Operating expenses (excluding purchased intangibles amortisation and integration costs)

  2007
£m		 2006
£m		 2005
£m
Administrative expenses:      
Staff costs 7,534 6,647 5,844
Premises and equipment 1,762 1,411 1,274
Other administrative expenses 3,081 2,626 2,592
Total administrative expenses 12,377 10,684 9,710
Depreciation and amortisation 1,676 1,568 1,588
  14,053 12,252 11,298

2007 compared with 2006

Operating expenses, excluding purchased intangibles amortisation and integration costs, increased by 15%, £1,801 million to £14,053 million including £1,880 million relating to ABN AMRO. Adjusting for this, operating expenses were down £79 million, 1% reflecting tight cost management and the benefits of the Group's manufacturing platform. Further improvements in productivity have supported growth in business volumes, and allowed the Group to maintain high levels of customer satisfaction.

The Group's ratio of operating expenses (excluding purchased intangibles amortisation and integration costs and after netting operating lease depreciation against rental income) to total income was 43.9% compared with 42.1% in 2006.

2006 compared with 2005

Operating expenses, excluding purchased intangibles amortisation and integration costs, rose by 8% to £12,252 million to support the strong growth in business volumes.

Staff costs were up £803 million, 14% to £6,647 million reflecting growth and expansion of activities in Corporate Markets, where the number of staff increased by 1,600.

Premises and equipment expenses increased by £137 million, 11% to £1,411 million reflecting the continuation of our branch network improvement programme and ongoing investment in our major operational centres.

Other administrative expenses, up 1%, £34 million to £2,626 million reflected efficiency improvements whilst supporting higher business volumes.

The Group's ratio of operating expenses (excluding purchased intangibles amortisation and integration costs and after netting operating lease depreciation against rental income) to total income was 42.1% compared with 42.4% in 2005.