The purpose of this plan & budget is to report on the performance of the Financial Ombudsman Service during 2003/04 and to consult on proposed expenditure, caseload forecasts and funding for the financial year to 31 March 2005.

The plan & budget also proposes changes to our method of invoicing and collecting case fees in 2004/05, and consults on the tariff and case fee rates for firms in our voluntary jurisdiction.

Despite the increase in workload, we expect to broadly meet our targets for timeliness in 2003/04, and plan to maintain them in 2004/05. Our surveys show that overall levels of consumer satisfaction remain high, with 80% of consumers telling us they are satisfied with the service they have received from the ombudsman service. Further details are given in chapter 2.

The industry will benefit from a continuing fall in our unit cost, from £730 in 1999/2000 to a proposed unit cost of £507 in 2004/05. Firms that rarely refer complaints to the Financial Ombudsman Service will benefit by being invoiced for case fees only for their third and subsequent “chargeable” complaint in a year. All firms will benefit from our returning a proportion of last year’s surplus to the industry. Overall, firms against whom complaints are made will continue to pay a greater proportion of the costs of the ombudsman service.

During the financial year 2004/05, mortgage and general insurance intermediaries will join our compulsory jurisdiction. We have been preparing for this by consulting the relevant trade associations on our funding proposals, and by holding seminars and roadshows around the country. We expect mortgage and general insurance intermediaries to increase our complaint-handling workload by between 5% and 10%, although they will increase the total number of firms we cover from under 10,000 to over 30,000.

In addition, in the White Paper on consumer credit that it published in December 2003, the Department of Trade and Industry proposed establishing an alternative dispute resolution mechanism for disputes about consumer credit. One possibility would be for this to be included within our compulsory jurisdiction. If this happened, it would be unlikely to take effect before 2006.

By the end of December 2003, we had received over 71,000 new complaints, and we expect this figure to increase to 98,000 by the end of March 2004. Of these complaints, approximately 50% relate to mortgage endowments.

During the year, we recruited additional casework staff to help handle the increasing numbers of complaints. By December 2003, we had resolved and closed 50,000 cases and we expect this figure to increase to 80,000 by the end of March 2004 – 17,000 higher than predicted in our budget for the year.

We expect our unit cost for the year to be £489, compared with our budget of £541.

Key points for the budget year 2004/05 are as follows:

As we have found in previous years, predicting the level of new complaints is not an exact science. Overall, we have assumed that complaints will fall by 15,000, reflecting a decrease in the number of mortgage endowment complaints reaching us.

With additional case-handling staff in place, we expect to resolve and close 88,000 cases in 2004/05, an increase of 10% on the figure for the current financial year.

Compared with the current exceptional year (2003/04), our productivity will return to normal levels. We set out the reasons for this in chapter 5. We intend to maintain our timeliness targets, despite the increased workload.

Our total expenditure, before financing charges, will increase from the budget figure of £34.1m in 2003/04 to £44.6m in 2004/05. This will equate to a unit cost in 2004/05 of £507 compared with the budget figure of £541 in 2003/04.

We welcome comments on any aspect of this plan & budget, and, in particular, on: