ROBERT STHEEMAN INTERVIEW: The king of debt with an IOU for £165bn

Robert Stheeman says he is in his fourth 'gap decade', having never quite got round to taking up his university place in the late Seventies after leaving Stowe school. But now there is another gap that is giving him concern - the £149billion hole in the Government's accounts for 2010-2011 that he has to fill.

Stheeman, 51, is chief executive of the Debt Management Office, an outfit so obscure that its website warns it is not a charity advising those who have borrowed too much money. In fact, it is the agency that sells Government bonds - known as gilts - to investors from Britain and around the world.

This financial year, Stheeman and his colleagues must shift £165 billion of these IOUs, taking into account the need to replace gilts that have reached maturity.

Balancing act: Robert Stheeman, head of the Debt Management Office, has the daunting task of managing the UK's overdraft


All this is a far cry from the position in 2003 when Stheeman took up the job. Public coffers at the time brimmed with cash from the tax take of the economic boom and the proceeds from auctioning third-generation mobile phone licences.

Indeed, the DMO had to create an artificial demand for gilts to keep the market alive in case dealers and investors drifted away and valuable expertise and capacity were lost.


Stheeman had about three years to settle in and learn the ropes before the countdown to the credit crunch of August 2007, which turned the City and the wider economy upside down - and shredded public finances. 'I am grateful to have had time to get my feet under the table and to understand the issues,' he says.

'Considering the market environment has changed dramatically, and so has the Government's borrowing requirement, the market for British bonds has held up much better than expected. Partly, that's because sovereign debt is often seen as a safe haven.'

Cynics have suggested also that the previous Government helped ensure a steady supply of customers by passing laws to force pension funds to hold a big pile of gilts.

Stheeman disagrees: 'There is a natural element of demand for longdated gilts from investors such as pension funds, but the market is not rigged. If the law were suspected of being used in that way, markets would be very sceptical.

'The Government has to borrow in the market like any other economic entity, such as a company.

'That is a good and democratic system. We cannot force people to buy gilts, we can only make them as attractive as possible in terms of their yield while keeping down the cost for the Government and, ultimately, the taxpayer.'

But what of that other support for the market, the Bank of England's £200 billion 'quantitative easing' scheme under which it prints new money and buys assets, overwhelmingly gilts, in order to stimulate the money supply?

'The Bank of England chose to buy gilts from investors in the secondary market,' says Stheeman. 'It did not buy directly from us and could not do so.'

The DMO auctions gilts to the 16 institutions listed as market makers. These include banks such as HSBC, Goldman Sachs and Barclays. Its other, lesser-known, job is that of 'the Treasury's treasury', taking care of the Government's day-to-day cash balances in the short-term money market.

On days when the Government has spare cash, the DMO lends it out, and borrows on days when the Government is short. All this with a staff of just 100 and modest premises in Eastcheap in the City.

But back to that gap year that became decades. After leaving Stowe school in Buckinghamshire, Stheeman ended up in Hamburg, where The Beatles had started out on the road to fame more than a decade earlier.

But instead of haunting the cellar bars, he took a banking certificate at Hamburg Chamber of Commerce and ended up at Deutsche Bank in London, often across the table from the DMO as a bond specialist. He saw his current job advertised in a newspaper and, intrigued, decided to go for it.

Stheeman is married with four children and lives in Surrey. Relaxation (music and walking in his case) is important for someone who routinely deals with such staggering sums of money. 'I have to sign two sets of DMO accounts,' he says. 'One is for our running cost of £14million a year. Fine.

'But the other is effectively the Government's balance sheet for its debt and cash-management operations, which is just under half a trillion pounds (£500,000,000,000).

'It is very easy to get blase about these vast numbers, but one really shouldn't.'


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