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
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
Q5 Jim Cousins: That is working on
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
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
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
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.