chapter seven
budget 2001/02

“costs allocated in accordance to numbers of staff directly involved with each ‘old’ scheme”

Introduction

1 The FSA and the Financial Ombudsman Service recently published a joint consultation paper (CP74) setting out a proposed framework for the funding of the new single ombudsman service. The paper proposes that the new funding arrangements will be introduced for the first full financial year following ‘N2’ (ie for the year beginning April 2002). The paper suggests that, to avoid the need for a mid-year levy at ‘N2’, the whole of the financial year 2001/02 should be financed under the existing ombudsman schemes’ powers and mechanisms.

2 This chapter assumes that the basis proposed in CP74 will be followed. If respondents disagree with this proposal, there will need to be an adjustment to each firm’s levy at the end of 2001/02 for the portion of the year from ‘N2’ to 31 March 2002.

3 The budget for 2001/02 is £27.6m. This can be allocated in the proportion that the costs applicable to each scheme – in relation to staff directly involved in case-handling – bear to total case-handling staff costs. This can be summarised as follows.

*The 2000/01 figures are not directly comparable because schemes made permitted deductions from members’ levies before passing over the above amounts to the Financial Ombudsman Service.

4 An early draft of the above allocation figures was circulated to the boards of the ‘old’ schemes in December 2000.