Ofcom must do more to prove value for money, finds Commons report

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It is impossible to assess whether industry regulator Ofcom is value for money according to a new report from the Commons Public Accounts Committee.

The report found that the regulator failed to outline precise targets, making it impossible for the committee to properly assess its spending.

It was also impossible to assess whether the cost of creating Ofcom – estimated by the National Audit Office in 2006 to have been £80 million – had been fully recovered.

"Ofcom should set out in its Annual Plan what outcomes it intends to deliver, expressed in a clearly defined and measurable way, and indicating in advance what success will look like," the report states.

Committee chairman Margaret Hodge said that the communications market "is working well in most cases and consumers are enjoying the benefits of competition". But she added that Ofcom "needs to do more to allow the taxpayers and companies that fund its activities to judge its performance".

"It does publish a lot of information about the consumer outcomes it desires, but does not say how it will measure whether it has achieved these outcomes. It does not tell us what success would look like. This makes it impossible to assess whether it is achieving value for money."

The report also said the regulator held an "unacceptable" contingency fund in 2009-10, "but could not adequately explain to us how it had been allocated".

It notes, "with some surprise", that Ofcom was able to find £14 million to offset part of its pension fund deficit – £7 million of that from unused contingency money.

According to the report, Ofcom, which was formed in 2003 from the merger of five previous regulators, has "relatively high" staff costs by comparison with its predecessors, despite staff numbers having fallen by more than 18 per cent.

Ofcom claims that it made a conscious decision to have fewer staff than its predecessors but to pay them more in order to deliver a better-quality organisation.

The regulator claims that, unlike it's predecessors, it has concurrent competition enforcement powers under the Competition Act 1998, and therefore has to pay for economists and lawyers who are able to exercise these powers.

The PAC says it is "not convinced by this argument", stating that Oftel also had powers under the Competition Act, but says the regulator has successfully reduced its cost base, compared to its predecessors, despite having taken on a number of additional duties.

The report also found that the regulator is also not doing enough to prevent so-called 'silent calls', which result from an error in an organisation attempting to dial using an automated call system, and says it has not done enough to ensure competition among landline providers and make switching between them easy for consumers.

As of 1 February, Ofcom has the power to fine call-centre companies up to £2 million for repeated silent calls.

Ofcom's operating expenditure in 2009-10 was £122 million, funded through broadcast licence fees and charges, and grant-in-aid from two government departments: the Department for Business, Innovation and Skills (£75.7 million in 2009-10); and the Department for Culture, Media and Sport (£600,000).

Image of Ofcom offices by [Matt Biddulph](http://www.flickr.com/photos/mbiddulph/) on Flickr. [Some rights reserved](http://creativecommons.org/licenses/by-sa/2.0/)