UNCLASSIFIED. The Supplementary Estimate includes a budget transfer from HM Treasury of 1,000,000 to support the launch of the new product 65+ Bonds.

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1 From: Rodney Norman Date: 6 February 2015 The Treasury Select Committee Clerk National Savings and Investments: Supplementary Estimate INTRODUCTION National Savings and Investments Supplementary Estimate sets out its resourcing requirements for the financial year. The Supplementary provides the final opportunity to ensure that National Savings and Investments have the necessary resources and cash for the remainder of the financial year to support its functions. This Supplementary Estimate enables National Savings and Investments to adequately resource the Chancellor of the Exchequer s 2014 Budget announcements regarding the raising of the cap on Premium Bonds to 40,000 and the launch of a savings product for people aged over 65 which would pay market leading rates. The total to be raised for the new product 65+ Bonds is 10 billion, making it probably the largest ever retail savings launch in the UK in peacetime. Investor activity in the days following launch has been exceptional. It also provides resourcing for the extension of the Premium Bonds distribution contract with the Post Office and a contractual commitment made to our outsourced operations provider. The latter covers the implementation of modern infrastructure that will lead to greater efficiency and substantial cost savings in future years. The total funding is by means of Reserve funding of 35,280,000. The Supplementary Estimate includes a budget transfer from HM Treasury of 1,000,000 to support the launch of the new product 65+ Bonds. The Supplementary Estimate also recognises that National Savings and Investments have reduced forecast gross income by 6,000,000 and also reduced its costs by the same amount. This is due to lower than expected earnings from our B2B activity. The change though is neutral and has no overall impact on RDEL. The Supplementary Estimate also transfers 1,400,000 from Resource DEL to Capital DEL as well as reductions in RDEL depreciation of 1,900,000 and Resource AME of 3,300,000. The changes above result in an increase in the Net Cash Requirement of 20,000,000.

2 Summary of changes sought in the Supplementary Estimate Summary of the main changes sought in the Supplementary Estimate RESOURCE DEL Changes to Voted Resource DEL of 32,980,000 arise from: Increase due to Reserve funding of 35,280,000 Increase due to budget cover transfer 1,000,000 Reduction in depreciation requirements of 1,900,000 Transfer of RDEL to CDEL of 1,400,000 Reduction in income and costs of 6,000,000 (zero net effect) The changes increase Resource DEL provision from 195,370,000 to 228,350,000 by 32,980,000. CAPITAL DEL Changes to Voted Capital DEL arise from: An increase of 1,400,000 in Capital DEL to fund additional requirements in IT, Furniture and Fittings and fit out costs The change increases Capital DEL provision from 273,000 to 1,673,000 by 1,400,000 RESOURCE AME Changes to Voted AME arises from: A decrease of 3,300,000 due to lower than anticipated revaluation costs on National Savings and Investments properties. The change decreases Resource AME from 5,300,000 to 2,000,000 by 3,300,000 NET CASH REQUIREMENT Changes to Net Cash Requirement arise from: The additional requirements highlighted in this Supplementary Estimate. This amounts to an additional 20,000,000 The change increases Net Cash Requirement from 203,603,000 to 223,603,000. Impact on NS&I s Service Delivery Measures (SDM s) (Targets agreed with Her Majesty s Treasury (HMT)). There are no changes to NS&I s SDM s.

3 Departmental Expenditure Limit (DEL) The table below provides some additional information on NS&I s DEL expenditure over the past three years. 000s Previous years expenditure against Departmental Expenditure Limits (DEL) Year Voted Non-voted TOTAL Outturn Variance Resource , , ,203 2, , , ,990 3, , ,350 N/A Capital , ,715 1, ,673 1,673 N/A The table below sets out the changes between the Main Estimate and the Supplementary Estimate. Changes to DEL in Voted Non-voted Total DEL Resource 1 April 2014 as in Main Estimate 195, ,370 Change announced in Supplementary 32,980 32,980 Estimate Revised RDEL 228, ,350 Capital 1 April 2014 as in Main Estimate Change announced in Supplementary 1,400 1,400 Estimate Revised CDEL 1,673-1,673 Less depreciation * TOTAL DEL 231, ,223 * Depreciation, which forms part of RDEL, is excluded from total DEL since CDEL includes capital spending and to include depreciation of those assets would lead to double counting. NS&I s Resource AME provision is being reduced from its Main estimates level of 5,300,000 to 2,000,000. For NS&I s expenditure was 347,000. The provision was for 5,300,000. The resulting underspend of 4,953,000 was caused by lower than anticipated revaluation charges applied to land and buildings. NS&I also have some non-budget/ non-voted elements that feature in Programme costs with Annually Managed Expenditure. For these totalled 30,083,000. This relates to service concession arrangements which include depreciation charges, reduction of noncurrent assets and a loss on

4 disposal. Programme costs also included a transfer to non-budget capital of ( 16,813,000). Other Programme costs included revaluation costs of 347,000. Administration Budget For NS&I, the Administration Budget is identical to Resource DEL. 000s Administration budget (previous years) Year Plans Outturn (Limit) , , , , ,350 N/A

5 Approval of Memorandum This Memorandum has been prepared by reference to guidance in the Estimates Manual and found on the House Of Commons, Scrutiny Unit website [insert hyperlink]. Glossary of Key Terms Departmental Expenditure Limit (DEL) This is spending within the Department s direct control and which can therefore be planned over an extended period, such as the costs of its own administration, payments to third parties. Voted and Non-Voted Voted expenditure is that which has gone through the Supply Estimates process. Non-voted, as its description suggests, has not been through this process. It usually refers to expenditure that comes from another source e.g. Consolidated Fund standing services