Examination of Witnesses (Questions 100-119)
OFCOM
17 APRIL 2007
Q100 Peter Luff: The principle you
agree with.
Mr Richards: In principle, I think
the consumer needs to have—.
Peter Luff: Good. I know you need to
go soon. There is one financial issue. Brian Binley.
Q101 Mr Binley: I want to come on
to the question of silent calls, and I want to declare an interest.
I am Chairman of a call centre operation. We do not use automated
diallers, I might tell you. You have taken action here because
it has annoyed consumer after consumer after consumer. The phone
rings after seven o'clock at night, they are watching Coronation
Street and there is nobody on the line, and it really does, frankly,
mess people about big time. Can I ask, what impact the new regulations
have had? They were introduced last year, as you know. How much
do you think they have eliminated this nuisance? We know about
the fines imposed, but have customer complaints actually received
it?
Mr Richards: There was evidence
that the level of customer concern has gone down, but there was
data I was looking at last week which suggested that it may be
picking up again. This is something we are monitoring very carefully
and, if it picks up again, we will take swift action again. We
have to get on top of this. It is extremely annoying for people,
as you rightly say. It is exceptionally annoying and frustrating
to be on the receiving end of these. I know from experience we
have had of calls to us and letters written to us that some people
not only find it annoying, they find it slightly frightening if
they live alone and they get a call. So we are monitoring the
data very carefully. There was definitely a sign that it had a
clear impact. If it is picking up again, we will get straight
back on the case.
Q102 Mr Binley: You know how easy
it is to set the rate of calls per operator. It is very simple.
My understanding is they simply set a lower rate for a while until
the heat goes off?
Mr Richards: If that it the case,
then that will show up in the data quite quickly.
Q103 Mr Binley: You are suggesting
it is beginning to show up?
Mr Richards: It is just a little
up-tick, it is not at the level it was—it is well below
the level it was—but if that is the case, then we will investigate
and we will fine and the fines will get higher and what we may
have to do in those circumstances, if it proves ineffective, is
come back to Parliament and ask for our powers to be enhanced
to levy greater fines. We are not there at the moment, but that
is a possibility. At the moment our powers to levy fines are restricted.
There is an upper limit, which I think is 50,000. The upper limit
is 50,000, which is not a big sum. In many cases you get the effect
from the PR. Many of the higher profile firms simply do not like
being embarrassed in public about being found in breach, but it
may be, if that is ineffective, that we will have to come back
to Parliament and ask for our powers to be enhanced.
Q104 Mr Binley: A lot of these operations
are generated off-shore. How are you dealing with that?
Mr Richards: We have not as yet
found that a problem, in the sense that the companies that we
found were the worst offenders, whom we have fined, were all UK
located and we have been able to levy that fine. So, so far that
has not proved a problem, because the companies are UK registered
companies.
Q105 Peter Luff: What is being done
for a British company wherever it is being done?
Mr Richards: If that became a
problem, again, it may be something we would have to look at our
powers in relation to.
Peter Luff: That is very helpful and
I think we are very sympathetic to the things you are saying to
the Committee.
Q106 Paul Farrelly: Very quickly
while we are on call charges, it is topical at the moment, it
is not a major part of your business, I know, but do you get many
complaints from NHS patients about the costs of calls. I am thinking
of me phoning my mum and chattering away and she gets charged
a small fortune, not for making calls but for receiving them.
Mr Richards: We did have a flurry
of calls raising concerns of that kind about a year and a half
ago. To be honest they have gone significantly down. We did look
into it and we concluded that the problem in this particular case
was really the nature of the contract between the NHS and Patient
Line, and therefore our powers to do anything about it were fairly
limited. We referred it on to the NHS and I believe there has
been a series of discussions since and possibly some contract
modifications. So we did look at it about 18 months ago. We found
there was little we could do. The root problem was in the nature
of that contract. We referred it on and I think it has been taken
forward. We are not receiving a lot of complaints about that at
the moment, that is for sure.
Q107 Paul Farrelly: Because people
are wise to it now?
Mr Richards: It may well be that
people have adjusted their behaviour.
Peter Luff: Finally, gentleman, before
we let you go, Lindsay Hoyle.
Q108 Mr Hoyle: Can you remind the
Committee: how are you funded?
Mr Richards: How we are funded.
Q109 Mr Hoyle: Yes.
Lord Currie of Marylebone: We
are funded basically from the industry. We have three main revenue
streams. There is a revenue stream which comes from spectrum licence
receipts, not auctions just the licence receipts, and we are a
net generator of income for the Treasury through that route. We
are paid the costs of our spectrum activities. There is a levy
on telecoms companies which relates to our telecoms activities,
and there is a levy on broadcasts on television and radio. There
are small areas which are, we used to call them, orphaned expenditure
because they could not come under any of those three caps, and
we get a direct grant for those (those include media literacy,
they include some aspects of competition policy), so primarily
by the industry that we regulate.
Q110 Mr Hoyle: It is coming out of
consumers or money that would have gone to the taxpayer. That
is fine. Can I take you on to salaries, because it intrigues me
when I begin to look at your salaries? It is quite obscene some
of the amounts that you are paying. In fact, I notice, Richard,
you worked for the Chancellor for a little while. I think the
earnings of your predecessor was three or four times what the
Chancellor earns to be Chief Executive of Ofcom? When I look around
and I look at Ofwat, they pay a lot less. In fact, are you twice
the salary of the Chief Executive of Ofwat and Ofgem? These salaries
are really obscene. In fact the average wage for an employee of
Ofcom is £65,000. They say MPs are on the gravy train; what
do they call it that you are on?
Lord Currie of Marylebone: Can
I answer that question, since I have primary responsibility in
this area? When we created Ofcom we were very conscious of the
need to ensure that we had within Ofcom people who came from the
sector who understood the businesses that we are regulating. Therefore,
we have in our salary structure struck a balance between the public
sector and the private sector salaries in the industry that we
regulate. In paying those sums, nobody is paid what they would
earn in the private sector, but, you are right, they are generous
salaries by conventional public sector standards. In comparison
with water, the same applies. The salaries that get paid in the
communications sector are significantly higher than get paid in
the water sector. So it is relevant to this. If I may finish,
the reason for doing that was to have a highly capable team in
Ofcom to deliver effective regulation, and I would like to think
that is what we have done. At the same time we have significant
reduced costs. In other words, if you look at the salaries at
the top but also take account of the fact that we have reduced
headcount substantially, we have, therefore, been able year by
year to deliver RPR minus performance in terms of costs, and I
think that is associated with the fact that we have very capable
people in Ofcom, including the man sitting to the left, and that
is absolutely crucial to the delivery that I think we—
Q111 Mr Hoyle: You are not trying
to mislead us, are you? In fairness, your head count is only slightly
down on the previous year? It says so.
Lord Currie of Marylebone: We
delivered a substantial reduction.
Q112 Mr Hoyle: Previously, but not
much.
Lord Currie of Marylebone: The
legacy regulators were 1,250, we are now about 800. Our costs
have gone down 5%.
Q113 Mr Hoyle: Seven hundred and
sixty two people, 50 million a year in salaries. I think that
is pretty obscene.
Lord Currie of Marylebone: I am
sorry, the justification for it is that good regulation requires
real expertise. Real expertise does not come cheap.
Q114 Mr Hoyle: What you are saying
is that the Chief Executive is worth three times more than the
Prime Minister?
Lord Currie of Marylebone: I am
not going to comment.
Q115 Mr Hoyle: As a cross bencher
I thought you would want to comment!
Lord Currie of Marylebone: I am
not going to comment on a comparison like that. I could make a
comparison with the Chief Executive of BP or other companies.
Q116 Mr Hoyle: All right. Let us
keep it within sight of each other. Ofgem, average salary much
lower. You are not trying to tell me the industry is so different.
The Chief Executive is half the salary. So come on, you are not
trying to tell me you have to be double the size?
Lord Currie of Marylebone: I think
we are much closer to the FSA (Financial Services Authority).
If you look at comparison of salaries, you will find we are a
relative snip compared with that.
Q117 Mr Hoyle: You are not answering
the question. I will try again. We are comparing Ofcom with Ofgem.
Lord Currie of Marylebone: The
FSA is a regulator like us. The nature of the industry we regulate
is much closer to financial services than it is to energy and
water.
Q118 Mr Hoyle: You can lead us round
the track all day. Let us get to the question, and I will make
it easy, I will say it slowly if you wish: if we have got the
salary of two chief executives, one of Ofcom, one of Ofgem, do
you really believe that the salaries should be double?
Lord Currie of Marylebone: I am
very content to justify the decision that we have in terms of
our—
Q119 Mr Hoyle: You are in charge.
If you cannot justify it, why should we bother?
Lord Currie of Marylebone: Could
I add one other element, which I think is very important. All
our people, pretty much, are on defined contribution pension schemes.
Ofgem, Ofwat and others are civil servants who are on a final
salary pension scheme. I think you will know that the costs of
final salary pension schemes are very much higher. I think you
really ought to factor that in when you make these salary comparisons.
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