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ombudsman consults on corporate plan and 2009/10 budget

15 January 2009

The Financial Ombudsman Service today publishes for consultation its proposed budget for next financial year (2009/10) - together with an update on the budget for the current year (2008/09) and the corporate plan for the next three years.

The budget sets out how the ombudsman service plans to gear up to resolve a forecast 44% increase in the number of disputes in the 2009/10 financial year. This will involve the ombudsman settling a record 165,000 complaints from consumers unhappy with their treatment by financial firms. This compares with the 115,000 consumer complaints that the ombudsman expects to resolve in the current financial year.

The substantial increase in the volume of complaints expected to be referred to the ombudsman takes account of initial forecasts from the financial services industry - and reflects the anticipated impact of the recent turmoil in the financial markets and the worsening economic climate.
It is expected that the number of consumer complaints will rise in most areas covered by the ombudsman - including disputes relating to mortgages (forecast to increase by 78% to 16,000 cases), current accounts (forecast to increase by 38% to 18,000 cases), pensions and investments (forecast to increase by 41% to 24,000 cases) and motor insurance (forecast to increase by 57% to 11,000 cases).

The growth in the ombudsman's workload caused by the forecast 44% rise in complaints will involve an increase in operating costs from £62.7m (forecast for 2008/09) to £92.5m (in 2009/10). This includes the cost of 300 additional adjudicators needed to help resolve the expected 165,000 complaints. The budget also covers increased expenditure on quality-assurance systems and on accessibility and openness initiatives (in line with Lord Hunt's recommendations published in April 2008 in his independent review of the ombudsman service).

The ombudsman service's unit cost - its average cost of handling a case, taking all overheads into account - is forecast at £544 for the current year (2008/09) and is expected to rise by 2.8% to £559 in 2009/10.

Operating costs are to be met mainly by an increased case fee - from £450 to £500 - paid by those financial firms that have four or more disputes referred to the ombudsman service during the year. It is proposed that the first three cases should continue to be free for each firm covered by the ombudsman.

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