inquiry that is undertaken.

But in ones where you had a knowledge of the subject area?

I have been in private offices before where I have been interviewed for leak inquiries. But I guess they have to work out what they feel the best and most proportionate use of their resources is.

We may want to ask some questions about that, because clearly it is the culture as much as the tech that is the issue.

I very much agree with you. It is about the culture of how you handle market-sensitive information.

On the culture of leaking, the inquiry into the leak in the Treasury and the OBR was leaked to the Financial Times before it was due to be published. We have a leak of a leak inquiry. It is getting a little bit—I do not know what the word is.

The irony of that is not lost on me.

Are you going to do an inquiry into that leak?

I am not going to do an inquiry into that. It was a relatively innocuous article, and we decided that the best bet was to publish our inquiry in full.

Do you think it was a leak, or was it a well-informed journalist?

I think it was pretty innocuous.

Innocuous, yes, but do you think it was leaked or do you think the journalists were very clever?

I think it talked about it in fairly broadbrush terms, and we have to be proportionate in how we respond.

I have a tiny question, Mr Bowler. I concede that there are minor leaks, big leaks and things in between, but culturally, is it attractive to have a situation where even a small leak is not followed up at present? There is a new process, and you want to show everyone you are really serious about this, but you are not even trying to have a look at the leak. How does that work, culturally?

I agree on the culture. I think the best thing to say is that that is why we are hugely tightening up on our security and sensitivity in the Treasury.

We will move on to the OBR leak, and Dame Harriett Baldwin is going to lead off.

If I may, Chair, I have a couple more questions on this subject, even though we seem to have asked a lot already. There were 60 people interviewed in the inquiry that you did—

I didn’t do it.

That the Cabinet Office did. Were they all in the Treasury, or were any of them in No. 10?

They included people outside the Treasury, yes.

Were any of them in No. 10?

I think so, yes.

The reason I ask is that I wonder whether you could clarify something. The story went out on the 13th that there was not going to be an increase in income tax. The markets moved on the morning of 14 November, and then a—presumably—Government spokesperson clarified that it was because the fiscal picture was better. Which part of the Government issued that reassurance to the markets?

It is probably worth doing the timeline here. On 4 November, the Chancellor gives her speech setting out her aims for the Budget and her priorities. On 14 November, there is the leak in the FT. There is an official statement that reiterates the fiscal aims of the Chancellor’s speech, including that the aim was to rebuild headroom.

Who officially put that out? Who instigated the official statement?

That would have been our press office.

It would have been the Treasury that immediately said, “We have to clarify this”?

Yes, but it was in the terms that I have just set out.

Right. Moving on to the Office for Budget Responsibility, can you update the Committee on the search for a new chair?

Yes. We will imminently be advertising the search for a new chair. The process will be that, first, the advert will go out, and then I and a panel will interview. We will give a recommendation to the Chancellor; the Chancellor will then put a preferred candidate to this Committee, and this Committee will have the right to agree or disagree with that proposal.

The spring statement will be on 3 March. How has the process of working with the Office for Budget Responsibility differed in the run-up to this spring statement compared with previous fiscal events, given that there is no chair?

The Treasury has been working extremely well with the Office for Budget Responsibility. I pay tribute to Tom Josephs, David Miles and their chief of staff for their leadership of that organisation. Alongside preparations for the spring forecast, the OBR has been engaged in this security review. We have also been engaging it in the primary and secondary legislation that we are taking through to take account of the fact that the OBR is not being asked to assess the fiscal rules in this spring statement. In all those things, we have been working very closely and collaboratively with the OBR.

So we will not see an Office for Budget Responsibility forecast this time?

You will absolutely see the full forecast. You will see five years of economic and fiscal forecasts. The only change is that it is not being asked to do an assessment of the fiscal rules. There is a draft charter for Budget responsibility out, and that will be debated in the House before 3 March. There is also a clause in the Finance (No. 2) Bill that changes the rules there. For clarity, and this was always intended to be the case, you will still be able to see the fiscal forecast and the aggregates on which the fiscal rules can be judged. The purpose of this, which I think is very sensible, is to bring some stability to policy making in the Budget and therefore have the main policymaking event in the autumn at the Budget and just have the forecast in spring.

Will we see an assessment of the headroom?

You will see the headroom. In its EFO, the OBR used to give a percentage chance of meeting the fiscal rules. It no longer has to give that assessment. However, you will be able to see the number for headroom.

So the Treasury itself will not do the forecasts?

No, it has not since 2014.

But it will still be an independent body doing the March forecast?

Yes, absolutely. The only change is the assessment of the fiscal rules, which is not an enormous structural change to how we do things. The forecasts of the economy and public finances will be entirely and independently done by the OBR.

To clarify, will the OBR produce an assessment of headroom at the end of the forecast period?

Yes.

So the only difference is that it will not be giving us the confidence intervals for that?

Yes. You will have to see how they do it—but yes. We have set it out in the charter for Budget responsibility in draft. There will be a chance in Parliament to change that. It is also in clause 251 of the Finance Bill.

I am sure that all of us on this Committee will be interested to read every page of the OBR report along with every chart and statistic when it comes out.

I hope that you do.

However, most of the public and even many journalists will simply look at the single-figure assessment of headroom rather than the confidence intervals. Does that mean that there is effectively no real change in communication?

Yes, virtually everything is as it was. The signal is as much about wanting stability, and about this event not to be changing things. That is for lots of reasons: stability in a macro sense and a micro sense. I have said several times before this Committee that I do not think that it makes sense to fundamentally change tax policy twice a year when households and businesses are just trying to work out what the last thing was. We think this is the right idea, and lots of people have proposed this as a way forward. The OBR has agreed and is working with us on how we do that, so this is a consensual process.

But if you compare the experience of a member of the public, or even a member of the financial media, from the last spring statement to this coming spring statement, will virtually nothing have changed?

The assessment will not be there. I do not think that people should focus entirely and solely on the headroom in year four or five, which is a wider point.

Ah, but they do.

People do, and they should, but a whole lot of other things are going on, including the fact that we are due to consolidate quite significantly in the years ahead of that. The UK is alone in this focus on one number in several years’ time. I would chuck that into the Committee.

I fully share your frustration about that fact, but given that even the confidence intervals will be taken away, surely there will be more focus on that single-point estimate, not less.

I am not trying to totally belittle the headroom point. One of the major focuses of the 2025 Budget was to increase that headroom, and for very good reason. I am hugely supportive of that. We increased that headroom precisely to show the markets and anyone else that we had more room for manoeuvre against our fiscal aggregates and therefore that they needed less micromanaging and therefore there would be less need to intervene through the spring forecast. It is an important point. I was just making the economic point that I know you have heard from many people.

Coming out of the experience of the OBR leak inquiry that Dame Harriett mentioned, will the Treasury change the nature of its engagement with the OBR going forward, for example the number of different rounds of information passing to and fro, the number of forecast rounds and so on?

You will see that we have put out a draft. On the OBR’s remit, we have put out the new charter of Budget responsibility. The only change in it is the judgment on the assessment of the spring. We also put a clause in the Finance Bill that changes that. The OBR’s remit remains the same. We continue to work closely and collaboratively. In preparing for this Committee, I was pleased to see comments from Richard Hughes, from the chief of staff and from others about what they think that relationship is, including to the Lords Economic Affairs Committee. If there are ways to improve things coming from either the OBR or ourselves, we talk about those and agree them, but the charter and the law is there for you to see.

I have a couple of quick operational questions. First, the OBR is no longer going to publish its forecasts on its own website, but on the gov.uk domain. Is work on that going ahead as planned?

Yes. There are two elements to that. Just briefly—I know this is quickfire—it will publish on the Treasury’s gov.uk domain for the spring and then consider its own domain on gov.uk thereafter. That is about pragmatism and timing, and it is the recommendation of the National Cyber Security Centre. Work is going ahead sensibly on that.

Secondly, you mentioned to Dame Harriett that the job advert will be going up in the near future for the chair of the OBR, which has been unfilled for two and a half months. Why has it not gone up already?

David and Tom were always going to do the spring statement.

We should be clear that they are the two other members of the BRC.

Yes. We remain on track to appoint a new chair in time for the Budget. There is no particular reason why; I am keen to get on with that.

I should just stress that we are doing our own inquiry into the future of the OBR. Two former chairs are coming to give evidence on 25 February.

Can I say one thing? It is important to say on these occasions that the Treasury, at official and ministerial level, could not be more behind the role and independence of the OBR as an institution. It is very clear that, in an interesting geopolitical world, our institutions have never been more important.

Indeed. I think we might have a shared agenda on supporting our independent financial institutions.

Can I turn to staffing in the Treasury? Mr Bowler, I am conscious that you have been talking for most of the last 50 minutes; please feel free to pass this question to one of your colleagues.

My colleague, Beth Russell, might help me here. I will tell you who watches this Committee: my staff—the one group of people I do not want to have an impression of anything other than my answers to your questions.

After five and a half years as a Treasury Minister, I have deep respect and gratitude for your work and the work of your colleagues, but I am a little anxious when I look at some of the reports around staffing in the Treasury. There has always been a higher turnover of staff—I think about three times the civil service average. There is natural attrition of 380 people a year, and there is a scheme in place to pay people up to £100,000 for voluntary exit to get rid of another 300 staff. How can you convince me and the country that the Treasury is going to be fit for purpose? Anecdotally, a lot of people who have worked for me have contacted me over the last 18 months and asked, “What do you think I should do?”. There is also the issue of the dynamic with the FCA and the Bank of England in terms of differential salaries. Would you like to reassure us, if you can, about what is happening?

I can absolutely reassure you. We do have higher turnover than other institutions—it is down quite considerably in the last couple of years. More than half of that turnover goes to other Government Departments, and you might recall that we are a bit of an accelerator Department. Our actual resignation rate is at 5%, which is 1 percentage point more than the average of 4%. We are in the middle of a transformation in the Treasury where we are going to get smaller, and that is one of my most important objectives for this coming year. I should reassure you that we are going back to our pre-covid size. We expect to reduce by just over 200 people, and we will use a voluntary exit scheme, in common with most other Government Departments at the moment, to achieve that. We are doing that incredibly carefully. For example, I think we are the only Department that is saying the scheme is not open on balance to our highest performers, and we are doing that because we want to retain talent. We are talking with our staff all the time. It will be accompanied by a vision that we can talk more about. Although we have very clear budget constraints at the moment, we also think and are open with everyone, including our staff, that a slightly smaller Treasury can be a better Treasury. For example, our staff are very focused on career progression, as you know, and we think a slightly smaller Treasury can aid that. In your questions, which are perfectly reasonable, you have hit squarely on the head the challenge that we have as the transformation goes through. I am very confident about the quality of the Treasury, but we are going through a moment of transformation and change, which we need to do very carefully.

I had a constituent who wrote to the local paper saying that, in the years to come, most of the Treasury will be hollowed out by AI. Can you tell us how you see AI working to create efficiencies?

As you can see, I am nothing but an expert in AI. The best thing about our young Treasury is that they are using AI, but I will hand over to Beth.

Beth Russell is based in the Darlington economic campus.

The Treasury is not an operational Department like a lot of other large Government Departments. Our work has some operational aspects, which we are particularly looking to use AI to change and improve, including things like correspondence and our Office of Financial Sanctions Implementation casework. I think we are the first Department to have an HR chatbot. In our operational processes, we are already using AI. For our policy teams, we are rolling out and testing general-purpose tools. We have our own HMT-GPT, and we are trialling Copilot at the moment with 25% of our staff. In the policy space, we are doing some deep dives across our policy teams about how AI can help complement and improve the policymaking process—from research into issues to helping write advice, presentations and consultations, where we can use AI to analyse responses. We are very much looking at AI as a complement to what our staff are doing to help improve the outcomes, but also I guess to relieve them of some of the lower-value work and to enable them to focus on the higher-value work.

Sorry to interrupt, but does that translate into tangible savings that would mitigate the anxiety over people leaving and headcount loss? Can you say that you will then see individuals doing higher-order work as a consequence of what you have just described?

Yes. AI is one way in which we think we can achieve the same outcomes and the same quality of policy advice with a slightly smaller workforce. It is not the only thing. We are also thinking about how we prioritise better. In the spending side of the Treasury, we are thinking about the relationship with Departments so that we can make sure that the Treasury is focusing on the most high-priority things and that we are not micro-managing Departments on more of a day-to-day basis. We are also thinking about how we better get information from Departments in real time to enable us to focus on the insight rather than the transactional bit of the relationship.

How would you say this Committee can best scrutinise progress in that domain and weigh it against best practices elsewhere, in financial services, across Whitehall, and beyond?

On the pure efficiency side of things, we set out in the spending review some of the things that I talked about, such as how we use AI in some of our operational processes. We will measure progress on that in terms of numbers of cases worked and that kind of thing. We will be able to provide information and data on that. I think it is more challenging to work out how to measure success and benefits on the policymaking side. We will have to think about that a little bit more, but it will be around how we tip the focus into the higher-value work. We are still thinking through quite how you measure that.

Regional jobs are part of the Government’s priority. I understand that there were going to be 333 Treasury staff based in Darlington. Will you say if that has changed, or are you on target? Is it subject to the “smaller but more agile” working arrangements that Mr Bowler outlined? Regarding the way that you interact with one another, do you see each other enough or is it all on Zoom?

As you said, we set a target. Four years ago, the Treasury had no staff in Darlington. We set a target for March last year to reach 335. We reached that target in March last year, and we have maintained that level. We are actually a little above that level, with about 350 staff. Our commitment is to maintain that target and maintain at that level, despite the fact that the Treasury as a whole is getting a little smaller. We see each other quite a lot on Teams, but it is important that, when we set up the campus in Darlington, it was not supposed to be that you go there occasionally but spend all your time on the train to London. The point of having the campus, and of us living and working there, is to understand and have experience and insight from being in a place that is not London. I come down to London every two or three weeks, but I think that one thing that is really important in making jobs work outside London is the willingness of Ministers and senior officials to do things online and not expect people to be physically in London all the time.

Covid did teach us that there is something special about face-to-face. I wonder, for example, how often James might have been up there.

I was there on Monday.

How much is the return ticket to Darlington, and does that have an impact on your travel budget?

It depends how much in advance you buy it.

The Treasury policy is that you use standard class, and that you book in advance to get the cheapest ticket. I was in Darlington on Monday last week. To Beth’s point—and thanks to our Ministers—it is not the case that if you need to have a meeting or to see a Minister, you must get on a train and come to London. Ministers will work with a TV screen, writing their things, and people interact very well. I think that was very much helped by covid working arrangements.

I had a similar role in promoting the Glasgow proposal when I was a Minister in the Foreign Office.

That has not come to pass, I think.

No, it did not happen—too expensive. One of the problems was getting Ministers and senior people there, because if there are 10 meetings in a day, it is more efficient to be doing things here. Trying to get that balance is really important, so I am very pleased to hear that the boss has been up there—

Well, I don’t need to be.

And the cost is a standard return, so it is quite available for other people to take it?

We particularly encourage line managers and their staff to meet face-to-face fairly regularly in one location or another because, as you say, that is really important. Now that we have a critical mass of our staff in Darlington—nearly 20% of the Department—there is a lot of face-to-face interaction, including with the other Departments based in the same building, which is one of the great benefits of DEC. We are co-located closely with other Departments, so there is a lot of interaction on regional growth, for example, between the teams that work there—between the Departments.

I was very impressed to see the Edinburgh example and, personally, wanted the Glasgow one, but we can talk about that outside the room with Mr Grady.

How often do Ministers go to Darlington? It can be hard for them when Parliament is sitting. I understand that.

It depends a bit on when they are doing other things and passing through. The Chief Secretary was there again last week, so reasonably regularly.

I am not trying to pin Ministers down, because it is a bit unfair to ask, “Are they locked in a room in meetings?” as that is probably why they are there, but do they walk the floor? Do people see Ministers?

Absolutely, and they often do events with our staff, and external events too. When the Chancellor was in Darlington a few weeks ago, she and I met a group of women who founded their own businesses in the north-east. It is also an opportunity to meet different stakeholders you would not necessarily see in London.

Can I turn to efficiency savings? The previous Chief Secretary to the Treasury, Darren Jones, talked about the real-time cross-departmental spending tracker. He said it would take two to three years. A recent NAO report found that Departments lacked the granular data to track basic service costs. There is a projected £3.5 billion in efficiency savings across all Departments for 2025-26. Could you help us understand how it is going to work in that two to three-year timeframe? Maybe I am confusing two things, but can you give us some more detail on how the tracking mechanism will work and how confident you are about achieving those savings? Just so I can get it all out, and then you can respond, I have another question. How can we be sure that these efficiency savings are cash-releasing savings, rather than staff time saved through AI and automation? Most people hear these things and think, “Great. We’re going to save this money and redeploy it somewhere else,” so it would be helpful if you could explain what is happening and its proportions.

On the finance systems project that you referred to—as I think the previous Chief Secretary talked about when he met you before—we currently receive a huge amount of information from Departments about their budgets, spending against their budgets, performance and so on, but it comes in very different forms. That could be Excel spreadsheets, board reports from Departments and so on. The objective here is to get a much more consistent set of up-to-date and robust data from Departments, and therefore to be able to use it more effectively to provide insights. The work on that is still at a reasonably early stage, precisely for some of the reasons you said, which is to make sure that we design a system that works and is helpful. We are in the process of putting together a business case, understanding what users in the Treasury and Departments would find most helpful, and then talking to the market about what the market can offer. That business case will be worked up in the first half of this year, and then, as the previous Chief Secretary said, we are aiming for it to be delivered in 2027. The primary aim is about the flow of information from Departments to the centre and then being able to use that in a more consistent way.

I think that people watching this will probably think, “Gosh”, because in a business, even in a quite sophisticated global corporation, managing the flow of money between departments and so on should be quite achievable. How would you reassure us that you are doing this at the best speed you can, and that it could not be done much more simply? A lot of people in politics are saying, “Just bring in people from the outside who know what they’re doing.” How do we know that you are doing it in the best possible way?

We are talking to lots of people from outside. We have set up a small project team that is leading on this and definitely wants to take insights from elsewhere. Obviously, we have existing systems, like the OSCAR system, but a lot of those are about collating information for external uses, such as the estimates process and so on, whereas this is more about how we collect information at the centre that can be used internally for insight. We are trying to get the balance right, so that we do not rush to design and deliver something that will not be future-proof, and we are looking at how we use AI as part of that.

As a former Chief Secretary, I seem to remember talking to individual Cabinet Ministers where the senior officials in their respective Departments would condition the numbers with lots of qualifications, in ways that made it very difficult for the Treasury team to penetrate, so it is not just about systems. How would you address the wider cultural problem that possibly exists, where people get a call from the Chief Secretary and start saying, “Right, we’ll try to protect that”?

I should have said that this is very much part of something we are calling Project Reset. I alluded to it earlier, and it is about how we think about the role of Treasury with Departments, particularly on spending. As you say, a lot of that is cultural. Can we get to a position where we have a bit less micromanagement by the Treasury—it might be said to be like that—and more transparency from Departments? How do we get the incentives right for the Treasury to be involved a bit earlier and more upstream in decision making? The quid pro quo is that there is not a delay later, where we are trying to mark people’s homework and do big assurance processes, but instead are involved a bit more upstream, which does happen with a lot of Departments. I work very closely with HMRC and DWP—Treasury sits on a lot of their investment boards and delivery boards. Can we try to get that positive culture, where we can work together in partnership more?

More immediately, and back to the question I put about the year ’25-26 and the £3.5 billion efficiency savings across all Departments, would you like to comment on the progress towards that goal and what is happening with that money?

We have a government efficiency framework, which is the underpinning for that, and we now have quarterly reporting from Departments on their efficiency savings. Spending teams then discuss those with Departments. Obviously, we have not yet got to the end of that this year, but I think we are seeing good progress on those. From the next financial year, we will be publishing the progress made against the targets and plans that all Departments set out in the spending review, which I think was the first time that every Department published a plan for their efficiency savings for the next few years.

Which Departments are finding it most difficult, do you think?

There is a lot of optimism in “efficiency savings”.

I think the ex-Chair of the Public Accounts Committee could tell us the answers to that one.

That would be my annual report. How is it going in Defence?

We are working very well with the new permanent secretary. [Laughter.]

You’re on the naughty step again.

Obviously, they have the geopolitical reality of things in Defence at the moment.

But that mustn’t mask inefficiencies. That is the challenge, isn’t it?

No, indeed—and priorities.

You are definitely stripping out inefficiencies, because there are proper savings, proper challenges and proper future expenditure, and it always struck me, over a decade, that efficiencies are always very optimistic. When Ministers announce an efficiency saving out of a hat, my question is always, “Well, where’s the plan?” So, are you telling us that there is a plan behind all this?

Yes, and you mentioned AI and tech. Of course, in some senses, those are routes by which it is possible for Departments to deliver the same or more with fewer resources and a slightly smaller workforce, so where the money comes out is in fewer people.

Efficiency savings in-year are always suspicious, but these are over the three years of the spending review.

Could you talk me through how the Treasury decided how much funding to provide HMRC for closing the tax gap?

I will ask Beth to come in on that.

There are a couple of things here. We looked at HMRC’s budget in the spending review, alongside those of other Departments, but then at every fiscal event we have a conversation with HMRC about the measures that are in its pipeline or that we would like to work up with it to crack down further on tax avoidance, evasion and fraud. We look at those against a few different things. One is the rate of return for investment—on which HMRC has pretty good analysis—on more compliance officers in downstream compliance and on changes to policy or procedures upstream to try to prevent non-compliance in the first place. We look at a lot of very detailed analysis on that. We also look at things like the distribution of measures to tackle different aspects of the tax gap and to make sure that we look at, for example, both small business non-compliance and larger businesses, and that we have a good spread of interventions. Generally speaking, if a measure is deliverable and provides a good rate of return, there is a track record of it being funded in fiscal events. Since July 2024, we have invested about £2.6 billion extra in HMRC to get a forecast £10 billion more of tax revenue every year.

Given that the Treasury has targets for how much you want to raise from closing the tax gap at different fiscal events, how confident are you that the amount of investment you have put in gives the level of staffing—the number of compliance officers and so on—needed to actually meet those targets? Have you made an assessment of the investment versus those targets?

We have set the HMRC compliance targets, which are adjusted as we introduce new measures. Obviously, not all new measures require more compliance officers; they can also be policy changes. The individual interventions feed through into HMRC’s overall compliance target, and we have quite detailed measuring, monitoring and engagement with HMRC on whether it is meeting those targets. The Exchequer Secretary now chairs the HMRC board, and there is a lot of information and assurance through that process.

Do you think it is a positive change that the Exchequer Secretary chairs the board?

I do. Although HMRC is a non-ministerial Department, a lot of what it deals with is general policy and delivery. Rightly, Ministers are closely involved in that strategy, although obviously not in individual taxpayer’s affairs.

The whole point is that the Minister, who is involved in the strategy, is chairing the board. That is perhaps a bit too hands-on for a Minister who has a very wide portfolio, and who deals with other arm’s length bodies through the normal processes.

The Exchequer Secretary’s main focus is HMRC.

We had this conversation with the Minister this morning, so I will leave that for now.

It is good to see the arrival of the new version of the Green Book. A previous criticism was of an over-reliance on benefit-cost ratios as a pass or fail, rather than taking a more rounded view. The Chancellor said that she thinks the new Green Book may well unlock billions in investment for the north. What would success look like for the new Green Book, and how will you monitor that?

As you said, the overall aim is to get the best and most rounded assessment of both benefits and costs for Ministers to be able to make decisions. Ultimately, it is Ministers who make decisions on the basis of all the evidence they receive, and the objective here is to make sure that they get the best evidence. A lot of work around the Green Book will be about monitoring and looking at individual business cases as they come through. One of the other recommendations of the Green Book review was for us to publish business cases much more routinely so that there is much more transparency about what they say and the decisions made on them. The other aspect of the Green Book review and the work we have done over the last 18 months has been to get a huge amount of feedback and engagement from external commentators, and particularly from the mayoral combined authorities and local government. That will be a big part of how we measure success, because this is ultimately about making sure that people feel that their investment proposals have had a good hearing, regardless of the end decision.

I would particularly pick out the place-based business cases, where multiple projects can go in for one decision. That is particularly relevant for regeneration. It is quite a big change that could have quite a big impact.

Would you see that resulting in a geographical shift in the pattern of investment, as a result of changing, effectively, the criteria by which investment gets approved in the Treasury?

Well, I hope it is not a zero-sum game that takes away from other areas, but I would expect it to allow more investment in areas. The overall aim is to improve places—to be positive.

The other thing that we are trying to do much better is understanding the geographical spread of spending both at spending reviews and when Departments allocate their spending afterwards. That will be one input to understand the success or not of shifting spending.

Ms Nurse, it is your moment. The other week, we had a conversation about mutuals with the Building Societies Association and the credit unions. It was about a year ago, in Darlington, that we asked the permanent secretary about mutuals, and there was a bit of a pause, I have to say. I am hoping we can get some more specific answers now. Since last year, what specific actions have been taken to support the mutuals sector?

We are engaged in a multi-year programme across the mutuals sector. The Chancellor set out quite a lot of this in her first Mansion House speech, and we have been pursuing it ever since. We launched a call for evidence on the reform of the credit union common bond. Recently, in the financial inclusion strategy, we announced that we would be taking forward measures on that reform. I cannot front-run those, but we will very shortly be out with a set of changes that will help the growth of the credit union sector. In the same speech, the Chancellor announced that we would make progress on the statutory instruments we need to change the funding limit for building societies. We have not made progress on that yet, but I can tell you that we will be laying those statutory instruments before the summer recess. We have some resource that has come in to help us do that. We also asked the PRA and the FCA to produce a report on the mutuals sector. They delivered that in December and have committed to looking further at credit union regulation in particular. There are a number of recommendations in the report that we will be looking at, and we will be working collaboratively with them on that. We welcomed the creation of the Mutual and Co-operative Sector Business Council, and I am really pleased to say that it has produced three reports on growth in various aspects of the sector. Again, there are some recommendations for us, which we will be looking at closely, working in collaboration with the people involved. We also confirmed that we would continue to fund the Law Commission’s reviews of the law on co-operatives, community benefit societies and friendly societies. The Law Commission is proceeding with that. It will report later in 2026, and we will then take a look at those recommendations. We have also announced a £30 million transformation fund for the credit union sector, funded from the dormant accounts money. That is going to help with back-office functions and technology. Picking up a point made by the right hon. John Glen, we have certainly looked at the lessons of the £38 million project that was previously run. We are not going to repeat the mistakes of the past.

It wasn’t mine, though, was it? It was pre-me. I just want to make that clear.

It wasn’t yours. It was pre-you. We are trying to look at this holistically. There is something in there for all the various aspects of mutuals. We are certainly very committed to taking this agenda forward.

That is good to hear. I will come back to some of the specifics on legislation in a moment. The aim in the Government’s manifesto was to double the size of the mutuals sector. That is across the whole of Government, but I assume you take that as a doubling within the financial services sector?

Yes.

Is that more smaller ones or just lots more Nationwides?

I think it would be hard to make lots more Nationwides. There is not a single answer to that. It depends on which part you are looking at. For example, we have fewer credit unions than we had previously, but they have taken on more members, have more savings and are making more loans.

Are you looking at their balance sheet? With credit unions we know that there is a challenge regarding the smallest ones, so amalgamation has not always been a bad thing. Are you looking at the number of customers, and is that what you consider doubling when you measure that sector?

I think we will look at the number of members and all those different aspects. We are going to try to drive them all regarding membership.

That is great, but how are you going to measure success? It seems that in the credit union sector you are looking at the numbers of people. There could be lots of smaller co-ops set up, or smaller building societies could re-establish or amalgamate and so have bigger customer bases. How are you measuring across each bit of the financial services sector, and how will you measure whether you have achieved what you are setting out to do?

Ministers have not yet determined exactly how to measure it, but those are all the various factors that we will be looking at.

I should have declared that I am a Labour and Co-op MP. Just to be clear, it is not sponsored by the bank or the Co-op group.

Economic Secretaries through the ages have repeatedly seen credit unions go under. Often those are very small institutions. It has never really been possible to drive consolidation from the centre. How do you reconcile anxiety over performance and security with the desire for expansion? Secondly, we have brilliant initiatives led by the Treasury on things such as Help to Save, where credit unions could collaborate well with Government initiatives. Is there anything that you could say about the role of the credit unions in that regard?

On the first point, we have the Prudential Regulation Authority which is responsible for the sector and supervises firms from the very largest to the very smallest. It has done a good job of managing the failures of some of those smaller organisations. There is also the work of the transformation fund looking at those credit union service organisations and trying to get some of the economies of scale—even if they are not going to merge—along with efficiencies and learnings. All those things will add to the resilience of the sector. I expect that there will be some more consolidation. I saw that ABCUL was saying the same thing when it appeared before the Committee. It is always something that one must be aware of. However, the balance does not feel too bad right now. On things such as Help to Save, there is an active conversation going on right now about how to take that forward. The Government are looking at it right now. Up until now, there has been one provider. The question is whether we can open it up to multiple providers. The credit unions will be an active part of that conversation, because that would be a very obvious place to go.

You mentioned legislation. It was good to hear because the Committee had concerns that it was being held up. Just to be clear, do the common bond measures require legislation?

Yes, it will require primary legislation.

So that could be a bit slower? Or if it is primary, would it potentially be in a future Finance Bill?

It would not. It would be in a future financial services Bill. Obviously, I cannot say if we can have one or not. However, we are always hopeful of financial services legislation.

But could it be added into a wider financial services Bill?

Yes.

Okay. You have highlighted the statutory instruments. There are also the mutual and co-operative sectors’ reports and recommendations. Will any of that require legislation?

Definitely some of it would. Some of the things that are there would require either primary or secondary legislation. There are some things regarding how, if something happens in company law, we then need to replicate it in mutuals. For building societies, we have a power in the Building Societies Act 1986 that allows us to do quite a lot of that by secondary legislation. It is a blend—and some of it might just be by regulation as well.

The Law Commission’s review comes later in 2026—it is always later. However, are you hopeful that it will actually report at the end of this year?

Yes. I have been tracking it closely, and I believe it will report this year.

Okay. One of the things that might be needed is tidying-up legislation to make it easier to do these things in secondary legislation, because the primary legislation has been holding things up. Is that a consideration for the Treasury?

As you know, in some of the legislation over the years we have been putting more in so that we can have powers to make things by secondary legislation. That is definitely an area we will consider across this mutuals piece.

Sticking with legislation, obviously we want more growth in the economy, and a key focus of that is FCA regulation. Mr Rathi, the chief executive of the FCA, wrote to us last month with a pretty broad list of areas where the FCA is waiting for regulation. Why is it taking so long to push through legislation to back up the Government’s own strong policy of economic growth?

We are working with the FCA across the things it raises in that letter. Quite a lot of those things take primary legislation, so we are working hard to be ready if there is an opportunity to do that. Obviously, I can’t front-run the King’s Speech, but we will be ready to go. Lots of things that have been announced, such as Consumer Credit Act reform, consolidating the Payment Systems Regulator into the FCA, the senior managers regime and FOS reform all take primary legislation, and that takes time.

Just before we move on to primary legislation again, the Consumer Credit Act passed in 1974, when we had only three TV channels and “Rising Damp” made its debut, and the ATM had come in only in 1967. It was a very different payments landscape.

You’ve just lost half the room.

Only myself and Mr Dickson were there, and he was very young. When will phase 2 of the consultation on the Consumer Credit Act open?

We have already been consulting on some of the Consumer Credit Act, and we would intend to advance through the next piece of primary legislation that we get. We will be responding to that in the spring.

And when would you expect that primary legislation to be advanced?

That will depend on the King’s Speech.

What is behind the delay in primary legislation? Is it that politicians are dragging their feet? Is it that we don’t have enough civil service capacity—at the same time as we are looking to downsize the Treasury? Is it a lack of particular skills in the Treasury, such as draftsmanship and legislative drafting skills? Why aren’t we getting with this legislation? The Consumer Credit Act is from 1974; the world is so different.

To provide a bit of context, not least for our staff watching, we have transferred the entirety of financial services regulation from the European Union to a domestic thing in the last couple of years. Far from having a lack of legislative capacity, we have been doing nothing but legislating. In doing that, we tried to set out a framework to make this a more modern and bigger approach. There is a lot of focus on financial services legislation and growth. That is part of the context, as we focus on how we regulate outside the European Union and look at how we focus on growth.

So another hidden cost of Brexit is that we haven’t been able to undertake the legislative modernisation to get growth.

Obviously, there are going to be some advantages in being able to regulate our own financial services, but there has been an enormous amount of financial services regulation.

To turn it on its head, before I go back to Dame Meg, are you confident that the civil service in the Treasury is able to progress this, so that, for example, we can get this legislation into the next King’s Speech, if we so desired?

Yes. As with all legislation, a Government need to prioritise what they want to do, but we are very clear what we want to do.

Mr O’Neil, I am conscious that you have not had a chance to speak at all today. Is there anything you would want to add to that?

I am here to talk about the growth agenda of the Government, if that question came up. To summarise: growth is a No. 1 priority. It is about stability, investment and reform.

That means legislation.

A promotion beckons, Mr O’Neil, if you say that enough in front of Ministers. We are obviously keen on growth, but the nitty-gritty has been the focus for today, so I appreciate your attending. On consumer credit, before we finally move off that, is it actually possible to legislate for such a complex and varied landscape? It has been discussed for a long time; would it be better to do it, for example, through the existing consumer duty?

We have already transferred about half of the Consumer Credit Act to the FCA, and they have been regulating it. We also have the retained provisions of the Consumer Credit Act, which we are looking at now. Some of those things are challenging to put into regulation, because they are fundamental rights that, perhaps, work better in legislation than in regulation. That is what we are working through now.

So you are not really going to focus on the bit that was with the FCA.

The bit that is already with the FCA is working well. We are working through the bits that are still retained in law.

And are you confident that you need to have that legislation? Putting it bluntly, there is a tendency for all politicians to say, “We’ll legislate for that,” because it is an action point. Actually, some of the best work that Parliament does is not through direct legislation but through secondary legislation or guidance.

Some of it we have to do in primary legislation because it is in primary now. We cannot amend it by secondary, so we will have to do some of it in primary, but we will try to shift as much as we can into the FCA regulations so that it can be more responsive.

Under the consumer duty?

Under the consumer duty, yes.

I have just one more quick question for you, Mr Bowler, on politically exposed persons. You mentioned that, because we are no longer in Europe, we can set our own rules. Is there any discussion in the Treasury about how to manage that? Admittedly, it affects a small number of people, but is it something that is being looked at?

I do not have anything particular to say other than we are highly aware of the issues and some of the burdens that can place on both the institutions and the individuals. We will continue to engage with everyone on the best way forward.

We will pick that up separately if we need to. I thank our witnesses from the Treasury very much indeed. They are Jim O’Neil, second permanent secretary; permanent secretary James Bowler; Beth Russell, second permanent secretary; and Gwyneth Nurse, director general, financial services. The transcript of this session will be available on the website, uncorrected, in the next couple of days. Thanks to our colleagues at Hansard and BowTie for the broadcasting. Witnesses: Jessica Pulay, Jo Whelan and Paul Canty.

Welcome back to the Treasury Committee on Wednesday 11 February 2026. We are delighted to welcome the Debt Management Office. We have in front of us: Jessica Pulay, chief executive; Jo Whelan, deputy chief executive; and Paul Canty, managing director for financing strategy at the Debt Management Office. Ms Pulay, you have not been in post that long. Have you any general comments about how life has been at the helm of the DMO? I should just say that I think we first had contact when your predecessor was in front of the Committee that I formerly chaired. We were worried then about, and our concern in the Public Accounts Committee Report was, the succession management. You are the successor to Robert Stheeman, who was there for 20 years. How has taking over been for you?

Thank you very much, Chair, and good afternoon, everybody. It is a pleasure to be here and to have the opportunity to talk about the work of the DMO. First, I would like to say what a tremendous privilege it has been to be CEO of the UK Debt Management Office and, in particular, to lead such a talented and professional team. Reports from the front suggest that it has been, so to speak, a seamless transition. However, since becoming CEO, I have implemented several changes and adaptations, to reflect the complex environment in which we all live. First, to ensure optimal operational resilience, we have expanded the executive committee by an additional three members. That not only helps with the organisational decision-making process, but strengthens our capacity to meet the Government’s financing needs in this complex environment. Secondly, we have established a new investor engagement and strategic research team. That is dedicated to deepening our dialogue with the market, which is an essential function to provide optimal market intelligence, which will ensure the effective delivery of our financing programme. That is from the internal perspective at the DMO, and that is just a couple of examples. From an external perspective, there are also a couple of adaptations that I would point to, but again, they are just a couple of examples that I would like to highlight now. The first is that, as an organisation, the UK DMO signed up to a memorandum of understanding with the Financial Markets Standards Board. We were pleased to do that in the autumn of last year. And from an operational perspective, the Government introduced some tactical adaptations in order successfully to deliver the financing remit over the past year. An example of those might be the introduction of a new modality, which is called programmatic gilt tenders or p-tenders. Those have been welcomed by the market as an additional tool at the margins to provide some flexibility within the context of an open, predictable and transparent programme, in order to respond in a more agile fashion to in-year market developments. Our core operating principles remain the same, but the adaptations that we have introduced, particularly over the last year, have ensured the successful delivery of the financing programme.

Your predecessor had to stop one auction in 20 years. I am just checking for the record whether you have had to do that in your time.

Have we had an uncovered auction? The DMO has not had an uncovered auction since I took over as CEO on 1 July 2024, nor since 2009.

You are obviously issuing a lot of gilts. What changes have you seen in who the end purchasers of those gilts are?

We do indeed have an elevated financing remit this year. Our gilt remit is £303.7 billion this year, dating back to the beginning of April. The year finishes at the end of March and, at this point, we have delivered more than £280 billion of that. We have done that successfully, notwithstanding the challenging backdrop. I mentioned that we had made some tactical adaptations. One of the adaptations that we made was to reflect the changing nature of structural demand for gilts. For example, for many years you had seen the defined-benefit pension schemes purchasing gilts. That had been a feature of the market for many years and was one of the reasons why the UK was able to benefit from a higher weighted average maturity of its debt portfolio compared with our G7 peers. This has been a trend going back some time now, but I think it is fair to say that, over 2023 and 2024, the pace has accelerated. These defined-benefit pension schemes have been bought out by insurance companies through so-called bulk purchase annuity—BPA—transfers. As I say, this trend had been happening for some time but, in 2023 and 2024, we saw around £100 billion-worth of these bulk purchase annuity transfers. From the early data that we have seen, it is the case that, in 2025, the pace of those transfers actually slowed a little bit. There is still demand from defined-benefit pension schemes for long-maturity gilts, and indeed for gilts across the yield curve, but it is fair to say that the structural demand, which was in place in the UK for many years, has dwindled. What has happened to those insurance companies that were buying these BPAs from the DB schemes? Because insurance companies are subject to a different regulatory regime than pension funds—they are subject to the so-called Solvency II regime, which means that they value their assets on an asset swap basis, effectively—they were expected to sell the gilts that they bought from the defined-benefit schemes. In fact, because gilts represent attractive value on an asset swap basis against other assets, such as US corporate bonds—US corporate credit—those insurance companies have not necessarily sold the gilts that they bought from the DB schemes. Not only have they not sold them but, in certain cases, they are actually adding to their holdings. I think it is fair to say that those are more tactical buyers, because they are purchasing gilts on what might be called a relative value basis against other asset classes, but nevertheless they have been buying gilts over the past couple of years. I would also point to a diverse range of other investors who are active in the gilt market, but I would note that as a result of the changing nature of structural demand for gilts, overlaid with our own assessment of cost and risk, which is the analysis that we conduct every year as we set the remit, it became clear to us that—from both a demand perspective and a cost and risk perspective—it would be appropriate for the Government to reduce the weighted average maturity of the issuance this year. That has been well received by the market. We were able to do it because we already benefited from the longest average maturity of the G7 countries. It has also been followed by a number of other countries that have taken similar decisions.

Thank you very much. Perhaps, Mr Canty, you would acknowledge that we are very dependent on the “kindness of strangers”, to use the famous words of Mark Carney about issuing gilts. What do you see internationally? Have there been any shifts in the buyers of gilts?

From an international investor point of view, gilt holdings have been relatively stable and in line with other peer sovereign issuers’ overseas holdings as well. There is a balance to be had there. Some of those holdings are from sterling’s position as a reserve currency, which is positive for stable demand for gilts. For some of those investors that are classified as international, the beneficial owner may well be within the UK, so it can be slightly misleading. But, overall, it has been stable and in line with our peers.

Are you seeing hedge funds or investment banks being bigger players in the gilt market?

Yes. It is fair to say that hedge funds in sovereign markets, and financial markets generally, have increased their presence. They do play an important role in the distribution of gilts. They are an important part of the market now.

Ms Pulay, you mentioned the challenging backdrop. Could you elaborate on what makes the backdrop challenging?

I think it is fair to say that the UK gilt market—I would say that global fixed-income markets are no exception—has been subject to episodic periods of volatility over the last year. It is also fair to say that gilt markets have, as other markets have, responded well to those episodic periods of volatility, in the sense that gilt market functioning, which is what is important to us as a user of the capital markets—as an issuer, and as the Government’s borrower—remains within normal parameters.

So the challenging backdrop is higher volatility in the gilt market?

That is correct. I think that, at a recent Committee hearing, you heard the phrase “we live in an era of volatility”. There will be episodes of volatility from time to time. I think it is fair to say that the gilt market has reacted efficiently, that you have not seen price gaps, that the price formation process has worked effectively and, most importantly, that against this backdrop the Government have been able to deliver their financing needs.

Ms Whelan, with your experience with the Bank of England, can you tell us a little about the impact of quantitative tightening on the gilt market?

That is a really good question. I am looking at it from the point of view of our being a user of the market. Obviously, the whole policy purpose of the Bank of England in terms of quantitative tightening is not really our area of expertise, or anything that I would pass judgment on.

No, but it has an impact on the gilt market, doesn’t it? Presumably, you work closely with the Bank of England in feeding into it about what size of quantitative tightening you think the market can absorb on top of your own issuance.

Thank you for the opportunity to elucidate that. We absolutely do work really closely with it and have a very good level of co-operation at an operational level. We are not involved in the total quantities they would do, as that is something for the MPC. What we do is talk to Bank of England officials when they plan the operations needed to do the gilt sales for quantitative tightening, just so that our calendar and their calendar mesh nicely. It is in everybody’s interest, and it helps the market adjust more smoothly.

Do you talk to them about the maturity of what they are selling and things like that?

That is typically dictated from the MPC strategy. The MPC will say that they wish to sell in these maturity buckets at such and such a pace. We would not be involved in that. It is more at the level of the calendar design. The Bank may want to have an operation on a particular day of the week, or a particular week of the month. It is useful for them to know what we plan to do and to make sure that the operations we are doing are evenly spaced out overall.

Following on from what Dame Harriett asked about the impact of quantitative tightening, Ms Whelan, does the DMO have its own assessment of the impact of QT on gilt markets?

That is a really good question, and you might expect us to, but from our point of view it is worth emphasising what kind of analysis we have to do for our particular role. When we are making advice for Ministers and so on, we need to think about the medium-term outlook. We look at the whole range of factors that could affect the market level, rather than specific things. We do not do studies on individual, particular subjects like that. We look overall, and I am sure Jessica will want to elaborate on the kind of analysis that we do.

So you take all those different factors in the round, but if the MPC were to vote one year to slow down QT dramatically, for example, I presume your advice to Ministers about the capacity of the gilt markets would change. Is that the kind of decision making and advice that you give?

It is a bit more nuanced than that, in the sense that the Government have undertaken not to change their issuance strategy in relation to monetary policy. If you go way back to 2009, the Chancellor wrote to the Governor of the Bank of England to that effect in relation to QE. The same policy principle applies in relation to anything to do with monetary policy. What would happen in that circumstance is the market expectations would change and the whole demand structure would change, so the dialogue that we have with the market to understand what the demand and distribution dynamics are would ultimately factor that in. I am sure Jessica wants to comment on some of that as well.

The only thing I would add is that the institutional separation of responsibilities between the Bank of England—particularly the Monetary Policy Committee—for setting monetary policy, of which QT is a part, and the DMO’s responsibility for debt management policy is very important. It is fair to say it is also important from a market perspective as part of the established framework that exists between the institutions that are responsible for economic policy.

Short-term instruments account for only about 4% of UK Government debt, compared with about 20% in America. Is it feasible for us to move to a higher level of short-term debt, and what is the thinking around that?

That is a very good and topical question. When we talk about short-term debt, it is fair to say you are talking about Treasury bills, which are issued at one month, three months and six months, every Friday at 11 o’clock. The Treasury and the Debt Management Office announced at the Budget that we would be jointly undertaking a consultation on the T-bill market, and the potential for expanding and deepening that market. That consultation opened on 5 January; it is still open, and it closes on 27 February. We would be grateful to hear back from market participants as to what their recommendations might be in terms of the potential for broadening and deepening the market.

Are you giving advice to the Treasury from your perspective on this? How does that relationship work? You are a recipient of that consultation, but were you advising before the Budget, and will you advise after the consultation? How deeply do you get into the policy side of it?

As you know, we are an executive agency of the Treasury. We have operational responsibility for delivering both the Government’s debt management and cash management objectives, of which Treasury bills form a very important part, because we issue T-bills for cash management as well as debt management. Our policy is set by the Treasury, ultimately by Treasury Ministers. We provide advice throughout that process to the Treasury, including, for example, around this Treasury bill consultation, but more generally around the development of our financing programme.

What would you say to us about the risks of moving to shorter-maturity debt?

One of the ways in which the DMO thinks about the debt management programme is on a long-term basis. Our debt management objective is to achieve value for money over the long term, subject to risk, for the UK taxpayer and the Government more generally. I stress over the long term. In that context, it is very important to consider issues such as refinancing risk and refixing risk, as well as other risks such as liquidity risk and execution risk. There are myriad risks that go into the assessment of cost and risk advice that we provide to the Treasury. With respect to refinancing risk in particular, which perhaps plays to your question, Chair, it might be useful to note that last year, in our annual review, the DMO published quite a lot of information about the trade-offs between those different risks, and we simulated different scenarios for our skew and remit proportions—that is, the bonds we are selling in different maturity baskets—when overlaying that with different risk parameters. That is something that we, as a long-term borrower, need to consider very carefully.

Going from very short to very long, we hear that tech companies in the US are issuing 100-year bonds. Have you been part of any discussion about having very long bonds? Of all people, I would think any Government, including the UK Government, could potentially back that. Has that even been discussed? What would be the problems or advantages of doing that?

It is important to note that yesterday’s transaction, which was very significant for the UK credit market, was perhaps a slightly special example. I mentioned that, historically, the UK has benefited from the demand from defined-benefit pension schemes, and that has supported long-dated gilt issuance for many years. I think we were the first Government borrower to extend our yield curve to 2073, which is the longest bond we have on our conventional curve.

What is the length of that bond? When was that issued?

It would have been a 50-year bond.

Yes, exactly. That is the longest bond we have issued. We are aware that other issuers have accessed the so-called century bond market in the past. However, bearing in mind the structural nature of demand, my sense at the moment is that there would be sporadic demand for this type of product.

May I declare that I am chair of the APPG on Qatar, given that we are discussing Islamic finance?

And I am the trade envoy to Pakistan. This question concerns the UK’s last issuance of sovereign sukuk in 2021, maturing in July of this year. In the assessment of the panel, how has the sukuk performed?

I think it is fair to say that the UK was the first issuer on a sovereign basis—

We have confirmation.

We were the first issuer on a sovereign basis in the non-Islamic world of sovereign sukuk back in 2014, and that was followed up in 2021. The first issue was £250 million, and the follow-up issue was £500 million. I might ask Jo to comment a little on that transaction.[1]

Absolutely. That was an al-ijarah structure. It had a five-year maturity and was well placed into the market, with good global placement. From our point of view, just to explain what our role is, the DMO is not involved in the policy side of Islamic finance, of course; nor were the sukuk issues part of the debt management programme as such, but our expertise was useful and relevant—hopefully—because we bring things to market, so we were able to help on the marketing and distribution side. On that score, I would say the main choice was to use a technique called syndication to bring it to market. That worked well; it allowed a very interactive dialogue with the investor base, reaching out to lots of different types of investors. There was some international marketing effort as well, and you could see that reflected in the gradual level of comfort that built among investors. It was a good technique.

What lessons have been learned through that process, which is relatively new compared with how long we have been selling debt?

I would say it is quite niche, in the sense that it was a very small, bespoke type of issue. We use syndications for the wider programme anyway; we had done so before and continue to do so. I do not think there were specific lessons from that for us or for the debt management programme, but others may have thoughts to add.

I would echo that this was a transaction done outside the normal debt management framework. It was led by our colleagues at the Treasury and was done for wider purposes than debt management.

It was very policy driven.

I might be asking the wrong people these questions, but I am sure you will have some light to shed on this: what was the investor base for the 2021 sukuk? Who were the buyers?

Quite a few buyers were regular gilt investors who were not buying it specifically because of its structure; they were buying it for its yield. There were also Islamic banks, international Islamic parties and investors who were interested in purchasing it.

Obviously, people use Islamic finance in Britain because we have a Muslim population that includes many successful businesspeople who fund things through Islamic finance. Out of interest, what do you think about the fact that we are not issuing another sukuk? Does that have any impact on the UK’s position as an international centre for Islamic finance?

I am afraid I am going to have to say that you are asking the wrong people.

I thought I might be.

I think that is a matter of policy. But are you confident that, were you required to issue another, you could do so with no issues?

I think we learned a lot about making sure there is a lot of cross-working across Departments. There are quite a few legal complexities to it, so we have learned a lot, taken all the lessons and made a record of them.

I think that is all we can pursue on that.

Ms Pulay, you are now in the hot seat, and you have been for about 18 months. What do you see as the big risks to the future of the DMO? It has always been a very stable organisation, and it has been quietly operating—although I suppose it does not feel quiet to you when you are doing the auctions—in that corner of the City, doing what you do. Are there any big risks or worries that you have as chief executive?

The most important thing for the DMO is to deliver on its core objectives for Government, including meeting the Government’s debt management objectives, which it is doing very effectively. Of the £303.7 billion of gilts that I mentioned, we have sold £280 billion so far. That is more than 90% of the financing remit, and we have done it with auction cover ratios that are extremely robust, and significantly more robust than they were in the previous 10 years.

Do you have any sense of why that might be?

I think there are a number of reasons. The gilt market remains a very efficient, very liquid, very deep market. Investors like to diversify and we have a broad range of market participants. We referred to that somewhat earlier. Not only do we have some of the ones that have previously been referenced, but financial institutions and others look to acquire gilts for many different reasons, so the programme is very well supported. We have also seen, over the past year, record amounts raised through our syndication programme. Just last September, we issued a £14 billion transaction at 10 years. That was the largest ever bond issued in one go by the UK Government. It was followed up by three more syndications, including one just a few weeks ago in January, that have also seen very robust participation from both domestic institutions here in the UK and international investors. The programme continues to be very well supported. What would concern us is if the gilt market did not function as effectively as it does now. I am pleased to say that, from looking at the range of metrics that we monitor—and we monitor a range—the gilt market is functioning effectively. If it were not, that would be a concern. Without that, it would be, of course, more challenging to deliver the Government’s financing needs.

Do you have an indication of the range of bids that come in? Obviously, they coalesce at the point of crystallisation, but is that range wider or narrower than it has been in the past? If so, is that significant?

There are different metrics to measure that. The most visible is what one might call the tail, which is the differential between the highest accepted yield and the average accepted yield. Those auction tails, which the market monitors very closely, have been extremely concentrated. I think that reflects the appetite for the instrument and for the efficient way that the programme is being supported by market participants.

I should know it, but I think the Red Book laid out your figure for next year. Can you remind us what that is?

Our financing remit for next year will be set on 3 March, following the OBR’s spring forecast.

Therefore, we cannot ask you questions about that, because we would put you on the spot, but if you can deliver 90% of the target at this point, you are clearly on target for the end of this year. Thank you very much indeed for your time. Thank you for what you do in a corner of Government that a lot of people are perhaps not aware of, except for those who are buying gilts off you. Thanks to Jessica Pulay, chief executive; Jo Whelan, deputy chief executive; and Paul Canty. The transcript of this session will be available on the website, uncorrected, in the next couple of days. Thanks to our colleagues at Hansard and to our broadcasting colleagues at BowTie. [1] Witness clarification: the size of the 2014 sukuk insurance was £200 million.