2 NS&I has two measures of added value. The first is referred to as the 'lagged' measure and this is a measure of the actual cost effectiveness of raising funds through the retail market against raising funds on the wholesale market. The second, called the 'delagged' measure, takes into account the underlying business performance of NS&I.
3 The difference between the two measures represents the timing differences between movements in the comparable cost of funding on the wholesale markets and the comparable consequent changes in NS&I product interest rates becoming effective. As these timing differences are dependent on the movement of market interest rates they are highly unpredictable and can obscure the understanding of the underlying business performance.
4 The lagging effect will have a negative impact on the 'lagged' value measure in times of falling interest rates and a positive impact when rates are rising. Hence, after adjusting for this effect the 'delagged' value added measure will be greater than the 'lagged' value added measure in an environment of falling rates and vice versa.