Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 20-39)


21 FEBRUARY 2007

  Q20  Ms Keeble: When did you take that decision?

  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.[1]

  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 very different.

  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 market channel?

  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?[2]

  Ms Platt: No.

  Mr Todd: I thought not.

  Q37  Chairman: Do they give club card points?

  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 under review.

  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.

1   Ev 7 Back

2   Ev 8 Back

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