Memorandum submitted by NAO
THE CREATION OF OFCOM: WIDER LESSONS FOR
PUBLIC SECTOR MERGERS OF REGULATORY AGENCIES
This NAO report was published in July 2006.
The report reviewed the costs and challenges of organisational
change in the merger of five regulatory bodies to create the Office
of Communications (Ofcom). The report looked at the decision making
process behind the creation of Ofcom, how the merger was carried
out and whether the merger achieved its objectives. The report
also included a more general good practice guide setting out lessons
learned from the creation of Ofcom for other mergers in the public
sector.
THE DECISION
TO CREATE
OFCOM
Ofcom was established by the Office of Communications
Act 2002 and formally took over its powers under the Communications
Act 2003. It consolidated the functions of five previous regulators:
— The Broadcasting Standards Commission.
— Independent Television Commission.
— Office of Telecommunications.
— Radio Communications Agency.
The creation of Ofcom was funded by a loan from
the Department of Trade and Industry amounting to £56.8 million.
The NAO calculated that the full cost of the merger was at least
£80 million. The report commented that policy makers who
propose mergers should give serious consideration to these costs
in assessing whether a merger will represent value for money.
THE MERGER
The NAO's preliminary review of whether the
creation of Ofcom achieved its high-level objectives found that
Ofcom was delivering benefits for markets and increased business
satisfaction. The report found that Ofcom was costing less per
annum than the sum of its predecessors and that overall, many
of the merger's objectives were being met.
GOOD PRACTICE
The government has proposed 30 other mergers
in the fields of regulation, environment, education, police services,
healthcare and criminal justice. In order to learn lessons from
this merger the NAO report included a good practice guide for
other mergers in the public sector. Amongst the 14 specific recommendations
for those leading mergers of public agencies were:
— Identify and clearly account
for the transaction costs of the mew;
— Develop a careful risk mitigation
strategy covering finance and IT; and
— Establish an explicit programme
to assist the integration of the cultures for previous bodies.
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