Ofcom plans to cut costs by 5% a year

Ofcom, the media and telecoms watchdog, has unveiled a three-year plan to produce an environment in which it "costs less and does less".

Ofcom, the media and telecoms watchdog, has unveiled a three-year plan to produce an environment in which it "costs less and does less".

The regulator, which has faced criticism over the financial burden its formation has placed on the companies it regulates, intends to cut costs to £133m in the coming financial year, from £144.2m in the current 12 months.

Ofcom consolidated the roles of five other regulators from the beginning of last year. Although the five legacy regulators, including Oftel and the Radio Authority, had combined costs of £136m in their final year of operation, Ofcom's initial costs resulted in a £144.2m bill. This included non-reclaimable VAT and the costs of new duties.

However, the regulated firms have also been faced with meeting an extra £56.8m in Ofcom's set-up costs, funded by an interest-bearing loan from the Department of Trade and Industry but repayable by the regulated companies themselves. In the current financial year the loan is costing £20m and in 2005 to 2006 it will cost £19m. It has to be repaid by 2007 to 2008.

In their foreword to Ofcom's plan, Lord Currie and Stephen Carter, the regulator's chairman and chief executive, said: "We have now created an organisation which has over 25 per cent fewer people than the previous regulators and which has lower operating costs. Ofcom's budget for 2004-05 was, on a like-for-like basis, 5 per cent less than the combined budgets of our predecessors and during the year we reduced our costs by 5 per cent. During 2005 to 2006, we aim to reduce our costs by a further 5 per cent."

They also spelt out their determination to implement the findings of wide-ranging strategic reviews into the television and telecoms sectors.