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corporate plans and budgets » Plan & Budget 2002/03 - Performance during the current year

‘our activities have concentrated on preparing for N2’

introduction

3.1 Our activities during the year have concentrated on preparing for N2. Although the Financial Ombudsman Service has been operating to all intents and purposes as one entity, in reality it has operated under service level agreements on behalf of the existing schemes. At N2, these arrangements fell away and the Financial Ombudsman Service now operates under its own statutory powers.

3.2 The key activities of the year so far have been as follows:

3.3 achievement of targets During a year that has seen considerable challenges with the introduction of our new casework system and business process, and the change associated with N2, we are on target to meet our anticipated number of case closures and our budget for the unit cost.

3.4 preparations for N2, including the harmonisation of ombudsman policy Previously the ombudsmen within the Financial Ombudsman Service operated using different sets of rules, depending on the scheme to which an individual complaint related. Our panel of ombudsmen have met regularly to discuss issues that will arise after N2 and ensure that decisions will be consistent, fair and reasonable across the Financial Ombudsman Service.

3.5 finalisation of new eligibility, process and funding rules In conjunction with the FSA, we have already consulted on draft funding rules and these rules have been published in ‘virtual final’ form. Rules covering internal complaints-handling procedures, jurisdiction, and investigation procedures have also been made, after consultation with the industry. HM Treasury has made rules relating to transitional arrangements, which extend the scope of our powers to include complaints about pre-N2 business. This will enable us to have a ‘seamless’ transfer between the old schemes and the new service. Without this, the situation would have been complex, and confusing for consumers.

3.6 close co-operation with the FSA on mortgage endowment redress policy Following the FSA’s publication of its regulatory guidance on mortgage endowment complaints, we published an assessment guide detailing the new procedures and the tools we use when considering mortgage endowment complaints. This guide not only helps speed up the process for the cases we deal with, it also enables firms to understand our approach and the amount of compensation we may award, making it easier for them to settle cases satisfactorily themselves, without the need for our involvement.

3.7 a pre-N2 focus on communication with the industry, including the publication of ombudsman news Our aim as far as the industry is concerned has been to ensure N2 brought no surprises. To help firms and consumer bodies fully understand the changes coming at N2, we organised training events, workshops and seminars. We produced a range of technical briefing notes and updates and helped firms distribute over 1.5 million copies of our new complaints leaflets. In addition, we launched a monthly publication, ombudsman news, containing case studies and commentaries on topical subjects.

3.8 the introduction of our new business process and case-handling system Our new unified case-handling system was implemented on time and within budget during the summer of 2001. At the same time, we introduced a new, consistent business process across the case-handling divisions, enabling us to improve our productivity and service quality levels. It will also give us the flexibility to move staff across divisions, where necessary, if there are changes in the balance of the workload.

3.9 an emphasis on complaint prevention Our technical advice desk now deals with around 400 calls a week, mostly from professional complaint- handlers in firms. Firms report that the advice we provide enables them to resolve many complaints themselves, without the need for our direct involvement. In addition, staff in our customer contact division (the division that deals with customers’ initial telephone calls or letters) do not simply answer enquiries and process complaints. They actively seek opportunities to resolve disputes at this early stage. Where this can be done, we avoid the need to pass on the complaints to our case-handling divisions for investigation. This helps reduce costs for firms and for ourselves.

summary of workload

3.10 A summary of current forecast workload is as follows:

2000/01 Actual
2001/02 Budget
2001/02 Forecast
Cases at 1 April
11,800
15,300
14,700
New cases
31,300
38,000
38,000
Closed cases
28,400
38,500
38,500
Cases at 31 March
14,700
14,800
14,200
No of weeks’ work outstanding
20
22
20
Productivity
* 3.3
3.5
3.7

* Productivity is defined as the number of cases closed per case-handler per week

3.11 At the end of November 2001, the number of new cases was 29% higher, on a comparable basis, than in the previous year. This rate of increase over last year is unlikely to continue for the rest of the year; there was a sharp increase in new cases in the second half of last year, which has now flattened off.

3.12 If we simply extrapolate the current average weekly new case figure for the balance of the year, we come to a full year figure of around 39,000. However, we are seeing a slowing down in the rate of increase in new cases. Our current best estimate is therefore in line with the original forecast figure of 38,000, which we gave in last year’s Plan & Budget.

3.13 At the end of November 2001, our cumulative case closure figure was 24,900. This averages at just over 700 a week. However, this period includes the introduction of the new case handling system. If we just look at the 10 weeks from the beginning of October 2001, the average weekly closure rate has been around 780, representing a productivity rate of around 3.8 cases per case-handler each week. This compares with the average productivity rate last year of around 3.3 and signifies an excellent recovery rate so soon after the introduction of the new process and system.

3.14 At current levels, we should achieve a closure figure in the range of 37,500 to 38,500. Clearly, if the level of new cases falls sharply in the last quarter of the year, there may be a constraint on the number of cases that can be closed.

3.15 As far as timeliness is concerned, our target in 2001/02 is to complete 70% of cases within six months of the date when we formally accepted them as eligible cases. At present, we are exceeding this target - completing 73% of cases within this timescale. However it must be borne in mind that the closure time is also affected by factors outside our control, for example, awaiting replies from consumers, member firms, or technical experts.

3.16 The approved 2001/02 operating cost budget for the Financial Ombudsman Service (before financing) was £26.5m. We expect costs for 2001/02 to be in line with this budget. A summary is set out in appendix D.

3.17 The target unit cost for 2001/02 was £688 (operating costs divided by case closures). At present we are still on course to achieve this figure. If there were a sharp falling away of new cases in the last few months of the year, that could result in our failing to attain this target.

A summary of the current forecast for 2001/02 is as follows:

Half Year £m
Budget £m
Forecast £m
Operating costs
12.9
26.5
26.5
Financing costs
0.4
1.1
1.1
Total costs
13.3
27.6
27.6
Case closures
38,500
38,500
Unit cost*
£688
£688

*Unit cost is calculated before financing charges

3.18 If new cases fell away sharply in the final quarter, we would seek to make short-term savings in order to get as close as possible to the target of £688.

conclusion

3.19 In both our process and our decisions, we have tried to balance the importance of speedier complaint-resolution with the need to provide a quality service. With the aim of achieving this, we have slightly reduced the rate of increase in our productivity and timeliness targets for 2002/03.