Notes to the consolidated financial statements – analysis of items in the primary statements

1. Segmental analysis	10. Earnings per share	19. Trade and other receivables
2. Other operating income	11. Goodwill	20. Cash and cash equivalents
3. Operating costs	12. Other intangible assets	21. Borrowings
4. Exceptional items, remeasurements and stranded cost recoveries	13. Property, plant and equipment	22. Trade and other payables
5. Pensions and other post-retirement benefits	14. Other non-current assets	23. Other non-current liabilities
6. Finance income and costs	15. Financial and other investments	24. Provisions
7. Taxation	16. Deferred tax assets and liabilities	25. Share capital
8. Discontinued operations	17. Derivative financial instruments	26. Reconciliation of movements in total equity
9. Dividends	18. Inventories and current intangible assets	27. Consolidated cash flow statement

3. Operating costs

	Before exceptional items, remeasurements and stranded			Exceptional items, remeasurements and stranded			Total
	2008 £m	2007 £m	2006 £m	2008 £m	2007 £m	2006 £m	2008 £m	2007 £m	2006 £m
Depreciation of property, plant and equipment	940	830	844	–	–	–	940	830	844
Amortisation of intangible assets	50	41	44	4	–	–	54	41	44
Payroll costs	1,071	794	807	108	26	47	1,179	820	854
Other operating charges:
Purchases of electricity*	1,589	1,680	1,906	(236)	(87)	71	1,353	1,593	1,977
Purchases of gas	2,011	544	566	–	–	–	2,011	544	566
Rates and property taxes	608	472	437	–	–	–	608	472	437
Electricity transmission services scheme direct costs	574	558	536	–	–	–	574	558	536
Payments to Scottish electricity transmission network owners	226	237	259	–	–	–	226	237	259
Other*	1,452	1,165	1,064	137	5	(7)	1,589	1,170	1,057
	8,521	6,321	6,463	13	(56)	111	8,534	6,265	6,574
Operating costs include:
Research expenditure							13	6	7
Operating lease rentals
Plant and machinery							33	21	23
Other							30	63	53

* Comparatives have been adjusted to present items on a basis consistent with the current year classification

(a) Payroll costs

	2008 £m	2007 £m	2006 £m
Wages and salaries	1,169	819	857
Social security costs	84	65	59
Other pension costs	218	132	140
Share-based payments	18	15	14
Severance costs (excluding pension costs)	14	14	23
	1,503	1,045	1,093
Less: payroll costs capitalised	(324)	(225)	(239)
	1,179	820	854

Payroll costs above represent continuing operations only. Payroll costs of discontinued operations for the year ended 31 March 2008 were £16m (2007: £37m; 2006: £67m).

(b) Number of employees

	31 March 2008 Number	Average 2008 Number	Average 2007 Number	Average 2006 Number
UK	10,223	10,093	10,356	10,722
US	17,145	13,335	8,618	8,400
Rest of the world	5	5	8	4
Continuing operations	27,373	23,433	18,982	19,126
Discontinued operations	204	119	730	1,403
	27,577	23,552	19,712	20,529

The vast majority of employees in the US are either directly or indirectly employed in the transmission, distribution and generation of electricity or the distribution of gas, while those in the UK are either directly or indirectly employed in the transmission and distribution of gas or the transmission of electricity. At 31 March 2008, 3,155 employees were employed in other operations.

(c) Key management compensation

	2008 £m	2007 £m	2006 £m
Salaries and short-term employee benefits	9	8	7
Post-employment benefits	8	5	5
Termination benefits	–	1	–
Share-based payments	3	3	2
	20	17	14

Key management compensation relates to the Board of Directors, including the Executive Directors and Non-executive Directors for the years presented, together with Cheryl LaFleur, acting Executive Director for Electricity Distribution for the period to 13 August 2007.

(d) Directors’ emoluments

Details of Directors’ emoluments are contained in the auditable part of the Directors’ Remuneration Report, which form part of these financial statements.

(e) Auditors’ remuneration

	2008 £m	2007 £m	2006 £m
Audit services
Audit of parent company and consolidated financial statements	1.4	1.2	1.4
Other services
Audit of subsidiary financial statements pursuant to legislation	5.1	2.8	2.0
Other services supplied pursuant to legislation	1.8	2.2	0.8
Services relating to tax compliance	0.7	0.6	0.5
Services relating to tax advisory	0.5	0.7	0.9
Services relating to corporate finance transactions	0.7	1.4	0.4
All other services	0.4	1.3	0.8
Fees paid by associated pension schemes
Audit of pension schemes of the Company pursuant to legislation	–	0.2	0.1
	10.6	10.4	6.9
Total services pursuant to legislation	8.3	6.4	4.3
Total other services	2.3	4.0	2.6
	10.6	10.4	6.9

Other services supplied pursuant to legislation represent fees payable for services in relation to other statutory filings or engagements that are required to be carried out by the auditor. In particular, this includes fees for reports under section 404 of the US Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) and audit reports on regulatory returns.

Services relating to corporate finance transactions primarily relate to the sale of Basslink, the potential sale of National Grid’s property business and the KeySpan acquisition.

Other services include fees relating to corporate responsibility reporting, treasury related projects and sundry services, all of which have been subject to Audit Committee approval.

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