|
introduction
|
| 7.1
|
Our
plan is to build a cost-effective and responsive ombudsman service.
An increasing workload will require additional resources, but we
intend to measure our cost effectiveness by looking at unit costs
on a year on year basis. We gave a commitment in last year’s
Plan & Budget that the unit cost would not rise above
£688. If volumes fell, we aimed to make sufficient savings
to keep to our agreed target. But if this should happen mid-way
through the financial year, we would need a period of time to achieve
those savings. This remains our approach.
|
| measurement
of unit cost |
| 7.2
|
We
calculate the current measure of unit cost by taking the aggregate
costs of the organisation (before financing costs) and dividing
by the number of cases closed in that year. We noted in last year’s
Plan & Budget that this can be a misleading measure of
cost effectiveness, particularly if we resolve a higher number of
complaints
in our customer contact division so they do not go on to become
chargeable cases.
|
| 7.3
|
Since
the customer contact division plays a key role in settling cases
at an early stage (before they become chargeable), we are at present
developing a range of key indicators to measure our performance
in
this area.
|
unit costs |
| 7.4
|
In
2001/02 we expect the unit cost to fall from the 2000/01 figure of
£753 to around £688, which is in line with the published
budget. For 2002/03, we estimate that the unit cost will remain around
the same level in money terms, which represents a fall of £20
in real terms. This is after absorbing the improved timeliness and
service efficiency standards described above and the staff salary
increase. |
| 7.5
|
The
unit cost is made up as follows: - |
| |
Build-up
of the cost per case
|
Actual
2000/01
£
|
Forecast
2001/02
£
|
Budget
2002/03
£
|
| Case-handling
direct costs |
387
|
354
|
344
|
Cost of complaints prevention |
|
|
|
|
customer
contact division
|
74
|
66
|
65
|
|
technical
advice/communications
|
25
|
23
|
22
|
Other |
|
|
|
| support
costs |
90
|
70
|
69
|
| management
& board |
24
|
16
|
15
|
best
practice/management
information system |
0
|
9
|
12
|
| premises
& facilities |
100
|
96
|
95
|
| depreciation
|
53
|
54
|
66
|
Total |
753
|
688
|
688
|
|
| 7.6
|
The
fall in unit cost results from a combination of a productivity gain
by the case-handling divisions and a volume gain from the spreading
of support costs and premises costs over a wider volume of case closures.
|
| 7.7
|
The
impact on unit costs of the two alternative scenarios would be as
follows:
a)
higher complaint levels
The unit cost would fall to around £650, due to the volume
gain from spreading fixed costs over additional
case closures.
b)
falling complaint levels
As soon as it became clear that this was the position, we would
have two options. We would consult the FSA and other stakeholders
on which option to pursue. First, we could cut costs aggressively
to maintain the £688 level – although the later the position
became clear, the more difficult this would be. Second, we could
allow the unit cost to rise to just above £700 (still below
the £688 in real terms) in anticipation of the extended jurisdiction
over the coming years.
|
| conclusion |
| 7.8 |
We
are committed to our unit cost and productivity targets and believe
they are entirely compatible with our desire to provide a quality
service. We would like to hear of any additional measures we could
usefully use.
|
