Budget, fines and collection rates

I hope you saw our consultation on our 2018/19 business plan and budget. It sets out our proposed budget and priorities for the next financial year. The consultation closes on January 26th – so please get back to us with your thoughts and comments.

For those of you who engage with us regularly, you will know that we take the cost of regulation very seriously. In the consultation, we set our intention to hold our budget for 2018/19 at £3.85m, equivalent to a 4% cut in real terms on the previous year and a 20% reduction since 2015/16.

We also reiterated our commitment to ensure the cost of regulation to our funders is held at a minimum. We have managed to reduce the levy by 34% (or £1m in real terms) since 2016/17, and we intend for this reduced call on industry funding to remain at the same level for at least the next three years.

We’ve been able to do this by utilising fine income accrued in previous years to offset the cost of regulation levied. Not that fines are issued with this in mind - sanctioning, quite simply, is designed to fit the offence.

Indeed, as you’ve told us – through our stakeholder surveys, at industry events and in conversation – fines must be a sufficient deterrent to bad practice. In the worst cases, a gentle slap on the wrist benefits no one. Consumers lose out, the offender gets away with it and the vast majority of industry, who are compliant and well-intentioned, is undermined.
 
Effective enforcement is therefore critical. In July last year, we updated our supporting procedures to ensure our sanctioning powers are as effective as they can be. The independently functioning Code Adjudication Panel has issued some very large fines in recent cases, including taking a particularly dim view of providers breaching Special conditions.

We, of course, seek to maximise the collection of fines. It’s unfair if we don’t, and if offenders don’t pay up, we pursue their debts with all the tools available to us. Where we need to, we work with debt recovery solicitors to identify monies or tangible assets that may be pursued to pay a fine. If we must revert to the courts, we do. In our view, effective enforcement is central to a healthy market in which consumers can have confidence.

Pursuing fines, however, can take years - for example, we are still chasing some debts from 2012/13. We often get asked about our collection rates, but we can’t give a fixed answer since while we’re still collecting the rates will change over time.  At present, fines collection rates over the past five years vary from 61% to 85%, as the table shows:

*this table excludes the impact of any financial year-end accounting adjustments

Our message is pretty straightforward: we’ll continue to keep the costs of regulation to a minimum and ensure our sanctioning protects consumers and maintains the integrity of the market.