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Tuesday, December 12, 2006

OFCOM: Telling Porkies

I immediately thumbed my way to the finance section of OFCOM - Draft Annual Plan 2007/08. I like to see how bureaucratic monsters grow unabated year on year. I was totally shell shocked to read the opening paragraph:
8.1 During 2007/8, we will maintain our commitment to providing stakeholders with value for money. In our first three years we have made significant efficiency savings which have enabled us to reduce our budget progressively. In 2004/5 our budget was 5 per cent less in real terms than the previous regulators' combined budgets (on a like-for-like basis). In 2005/6 our budget was reduced by a further 8 per cent in real terms. And for the current financial year, 2006/7, we set our budget a further 5 per cent lower in real terms.
I thought this was incredible news and worth examining how they had managed to cut costs. So I turned to the last set of published accounts which provided comparisons for 2005/6 to 2004/5 a period where the budget had been reduced by a whopping 8%, however I was going to examine actual costs.

Revenues in the period which is a combination of grants received from the Treasury and various taxes/charges on the industry had increased from £145.405m to £156.020m – an increase not decrease of 7%. Similarly, Cash Operating Costs had increased from £124.684m to £138.994m – again a whopping increase of 11% this time.

In the elusive search for savings, I thought I’d have a look at the line items. Other operating Costs had increased from £69.022m to £74.565m in the same period. However, Staff Costs had reduced from £53.900m to £49.841m – is this the elusive 8% decrease? Upon closer examination, this was a false hope because all the difference can be accounted for by redundancy costs decreasing by £4.173m, ongoing staff costs have actually increased. Despite the redundancies the headcount has been steadily increasing from 727 (Mar 2004) to 753 (March 2005) to 776 (March 2006). Over the same period the Remuneration of the OFCOM board had risen from £1.49m to £1.791m – a huge 20% increase.

I’m sure that somewhere in the arcane world of public sector beancounting there must be some explanation how an 8% cut in budget actually translates to large actual increases across the board, but the challenge to find it is beyond me.