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corporate plan and 2008/09 budget

January 2008

key issues for 2008/09 and beyond

The Financial Ombudsman Service's overall priority for 2008/09 and beyond continues to be to deliver an efficient and effective service which retains the confidence of consumers, businesses and all our other stakeholders in the essential role we fulfil. This chapter describes some important factors that we need to take into account when planning our work and priorities in the years ahead.

our roles

Our key roles are:

  • resolving complaints in a way that is impartial, fair, accessible, timely, informal, efficient and free to consumers - and awarding fair redress where appropriate;
  • encouraging the resolution of complaints before they reach the service, by providing clear information about our approach; and
  • encouraging the elimination of the sources of financial complaints, by providing clear information about the lessons learned from our work.

We are part of the statutory arrangements designed to underpin public confidence in financial services. As an alternative to the civil courts, we also form part of the arrangements for the administration of justice.

coverage of financial products

Government initiatives, such as the Hampton review, have emphasised the benefits of delivering public services that have fewer and clearer entry points for the user, with economies of scale and value for money being provided by a reduction in the number of separate organisations. Against that background, it is logical that we are seen as a one-stop ombudsman for disputes about financial products (whether or not they are regulated by the FSA).

As outlined in chapter 1, the scope of the Financial Ombudsman Service has been extended continually since we were established in 2001. The number of FSA-regulated businesses we cover has grown from around 8,000 to around 21,000. And since April 2007 our new consumer credit jurisdiction covers around 100,000 consumer credit businesses that have OFT standard licences.

Most extensions of scope involve new kinds of issues and a different range of consumers and businesses. And further extensions of scope are in prospect. For example, the government has announced plans for legislation that will encourage banks and building societies to transfer unclaimed assets to one or more 'reclaim funds'. Provision will be required for complaints against those funds. And the European Directive on Payment Services, to be implemented by 1 November 2009, says that out-of-court complaint and redress procedures must be in place for settling disputes between payment-service providers and their users.

The Thornton review recommended that the Pensions Ombudsman should be merged with the Financial Ombudsman Service to create a single scheme for all complaints about pensions, whether private or occupational. The Government has accepted this recommendation, and we are working with relevant government departments, the Pensions Ombudsman and the FSA on proposals for delivering this effectively. Legislation to implement this will be required in due course.

economic factors

Despite relative stability in the overall economy, there has been considerable recent volatility in the stock market, as well as a significant increase in interest rates payable by some borrowers. These factors do not, of themselves, affect levels of consumer detriment overall. However, they are likely to affect the behaviour of consumers and financial services businesses, and therefore to affect the scale and nature of our incoming work.

Recent increases in interest rates may, for example, affect borrowers' safety margins, and so increase their propensity to complain - both about their credit products and about financial products more generally. Similarly, recent stock market downturns may affect both the return on investment products and also consumers' propensity to complain about these products.

The same economic factors may also affect the way in which businesses that provide financial services and products handle complaints. Reduced margins might, for example, tempt businesses to be readier to reject consumer complaints. On the other hand, the FSA's treating customers fairly initiative should lead to improvements in complaint-handling by FSA-regulated businesses.


Predicting future caseload is an inexact science, as numbers may be affected by many factors, national or international. Our working assumption is that 2008/09 will see a significant fall in our caseload, but the outlook for future years is less clear. Turbulence in financial markets, natural disasters (such as flooding) and consumer campaigns can all lead to significant volatility in the number of complaints. We therefore need to plan for this in our systems and processes, which will need to be sufficiently flexible and scaleable.

The sharp reduction in new mortgage endowment cases means we will lose some of the economies of scale that we had developed in this area. More of the disputes which remain to be resolved involve smaller businesses, less familiar with our processes - and an increasing proportion of such cases are those which can only be resolved by going all the way to a formal ombudsman decision. So we will continue during the coming period to need different service standards for the declining number of mortgage endowment cases.

Cases about charges for unauthorised bank overdrafts are now on hold, pending the outcome of current litigation involving the OFT. It is to be hoped that the outcome of the court proceedings will provide a clear solution to all of these cases. If not, there is the prospect of a surge in caseload as complaints that are currently 'parked' with the banks and building societies come through to the ombudsman service for resolution.

value-added roles

While our statutory role is to resolve disputes between consumers and financial businesses, we have always recognised that we have a wider public-service duty to use our expertise to encourage the prevention and early resolution of disputes, before they reach our service. We have therefore devoted some resource to this, through our external liaison and technical advice teams.

It is for consideration, however, whether there are other ways in which the information we hold could be put to use in the wider public interest. Our current independent external review by Lord Hunt of Wirral is examining whether we are making the most effective use - for the benefit of consumers, industry and regulators - of the information and experience gained from our work. Various tasks may flow from the report's recommendations.

resource issues

Our restructuring programme aims to ensure we have the right level of resources for the workload we anticipate in 2008/09 - while ensuring we retain those skills that would enable us to respond flexibly to any sudden changes in workload.

A number of issues have the potential to affect the cost of providing our service. These include:

  • staff resources: Because of the restructuring programme, and the effective freeze on recruitment that preceded it, fewer staff are at the lower end of the relevant pay scale. So although overall staffing numbers will decline, staff unit costs are likely to increase in real terms. And there will also be an increase in the short term caused by the costs, direct and indirect, of the restructuring programme itself.
  • internal capability: Likely future changes in the balance between the different types of complaint mean that - through our restructuring programme and other work - we need to continue to focus on developing our staff to be broadly-skilled and flexible in the types of case they have the capability to handle. This means that, through peaks and troughs in workload, we need to retain existing knowledge and expertise, as well as continuing to invest in the professional development and training required to share knowledge and expertise.
  • infrastructure: We occupy our existing building on terms that provide reasonable flexibility to contract, which we will need to do as staff numbers decline - though there will be some inevitable time-lags as we await break-points in our leases. And we will need to continue the modernisation of our IT systems, if we are to be able to deliver a service that meets rising expectations and copes with future volatilities.

Such factors have the potential to affect significantly both our cost base and the value for money of our service. Our corporate plan needs therefore to include a range of initiatives that take these factors into account, while also bearing down on other costs, where practicable.

image of corporate plan and 2008/09 budget

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