MPs brand NS&I's £3B IT overhaul a 'full-spectrum disaster'

The UK's National Savings & Investments (NS&I) has been branded a "full-spectrum disaster" by Parliament's spending watchdog after its £3 billion digital transformation project spiraled into years of delays, cost overruns, and operational chaos.

The Public Accounts Committee (PAC) delivered a withering assessment of NS&I's "Project Rainbow" in a report published Friday, revealing that the state-backed savings bank's ambitious modernization effort has left taxpayers exposed to "unacceptable risks" while failing to deliver promised improvements.

What went wrong with Project Rainbow?

What began as an effort to modernize NS&I's aging infrastructure has become a cautionary tale of government IT projects gone awry. The transformation, originally intended to reduce operational costs and improve services for millions of customers, has instead exposed fundamental failures in planning, execution, and oversight.

PAC chair Sir Geoffrey Clifton-Brown pulled no punches in his assessment. "NS&I's original name for its troubled digital modernization effort was Project Rainbow," he said. "It is perhaps unsurprising that this upbeat name for the scheme was retired as aptly our report finds it has been a full-spectrum disaster."

The numbers tell a stark story. As of 2024, the full cost of the overhaul has ballooned to roughly £3 billion, with contracts supporting legacy systems already extended to 2028. When MPs asked how much had been spent to date, NS&I couldn't provide a figure, claiming it had "the right data" but was having difficulty extracting and presenting it from its own systems.

The complexity trap

The fundamental problem, according to the PAC, was that NS&I underestimated the complexity of replacing banking systems that have been integrated over decades. These systems underpin most of the organization's day-to-day operations, including customer accounts, payments, and internal record-keeping.

"It is deeply worrying to see a project in such an important organisation so off-track that neither this Committee, or at times the Treasury itself, could gain an accurate sounding on costs and progress," Clifton-Brown said.

Staffing and culture failures

NS&I's internal challenges compounded the technical difficulties. The organization spent approximately £43 million on consultants while pushing the overhaul forward, a figure MPs attributed to the bank lacking the in-house expertise needed when the program began.

The committee also criticized NS&I's internal culture, describing it as "bullishly confident" despite mounting evidence of failure. When asked whether people inside NS&I had been too positive about progress, leadership described a "can-do" environment that the PAC suggested was more accurately characterized as "can't do."

Treasury oversight questioned

The Treasury's role in the debacle also came under scrutiny. MPs noted that by the time the program was reset in 2024, delays were already entrenched and costs had well exceeded early projections. The PAC now wants NS&I to produce a proper plan built from scratch rather than reverse-engineered around optimistic delivery dates.

The cost comparison that stings

Clifton-Brown drew a pointed comparison with the Bank of England's Real-Time Gross Settlement system renewal, which was delivered on schedule for £431 million. The contrast highlights how NS&I's project has become an outlier in terms of both cost and delivery.

What happens next?

NS&I has acknowledged the need to reassess the program and is considering scaling it back, including loosening how deeply new technology integrates with the legacy estate. However, the PAC warns that until the organization produces a credible recovery plan with realistic timelines and cost controls, taxpayers remain exposed to the risk that Project Rainbow's promised benefits may never materialize.

The failure of Project Rainbow serves as a stark reminder of the risks inherent in large-scale government IT transformations, particularly when dealing with complex, mission-critical systems that have evolved over decades. For the millions of customers who rely on NS&I for their savings, and for the taxpayers who ultimately foot the bill, the full-spectrum disaster continues to unfold with no clear end in sight.