corporate plan and 2007/08 budget
The Financial Ombudsman Service was established by law as a unified service for resolving disputes between consumers and businesses providing financial services – fairly, reasonably, quickly and informally. It replaces eleven stand-alone complaints-handling schemes*. Since 2000 we have:
- dealt with more than 3,000,000 enquiries;
- provided independent resolution in more than 500,000 cases; and
- helped reduce the sources of financial complaints by feeding back to consumers, industry and regulators the lessons learned from our work.
Each year the ombudsman service produces a budget – setting out the resources and income required for this work – for approval by the Financial Services Authority (FSA). This consultation paper consults on a draft of our budget for the 2007/08 financial year, in the context of our corporate plan for the next three years.
When the Financial Ombudsman Service was set up, about 350 staff dealt with around 25,000 cases a year at an average cost per case of more than £750. By 2005/06, following a sustained period of rapid growth in workload, about 1,000 staff dealt with around 119,000 cases at an average cost per case of less than £500.
Most financial sectors contributed to the growth in workload, which has also been affected by the widening of the ombudsman service’s jurisdiction. But the most substantial factor has been a surge of disputes about mortgage endowments, which have provided more than half the new cases received to date.
In 2005/06 we received over 69,000 mortgage endowment cases, and there have been high levels of these cases so far during 2006/07. But an increasing number of mortgage endowment sales are likely to start falling outside the time limits set by the FSA for bringing complaints. So the number of new mortgage endowment cases is likely to reduce during 2007/08, although the timing and scale of this is uncertain at present.
This means that, following a period of rapid growth in workload and staff, we are currently experiencing a period of relative stability in numbers. But we face considerable uncertainty about our future workload.
A prospective fall in the number of mortgage endowment cases, balanced by a gradual reduction in staff by natural turnover, will be offset to some degree by cases from our new consumer credit jurisdiction, which opens on 6 April 2007. This will cover around 100,000 businesses with standard consumer credit licences issued by the Office of Fair Trading (OFT).
In recent years our overriding priority has been coping with the rapid growth in cases without compromising the quality of our work. Resolving our stock of cases and further improving the quality of our work will be a key priority for the coming period, but increasingly we are also planning for the longer term.
This includes ensuring that the way in which we plan and carry out our work remains effective and capable of retaining the confidence of all our stakeholders. Our stakeholders are not just the consumers and financial services businesses whose cases we handle. They also include the bodies which regulate the activities of those businesses, together with government bodies and Parliamentarians. All our stakeholders rightly expect us to deliver a modern public service with high standards.
Chapter 2 of this document summarises how our corporate plan was implemented in 2006/07. Chapter 3 outlines factors we need to take into account in updating our corporate plan for the future. Chapter 4 sets out the actions we propose to take in order to deliver this work. Chapters 5 to 8 set out the factors underlying our proposed budget for 2007/08, and the levies and case fees that will be required to fund this.
*The eleven stand-alone complaints schemes replaced by the Financial Ombudsman Service were:
- 2001: Banking Ombudsman scheme
- 2001: Building Societies Ombudsman scheme
- 2001: Insurance Ombudsman scheme
- 2001: Investment Ombudsman scheme
- 2001: Personal Investment Authority Ombudsman scheme
- 2001: Securities and Futures Authority complaints scheme
- 2001: Financial Services Authority complaints scheme
- 2001: Personal Insurance Arbitration Service
- 2004: Mortgage Code Arbitration scheme
- 2005: General Insurance Standards Council’s dispute-resolution scheme
- 2005: Adjudicator for National Savings & Investments.