Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 140-144)


2 MAY 2006

  Q140  Mr Whittingdale: I was on the Committee considering the Communications Bill and one of the main justifications was the streamlining and reduced overheads that bringing together five regulators into one would achieve, so it is not surprising that you should at least come in slightly below, but you are far higher in your costs than other regulators like Ofgem and Ofwat and it appears that you are far higher than almost every other country's equivalent regulator. Are you actively seeking to achieve rather greater reductions in your budget?

  Lord Currie: I think we are certainly looking to achieve economies over time and I think the reduction in costs that we have seen has been quite significant. It is worth recalling that we do have loan costs which come from the creation of Ofcom, the transition costs that arise from that. I would make the point that cheap regulation can be very expensive and I think that one of the things we have strived to do—and on which I hope we have delivered—is to have a highly professional, highly expert approach to regulation to ensure that within our regulatory body we have people who know the industry that we are regulating, and I think we are looking to achieve that but I think we are above all aiming to deliver very effective regulation because the truth of the matter is that the pay-offs we get from a well-regulated communications sector, which is so vital for the economy and for society, are huge relative to the regulatory costs of our organisation. That is not to say we are complacent about the costs, we are able to drive them down; but above all else it is important that we deliver effective regulation.

  Q141  Mr Whittingdale: Can I press you on one aspect? I would be the first to admit that Parliament tasked you with a very large number of jobs to achieve within your first 18 months. Most of those have now been achieved and therefore one would expect that your need for resources would diminish, and in particular staffing numbers might diminish. But in actual fact staffing numbers have gone up in the last year; why is that?

  Mr Carter: Have they?

  Q142  Mr Whittingdale: The figures we have are that in 2004 you had 727 members of staff and that in 2005 it went up to 753 in addition to 30 secondees from the DTI.

  Mr Carter: Okay, I understand the point. As the Chairman alluded to, I think by the end of next year we will have virtually paid off the £55.5m loan that is set-off as well as dealt with the pension deficits which we inherited, which is a not insubstantial achievement, as well as taking the vast majority of the payroll of defined benefit pension costs and therefore capping that liability. So the ongoing running costs of the organisation are in a substantially healthy place. On the headcount point, the budget headcount for 2004 was 820—we ran below headcount. I think our current headcount is about 760 and will stay there or thereabouts. As to further reductions, if you wanted to substantially downsize the organisation, just for the record the five previous regulators that we took over had 1200 people—we have 740. If you wanted to substantially downsize it Parliament would have to substantially rethink what it wants us to do. We are spending about £20m over the next three years to put in place integrated IT systems and that will give us some further headcount savings but not of a massive order of magnitude, Chairman. If I may, I think the "Of" comparison is not a helpful one. If you do an analysis of what Ofgem do and Ofwat do and what we have been asked to do they really are apples and pears comparisons—I am not saying one is lesser or higher, that is not the point—they are very, very different tasks, and that requires different people.

  Lord Currie: Could I just add to that? The notion that somehow we have done things and therefore that is it I think is not right. Take telecoms, yes, of course, we have conducted and completed our strategic review of telecoms and we have undertakings from BT as a result of that. But we are now in the process of actually implementing that and really making that work. That is resource intensive in a different way from the previous work, and I think that is true of many of our areas of work, that actually we have done some hard strategic thinking but operational delivery is every bit as important.

  Chairman: Because you have been such good witnesses and because actually I know that in general you are held in very high regard by the industries that you serve—and it is fair to say that—I am reluctant to let your chief tormentor back in again, but I am going to give Rob Marris the chance of the last question!

  Q143  Rob Marris: I would expect—and do correct me if I am wrong—that the business you are in is in a sense a service industry and is very people intensive. You, Mr Carter, said that you were wary of comparisons with Ofgem but the figures we have—and correct me if I am wrong—is that Ofgem have 305 employees and a £34m budget, you in the corresponding year had 727 employees, just over twice the number, but you had four times the budget in round terms at £130m, and that does seem to be quite a large discrepancy. Either your staff are getting twice as much, which is a possibility and they may need it in your sector, or you are spending the money on something else. Which is it?

  Mr Carter: I am sorry to be unhelpful, I am not in a position to knowledgeably comment about the cost of running Ofgem. I can knowledgeably comment about the cost of running communications regulation and whilst I take the question it is not a comparator I can manage to; I can only manage to where we started from and where we started from we are now going into the fourth year of reducing our costs of between 7% and 10% a year as well as taking our headcount down by 60%. Could we do it further? I have to tell you that I cannot see further substantial reductions. It may be that the tasks that Ofgem are asked to do are substantially different but I am afraid I am not sufficiently knowledgeable on that question to be able to mention it.

  Q144  Rob Marris: Do you think then we need an "Ofof" to regulate the regulators if you are on the face of it twice as expensive?

  Mr Carter: There are friends of mine who often say we could deal with another type of "off" that we could do with! I do think regulatory accountability on the numbers is important. At the moment we are subject to three external forms of scrutiny in addition to the joint parliamentary; we have two NAO studies being done on us at the moment, one a purely financial audit on the financial costs associated with the merger, one a value for money audit being done on the way in which we spend money, which I suspect rather goes to your question; then, thirdly, there is an independent case study being done on what lessons can be learned from regulatory mergers that could be transferred to other public sector mergers.

  So we are certainly not short of scrutiny and all of that we are doing within our existing budget.

  Rob Marris: I am pleased to hear it, thank you.

  Chairman: Gentleman, thank you from your joint Chairmen. Thank you very much indeed and we look forward to seeing you again next year.

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