4 Reducing costs
22. In the three years to 31 March 2004, Energywatch
spent £57 million and Postwatch £27 million. These costs
are borne by a levy on the companies in the energy and postal
industries respectively. Both bodies employ over 100 people, and
in the case of Postwatch the expenditure exceeds that of Postcomm,
the economic regulator.[28]
23. Average household spending on post is £26
a year, compared with the £520 spent on electricity and gas.
Yet the budgets of Postwatch and Energywatch are similar. In 2003-04
the running costs of Postwatch were £10.3 million and
it dealt with 27,500 complaints, some £374 per complaint.
In the same period, Energywatch incurred running costs of £12.8
million and dealt with 87,600 complaints, only £146 per complaint.[29]
24. Postwatch said that the postal market was very
different from energy, with business as the main sender (around
86% of mail) and households the main recipient (similarly over
80% of mail). It had to balance the interests of the 400,000 business
users of the postal system and the 60 million recipients. It added
that the costs it incurred in handling complaints were similar
to those faced by Energywatch, even though the amount of expenditure
in question was typically far lower for postal than energy complaints.[30]
25. Energywatch's expenditure in 2003-04 was 13%
more than in 2002-03. Since Postwatch was set up its budget has
increased from £8.5 million to £10.3 million, an increase
of 21%.[31] The main
influences on cost are the volume of complaints received and overheads,
particularly accommodation. Postal complaints have increased dramatically
in the three years since Postwatch was founded (Figure 1). Complaints
received by Energywatch have not increased to the same extent
and Energywatch considers that the peak has passed and the number
is falling.[32]
26. Just under £12 million of Energywatch's
expenditure was used to close down its predecessor bodies, the
separate consumer councils for gas and electricity (Figure
5). This included £3.8 million to vacate buildings no
longer required and Energywatch continues to pay for some leased
buildings that it does not occupy. Some buildings are up for sale
but others have proved difficult to dispose of because they are
unattractive with long term leases.[33]
Energywatch has reduced its expenditure on unoccupied buildings
from £156,000 in September 2004 to £74,000 from April
2005.[34]Figure
5: Costs incurred by Energywatch in closing down its predecessor
bodies[35]
| £m
|
| Redundancy payments
| 4.1
|
| Office closures
| 3.8
|
| Revenue and capital spend on IT
| 2.7
|
| Staff development
| 0.4
|
| Onerous leases
| 1.0
|
| TOTAL
| 12.0
|
Source: Energywatch
27. Both bodies have their headquarters in the Victoria
area of central London. They justify this location by pointing
to the wide range of London-based contacts they must maintain.
These include Ofgem, Postcomm, the Department of Trade and Industry,
Parliament, regulated companies and the media.[36]
28. In addition, Energywatch has seven regional offices
and Postwatch has nine, three of which are outsourced. Postwatch's
regional offices are consulted on Post Office Limited's closure
programme. Energywatch's regional offices have a less obvious
role, because the energy industry is organised nationally with
6 large companies operating across the United Kingdom. In a letter
to the Committee, the Energy Retail Association pointed out that
all energy suppliers are national and few issues fit in with Energywatch's
regional structure.[37]
29. Energywatch has taken some action to cut costs
and its budget for 2004-05 is around £1 million lower than
for 2003-04.[38] Postwatch
has also sought to cut costs by outsourcing its contact centre,
and locating it in Belfast, which is cheaper than many other parts
of the UK.[39]
30. Energywatch and Postwatch could reduce overhead
costs further by sharing or contracting-out administrative functions.
They are considering a range of options for sharing functions
such as human resources and Information Technology, but at present
their powers do not allow them to raise invoices to charge for
the services they provide each other. They need authority from
the Department of Trade and Industry and the Treasury to do so.[40]
31. The budgets for both bodies are agreed by the
Department of Trade and Industry. The Department has not taken
into account the level of consumer detriment in each sector in
agreeing budgets. Nor has it compared expenditure on consumer
protection in these sectors of the economy with others, such as
expenditure on household appliances or the purchase of second-hand
cars, where consumers can direct complaints to the Office of Fair
Trading.[41] The Department's
proposals to merge consumer bodies, and its consultation on the
creation of a new Consumer and Trading Standards Agency, should
enable a more coherent approach to budget-setting and reductions
in duplicated expenditure.
28 Postwatch's budget for 2003-04 was £10.3 million.
For the same period, Postcomm's budget was around £6.5 million. Back
29
Qq 20, 67 Back
30
Q 20 Back
31
Q 1; C&AG's Report, Figure 19 Back
32
Q 1 Back
33
Q 76 Back
34
Qq 77-79 Back
35
Ev 19 Back
36
Qq 84-100 Back
37
Ev 18-19 Back
38
Q 1 Back
39
C&AG's Report, para 3.8 Back
40
Qq 108-110 Back
41
C&AG's Report, paras 3.22-3.24 Back
| 
