Examination of Witnesses (Questions 80-99)|
19 OCTOBER 2005
Q80 Mr Todd: But because they are
intimately linked to you, if you have a downturn in activitywhich
is dictated, as we have just discussed in earlier questions, by
government policy to a substantial degreeSiemens presumably
have to grapple with that and find a way of dealing with a lower
throughput of activity, or that may be compensated within the
deal, which I assume we have never had a sight of, to see quite
how it handles that.
Mr Cook: We have a relationship
with them that pays a fixed unitary payment for the work they
took on in the first place. It is undoubtedly the case that if
we grow, then I have to pay them for that additional growth.
Q81 Mr Todd: And if you shrink, you
have to pay them for work that actually is not being done?
Mr Cook: No, because what we would
do, if we grew in a given year, is we effectively pay them the
lifetime value of the additional business that is taken on. If
we sold a five-year savings certificate, they have the processing
cost of issuing that five-year savings certificate. They might
get a change of address, a couple of phone calls; then it will
come up for maturity; they will have to mail them, and whatever.
We have calculated, by product, lifetime transaction costs and
we pay them for that. So if we did not grow the next year, we
just would not pay them.
Q82 Mr Todd: They have decided to
outsource some work to India. Any problems with that from your
point of view?
Mr Cook: To date, there are about
120 people doing the work there. The accuracy levels and the timeliness
are excellent. So we have had no difficulties whatsoever.
Q83 Mr Todd: Your view presumably
is that it is none of your business; that is their task as part
of the PPP.
Mr Cook: No, I would not go that
far. I think that it is very much our business. I have issues
on two counts. One, I need to make sure the work is done accurately
and correctly. Two, I have brand concerns.
Q84 Mr Todd: So is there a constraint
on that particular direction by Siemens?
Mr Cook: Yes. For example, I have
said that I would not wish to locate call centre work out there.
That has been done quite a bit in financial services, but there
are quite a lot of people in this country walking round, moaning
about it. I want us to be the most trusted financial services
provider and, at the moment, back office processing seems okay.
Q85 Mr Todd: Are you committed to
a no-redundancy relationship with them? They have taken over your
Mr Cook: No. We did agree to this
piece of off-shoring on the basis that there would be no redundancies
as a result of the off-shoring.
Q86 Mr Todd: That guarantee does
not apply to anything else?
Mr Cook: No. Indeed, as I have
already said, the headcount has come down from 4,000 to 2,000
over the years. A lot of that has been through redeployment on
to other contracts.
Chairman: We have a few minor issues
to clear upor perhaps not minor issues.
Q87 Peter Viggers: Your aim is to
borrow money on behalf of the Government and, of course, the Government
also borrows through gilts and other methods?
Mr Cook: Yes.
Q88 Peter Viggers: The extent to
which you are borrowing at a cheaper rate than gilts is described
as value added?
Mr Cook: Correct.
Q89 Peter Viggers: What was your
target for value added last year, 2004-05? It is page 39 and it
is described as "at least £200 million".
Mr Cook: Yes, that was the remit.
Q90 Peter Viggers: What is your target
for value added in 2005-06?
Mr Bayley: £225 million.
Q91 Peter Viggers: Why does the word
"confidential" appear in your annual report?
Mr Bayley: Because the remit is
confidential between ourselves and DRM, that is the Treasury.
Q92 Peter Viggers: Why is it confidential?
Mr Cook: That is what we are given
Peter Viggers: It cannot be that confidential
if you have just told us, I assume. I think that answers my question.
I was just baffled that it was described as "confidential"
in the annual report.
Q93 Chairman: May I ask you a couple
of minor issues? On dormant accounts, have you been involved in
discussions with the Treasury about your own dormant accounts?
Mr Cook: Yes.
Q94 Chairman: What has happened?
Mr Cook: I think the position,
to which someone has already alluded, is the Treasury view is
that our dormant accounts, or the money that sits there, is already
in play, as it were, in terms of it has been spent by the Government.
The notion that it might be given away to charitywe would
be giving away money that has already been given away, effectively.
Q95 Chairman: What about giving it
back to its owners? Are you still searching them out?
Mr Cook: I have already talked
about our tracing service. It is quite significant. Since 2001,
when we launched the tracing service, we have tracked down 18,000
people and repatriated £19 million. We have leaflets that
we publish; we do press articles; we will run ads. In particular,
we have a piece on our website which enables you to hunt and seeit
is called the Prize Checkerif you have any outstanding
prizes on Premium Bonds. So we put a lot of effort into being
visible and making a lot of noise about the fact that we have
money attached to customers that we cannot track down.
Q96 Chairman: That would rely on
someone going on to your website. You do not use professional
tracing services that, for example, trace shares?
Mr Cook: If you see any newspaper
article that is talking about dormant funds, or whatever, you
will see that they list two or three places you should go to track
it down, and we will be there. It is a very visible service for
something which, inevitably, is a very old organisation. So there
is a lot of history there.
Q97 Kerry McCarthy: You give figures
on page 11 of the report. You say that £200 million still
remains in these dormant accounts, which is a pretty significant
amount of money. Then, in terms of unclaimed Premium Bond prizes,
there is another £23 million. At what point do you draw the
line? There must come some point where it is obvious if the holder
of the account is of an age that you would expect them to be deceased.
Mr Cook: In the cause of honesty
and transparency, I have to say that those figures are under-exaggerated;
they are not quite right. I was talking about only one account
when I talked about £200million. It is actually much greater
than that. There is £1.8 billion of dormant accounts and
£25 million worth of unclaimed prizes on Premium Bonds.
Q98 Chairman: £23 million? £25
Mr Cook: £25 million worth
of unclaimed prizes, yes. All the numbers in this business are
very large. It is something you have to get used to after a while.
Q99 Kerry McCarthy: Do you have a
rough idea of what the average figure is in these accounts and
what is the maximum figure held in any dormant account?
Mr Cook: No, I could not give
you any headline-grabbingwhat is the biggest one. I do
not know. I would be making it up if I said what the largest prize
is. They are not huge, but they are big by anybody's
Mr Bayley: It might be £25,000.
Mr Cook: I would have thought
£25,000 was the largest one.