Examination of Witnesses (Questions 140-144)
OFCOM
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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