In a letter to interim chief executive officer Nausicaa Delfas, MP and chair of the Treasury Committee Mel Stride questioned the Fos on how it would get on top of the current backlog of cases.
A periodic review published last month found "substantial casework backlogs" and that the Fos was operating at a deficit, with the funding gap filled by eating into its reserves.
Following testimony to the committee that it costs the Fos on average £960 to resolve a case compared to the £650 case fee it receives, Delfas was asked to outline how it would address its funding issues.
Delfas said: “To sustain momentum and ensure continuity, we have secured the ongoing support of Oaklin Consulting, who carried out the periodic review. Oaklin were appointed following an open tender process.
“The additional work will cost about £300k (inc VAT), a sum we are confident represents good value for money. It is critical we quickly turn the ideas in the review into a structured plan of action.”
In the letter, she explained that over the next three months the Fos would explore the ideas and recommendations in the review and turn them into “a clear design, or ‘operating model’, for the future organisation”.
“This will involve detailed workshops with a wide range of our staff, as well as drawing on industry best practice,” she said. “As soon as a future model has been agreed the integrated plan to deliver it will be finalised.”
The Fos is also in the process of hiring a director of transformation, who will start their role at the end of February on a two-year fixed term contract.
While not a member of the executive, they will attend executive committee meetings as necessary and will report for the time being into its interim chief of staff as further changes are made to the executive team.
“Once the director of transformation is in post, we will review whether additional external advice is warranted and how it is best sourced, being ever mindful of the need to balance cost-efficiency with the benefits of external experience,” Delfas said.
Last month, the Fos pledged to go “further and faster” as it launched an action plan addressing the changes it will make to its operating model.
The action plan set out how the Fos will aim to improve its delivery for customers and provide help resolve cases more quickly.
Stride also requested details on how the Fos would use intelligent automation and technology in case handling, as well as whether it was realistic to achieve the commitments set out in its action plan by April 2022.
Delfas said: “We are confident that we can achieve what we have committed to do by April 2022. Between now and March 2022 we will be carefully considering all of the recommendations and will continue to develop our action plan.
“We will be able to go more quickly in some areas, with other areas taking more time and planning. Revisions to the funding model, for instance, requires public consultation, including with the FCA for approval.”
This latest correspondence follows previous concerns raised by the committee in January 2021 on the effectiveness of the Fos.
Stride MP said: “The publication of a plan to improve the Financial Ombudsman Service is a positive step in the right direction. As a committee, we have expressed concerns in the past about the effectiveness of the Fos, particularly about the cost of resolving a complaint and the extent of their complaints backlog.
“These positive words need to be followed by action. That’s why I have today written to the Fos requesting further information on the changes anticipated.
"We will be closely following whether the Fos’s ambition to develop a new strategy and operating model by April 2022 is realistic, and we look forward to having the Fos leadership in front of the committee early in the new year.”
Delfas said the changes proposed to its operating model would increase productivity and make the build-up of backlogs less likely
But she explained that as a demand-led organisation, the Fos would remain subject to unplanned spikes in volumes.
“Any change will inevitably impact on operations, but it is imperative we act now,” she said. “We have clear objectives from the review, which are being widely discussed and are acknowledged as sensible and proportionate within the organisation. We do not underestimate the scale of changes required.”
In December, the Fos announced it would increase its levy by 10 per cent to £106m to cover expected increases in its cost base for 2022-23 to £293.8m.
In the letter, Delfas said: “Having received more cases than expected last year, we need to reduce our queues more quickly than we had allowed for and urgently respond to the new cases we are forecasting to receive – as well as to take forward our action plan to set us up for the future.
“To do all this requires investment and, unless we take the opportunity to make fundamental change now, we will not be financially sustainable by 2024-25. Our aim for the new funding model is to encourage constructive behaviour by financial businesses and for it to be sustainable for the future.
“We will be looking at changes to both case fees and levy. We are working through various options and will consult on those in the first quarter of 2022-23, ready for implementation in 2023-24. However, as a first step, we are consulting on increasing the levy and reducing the number of free cases we offer to financial businesses in our 2022-23 budget.”
sonia.rach@ft.com
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