CRND

Commissioners for the Reduction of the National Debt - Investment of Government Funds

From their earliest days the Commissioners had associations with the stock market and this led to the acquisition of other roles, especially the responsibility for the investment of major Government funds. This now constitutes the main function of CRND, which has around £45 billion under its control, representing the assets of the various investment funds. The investment powers differ to some extent from fund to fund, depending upon the provisions of the relevant Acts of Parliament, but basically investments are restricted to central and local government securities. The largest funds are currently the National Insurance Fund Investment Account, the National Lottery Distribution Fund Investment Account and the Court Funds Investment Account.

The objectives of investment are, generally, to maintain sufficient liquid funds to meet withdrawals by the "client" departments, to maximise income and to protect the capital value of the fund. To meet these objectives it is necessary to have frequent exchanges of information and periodic meetings with the client departments. The relevant statutes generally make investment subject to Treasury direction, but in practice this power has seldom been exercised.

The purchase by CRND of large amounts of gilts in the market would cause difficulties for the DMO in its efforts to implement the Government's debt management policy. In the past, specific amounts of new gilt issues were often reserved for CRND, which avoided the need for large-scale market purchases, but this was not always a practicable solution to the problem. Market conditions might not be favourable to the floating of new issues at the time when CRND needed to invest large sums of money, or the new issues which were being made might not match CRND's requirements in respect of interest rate, maturity date, etc. So, in 1981, the Treasury arranged to create "NILO" stocks specifically to meet CRND's investment needs when there was no other way to do so. The Treasury issues NILO stocks on the same terms as the original gilt issue to which they relate, being distinguished from the "parent" gilt by the addition of the name "(NILO)" in the title. They are identical to the parent gilt in all respects except that they are not quoted on the London Stock Exchange. All transactions in NILO stocks are dealt with on the basis of the current market price of the parent gilts. NILO stock that is no longer required by CRND is purchased and cancelled by the Treasury.