Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 1-19)


21 FEBRUARY 2007

  Q1 Chairman: We welcome Jane Platt and Steve Owen to the sub-committee. I think this is your first appearance, Ms Platt. You arrived presumably after this report was published but it is fairly self-congratulatory. It describes its own results as first class and excellent. There are pictures of people eating cake, drinking champagne and so on. What is your assessment of the main strengths of the organisation since you have come in?

  Ms Platt: I joined in September, half-way through the year, and I came into an organisation which was focused on growth, of course, in the momentum building up towards the Premium Bond 50th campaign, that growth focus was driven by the five-year strategy which was to deliver £15 billion of net financing in five years. In actual fact, it has been delivered in four and we have had ministerial agreement to be able to close that strategy in March 2007 and move on to a new agenda from April this year. I came to an organisation with a good level of customer satisfaction with 89% of customers very satisfied compared 85% in the peer group; a good level of relationship with Siemens, with them hitting all their key performance indicators; staff morale good, and I am pleased to say that has held up. We have just been awarded star status within the 2007 "Best Companies to Work For" accreditation standard and we have had a lot of external recognition. Mr Fallon, I think that what you are seeing in the annual report is a document which is designed for two audiences. One is for the audience looking at our report and accounts and the other is for our staff and our partners in Siemens to congratulate the staff on a job well done. The tone of the document is about lifting staff morale, though I agree that it is unusual to have that level of tone in a public document.

  Q2  Chairman: You have been appointed for three years. How shall we judge you at the end of those three years?

  Ms Platt: I think that there are a number of challenges facing National Savings and Investments. Certainly, the first one I have is to build a good management team because when I joined there were two vacancies in the top team: the Finance Director and the Marketing Director. I am very pleased to say that we have already brought in a very good quality Finance Director who is not only skilled in finance but also in risk management and compliance, which will be increasing our bench-strength in that particular area. I want to develop the new five-year plan, which will be shifting the focus from growth to sustainable value-add, which means that we will be changing the channel mix of National Savings and Investments and also simplifying our products. I think you will be able to judge us on the work we do with Siemens to develop the partnership, particularly in the context of 2014, because although I am looking at the next five years, 2014 is a very important date for NS&I, which is when the partnership comes to an end and the operations either come back to NS&I or we need to find another or the same, partner going forward. Then, of course we have agreed our financing for the next three years, which is going to be very tight. So if, over the next five years, we can do all of that while keeping good long-term relationships with our customers, remaining flexible so that if our remit changed we would be able to respond to it, and keeping staff morale high, I think that will be a very ambitious programme and it will be a job well done.

  Q3  Chairman: Have you asked yourself why we need a government retail bank, which is what you provide to the customer, and what the customer cannot get from the broader financial services retail market?

  Ms Platt: The remit for National Savings and Investments is to raise cost-effective finance for the Government and to do that through the retail market. I have not questioned the existence or remit of National Savings and Investments. My job is to manage the operation as effectively as I possibly can to achieve that remit.

  Q4  Jim Cousins: You have mentioned your relationship with Siemens a number of times already. How many of their staff working on behalf of National Savings and Investments are presently based overseas?

  Mr Owen: Currently 182 staff are based overseas.

  Q5  Jim Cousins: That is working on National Savings?

  Mr Owen: That is correct.

  Q6  Jim Cousins: Just before Christmas, the Economic Secretary to the Treasury and Siemens agreed to more than a doubling of that figure of 182. How much will that save you?

  Mr Owen: May I put a little bit of context around the question? The overall deal with Siemens will save the taxpayer some £540 million in terms of reducing our costs over its life, so it is fairly substantial.

  Q7  Jim Cousins: That is a comparison of what and what?

   Mr Owen: That is a comparison between the cost of running the operational business of NS&I in 1999 when we handed the operations to Siemens and the ongoing cost of running it over the 15-year life of the contract.

  Q8  Jim Cousins: So that figure is the product of an assumption that there would have been no changes in the operations as they were in 1999?

  Mr Owen: That is correct.

  Q9  Jim Cousins: That is wholly unrealistic, of course, is it not?

  Mr Owen: It was not the public sector comparator, which was a different figure.

  Q10  Jim Cousins: The figure you have just produced is a wholly unrealistic one. It is a comparison between your relationship with your partner and a situation in which nothing would have changed after 1999.

  Mr Owen: It is the actual reduction in cost compared to 1999.

  Q11  Jim Cousins: Let us agree that that is a wholly unrealistic figure, but do proceed.

  Mr Owen: The second benefit that the deal with Siemens has given us is a very substantive improvement in capability. Siemens have lifted us off our archaic IT systems on to new systems and delivered new products at a much faster rate than we were able to do before.

  Q12  Jim Cousins: The £540 million assumes you would have done nothing about those things yourself?

  Mr Owen: Those things are all included in what we pay Siemens, so if we had done them ourselves, they would have cost us more money.

  Q13  Jim Cousins: How much will the outsourcing of the 200 to 240 jobs, more than a doubling of the number of jobs located overseas that was agreed between the Economic Secretary and Siemens just before Christmas, save you?

  Mr Owen: The offshoring will benefit NS&I in a number of areas. The first place it will benefit NS&I is in terms of service improvement. In fact, we have already seen significant benefits from having a fourth site in Chennai. As we sold very high volumes of business through Premium Bonds in recent months, our fourth site in Chennai helped us hugely in coping with that volume. We were able to run almost a 24-hour service.

  Q14  Jim Cousins: Shall I have another go? How much will it save you in money?

  Mr Owen: It reduced the cost of growth of our current strategy, the strategy that is just ending, the £15 billion growth, by round about 10%, which equates to about £1.5 million per annum.

  Q15  Jim Cousins: Why do you think that this was necessary when other operators of a similar kind are in fact in-shoring jobs?

  Mr Owen: What we see elsewhere in the market is an in-shoring of call centres primarily. We have not off-shored our call centres; we have only off-shored very routine, repeatable, rule-based tasks. It is not quite comparing like with like.

  Q16  Jim Cousins: You have indicated that the partnership with Siemens lasts to 2014. You anticipate that they are going to last the course to 2014?

  Mr Owen: Yes, I do.

  Q17  Jim Cousins: At that time, of course, they will have been in place for about 15 years. How are you going to prepare a properly robust assessment of where you go after that? This is a 15-year relationship and one that clearly gained your approval. How are you going to step back from that and properly and robustly assess it?

  Mr Owen: One of the things we have done since the contract with Siemens commenced back in 1999 is to maintain a very clear picture of the NS&I entity, exactly what is delivered to us, by whom and where, and what processes underpin that delivery. We are in a better position now than we were when we went to the market in 1999 in terms of understanding the business and in terms of understanding all the processes to deliver customer service. We have a very good picture of what the operational service is. We maintain that level of readiness at all times. Although I do anticipate that Siemens will be with us until 2014, if for some unforeseen reason they were not, we are always ready to go to the market with a very clear description of the agency's services.

  Q18  Jim Cousins: How are you going to guarantee a fair competition in 2014, given the length of your relationship with Siemens and its penetration in your operations in terms of joint working?

  Mr Owen: We have to work with other private sector organisations to make it clear to them that it is an absolutely level playing field and make them understand how the operational entity of NS&I could be handed over to them in a smooth and seamless way.

  Q19  Ms Keeble: The last time you came before this select committee, I asked about the Child Trust Fund and the fact that you were not providing that. I think you said that you do not do equity-based products. At the time, you said that you were looking into the possibility of providing such a product. I wondered what progress had been made on the Child Trust Fund.

  Ms Platt: We have looked carefully at the Child Trust Fund and our product, the Children's Bonus Bond, which already existed. We have decided that the Child Trust Fund is not a product that we would want to offer alongside the Children's Bonus Bond, and so we have taken a decision, based on the range that is available in the marketplace for Child Trust Fund products and also our remit, that it is not a product that we would want to offer.

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