Examination of Witnesses (Questions 20-39)|
21 FEBRUARY 2007
Q20 Ms Keeble: When did you take
Ms Platt: That decision was taken
at the very end of 2005, but I will have to check.
Q21 Ms Keeble: Obviously it was not
yourself, but when you came before this select committee on the
last occasion, you were asked about it and said that it was being
considered, but the problem was that with the Child Trust Fund
you have to provide an equity-based option and you do not do that.
Nobody said then that there was a decision taken not to provide
it. What you are saying now is completely different to what was
being said on the last occasion here.
Ms Platt: I am sure that if my
colleague at the time said that no decision had been taken, it
had not. I can clarify when the decision was taken for you and
write to you.
Q22 Ms Keeble: The point was that it
was more than that. We would have to check the words but the impression
I was left with was that you were actively looking at this option,
not that you already had this product and therefore you were not
looking at it. It was said that you were actively looking at it
and, particularly now that the unclaimed funds are being placed
with different banks, it would seem absurd that you are not providing
that, given your role.
Ms Platt: Our role is to raise
cost-effective financing for the Treasury. We do not have a social
remit. The two things are incompatible.
Q23 Ms Keeble: This is money which
is absolutely guaranteed, in a sense, is it not? I saw the reference
to the Children's Bonus Bonds. That is an optional thing that
parents can do whereas the Child Trust Funds are there. I do not
like to say this is easy money but you know what I mean. That
is money that is 100% guaranteed; it goes out to every parent;
it will be paid. I do not understand why, when all of this has
gone through previously, you are now saying something which is
Ms Platt: I cannot comment on
what was said before but I can say that our remit is to raise
cost-effective financing for the Government. We therefore need
to look at the value-add of each of our products, and anything
that we are looking to add to that product range, to check that
it will indeed add value above the cost of raising funds in the
gilt market. Certainly we would have looked at the product in
that particular context.
Q24 Jim Cousins: Were you consulted
about the decision to close a large number of post offices before
Christmas before it was announced?
Ms Platt: No, we were not consulted
about that. That is a decision for the Post Office.
Q25 Jim Cousins: Yes, but it was
a decision of the Government. It was announced by the Trade and
Industry Secretary. You were not consulted about that?
Ms Platt: No.
Q26 Jim Cousins: What impact do you
think that closure programme will have on you?
Ms Platt: We share our strategy
with the Post Office and they are aware of our strategy. They
remain a major distributor of ours and we are not expecting it
to have any impact on our relationship.
Q27 Jim Cousins: I did not ask you
whether it would have an impact on your relationship. I asked
whether it would have an impact on your business. If you have
a close business relationship with somebody who is closing 2,500
of their outlets, I think it is reasonable to ask what impact
that will have on your business.
Ms Platt: The impact that it will
have on our business is not expected to be material in that the
figures that we have show that the majority of the funds raised
by the Post Office for NS&I in fact come from the major branches
of the Post Office. The strategy that the Post Office uses for
their financial services products, and of course NS&I is only
one of a number of financial services products that are marketed
through the Post Office, is up to them. They were aware of what
we are asking them to do through their branches and they are confident
that they can meet that within their new structure.
Q28 Jim Cousins: The Post Office's
view, as expressed to you, is that they can deliver all the targets
that have been set for the business relationship you have with
them, despite the closure of 2,500 of their outlets?
Ms Platt: We are currently in
negotiations with them over the amount of sales through the Post
Office for the next few years. They have not raised any issues
about the amount having to be changed or modified in any way,
given the programme that has just been announced.
Q29 Jim Cousins: Do you see the Post
Office as a competitor in some respects? There may be Post Office
products; there may be a successor even to the Post Office card
account with a wider range of functionality, which might mean
an element of competition.
Ms Platt: We consider all financial
services companies as our competition and the Post Office is one
of those. We have a longstanding and excellent relationship with
the Post Office and they will continue to be a major distributor
for us, so that in terms of the way they develop their financial
services range, I am sure that they will continue to give us a
high level overview of their strategy. We will continue to keep
them absolutely up to date with our strategy so that the two organisations
can work together to make sure that we achieve the right things
for both organisations.
Q30 Jim Cousins: You have already
told the committee that you are in negotiation with the Post Office
about the next stage of your relationship. Do those discussions
and negotiations include a reduction of the transaction charges
for handling your products?
Ms Platt: The negotiation is commercially
sensitive at the moment and so that is not something I am going
to discuss in detail today.
Q31 Jim Cousins: I am extremely sorry
but I do not quite understand that answer. Are you saying that
the transaction charges for handling your products with the Post
Office presumably form part of the discussions you are having
with the Post Office?
Ms Platt: We are having a commercial
discussion with the Post Office about the distribution agreement
going forward and that does cover all aspects of it, yes.
Q32 Jim Cousins: So your negotiation
on the distribution agreement does indeed include the transaction
charge for handing the products?
Ms Platt: It does.
Q33 Mr Todd: The annual report highlights
the new partnership with Tesco. It describes it as a marketing
partnership. How does that actually function? Do they merely market
your products? Do they actually distribute the products and take
some ownership over the transaction of achieving the sale? How
does that actually work?
Ms Platt: We have a distribution
agreement with Tesco Personal Finance, which is a joint venture
with Royal Bank of Scotland. The way it works is that our brochures
are put in selected Tesco stores.
Q34 Mr Todd: Someone picks up the
brochure. How do they make the purchase? Do they make it through
Tesco Personal Finance or do they simply thank them for the brochure
and go away and apply by post to you or through whatever other
means they choose?
Ms Platt: That is right. They
would apply by post or by Internet or by telephone. There is no
money handed over at a Tesco store.
Q35 Mr Todd: That is what my line
of questioning was about, the relationship. How do you evaluate
the success of what actually appears, now I ask about it, to be
a rather more limited relationship than I might have thought?
How many sales have actually been made through this particular
Ms Platt: The precise amount of
sales is again commercially confidential and it will not be appearing
in the annual report as a separate line. I can say that they met
our expectations on the targets for the Premium Bond 50th anniversary
promotion, so that we were very pleased with that. The other thing
that we are very pleased with is that this has given us an immense
amount of understanding and learning about this particular market.
Currently, we are in the process of reviewing very carefully all
the data we have to see whether the relationship has actually
achieved what we wanted it to achieve, and whether it has indeed
given broader accessibility to our products, which was one of
the reasons for doing it in the first place.
Q36 Mr Todd: I think I know the answer
to this question. You are not going to tell me very much about
the terms of this relationship with Tesco, are you?
Ms Platt: No.
Mr Todd: I thought not.
Q37 Chairman: Do they give club card
Ms Platt: I am afraid not. That
was never part of the deal.
Q38 Mr Todd: Does it suggest that
there are other potential retail partnerships that you should
be forming to distribute your products through other channels?
Ms Platt: As part of our strategy,
we have been looking at the face-to-face channel, which currently
is the Post Office and to a limited extent Tesco. An amount of
work was done to see whether a high street presence in another
form might be appropriate. That is something that we are keeping
Q39 Mr Todd: Have you been approached?
For example, most of the big retailers have finance options as
well: Sainsbury's, Marks and Spencer and so on. Have you been
approached by those as potential partners or not?
Mr Owen: We did go out to the
market through the normal EU procurement route and we did have
a number of approaches. There was a fair amount of interest in
working with NS&I. The deal with Tesco Personal Finance is
very much a learning process for us to understand how our customers
will react to that.
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