Regulators need to do more to prove effective response – watchdog
Four major regulators need to do more to prove they are effectively responding to consumer concerns or offering enough protection to those who need it, the spending watchdog has found.
The National Audit Office (NAO) said Ofwat, Ofgem, Ofcom and the Financial Conduct Authority understood the “significant difficulties” facing consumers but could not prove if they were effectively responding to them.
The NAO found that the most common consumer problem across all four sectors was handling debt from bills and credit repayments, set against a backdrop of real-term price increases of 28% in gas, 37% in electricity and 6% in water since 2007.
Consumers also found it difficult to access the best deal or service, resulting in those who fail to switch paying a collective “loyalty penalty” of an estimated £4.1 billion a year “at least”, the report said.
Vulnerable customers, in particular, were less likely than an average customer to switch.
The NAO also noted that 15% of broadband customers had reason to complain about their service last year, with the most common cause being connection problems, while 36,000 homes were left without any water for more than a day during last year’s severe Beast from the East weather event.
The watchdog has recommended that regulators do more to measure their performance “so that they can understand what is working well for consumers and what isn’t”.
It found the regulators have not been specific enough in defining outcomes for consumers, noting that “high-level aims” were not matched by definitions of what these meant in practical terms.
The NAO acknowledged that reports by Ofgem and Ofwat on vulnerability and affordability, and by Ofcom on the roll-out of superfast broadband, had been well received.
But it recommended a “consistent and more meaningful approach” to measure regulators’ influence and impact on consumers.
NAO head Amyas Morse said: “Regulators need to do more to show the concrete results they are aiming to achieve for consumers.
“I understand that there is a difficult balance to be struck between long and short-term outcomes, between the needs of businesses and the interests of consumers, but at present the regulators’ results can come across as somewhat academic and detached from people’s practical concerns and pressures.”
An Ofgem spokesman said: “We agree with the NAO that regulators need to effectively measure their impact to help deliver the best possible outcomes for consumers.
“Ofgem has already made progress in this area; last year, for example, we published our first Consumer Impact Report measuring how much our regulatory decisions were expected to benefit consumers and we also publish annual reports on the state of the energy market and on the situation of vulnerable consumers.”
Caroline Normand, director of advocacy at Which?, said: “Consumers need regulators to protect them from harm and hold companies to account when things go wrong.
“However, trust is severely lacking across a number of essential markets because people don’t believe their interests are being put first.
“If faith is to be restored, a shake-up of the consumer enforcement system is needed to ensure regulators have the powers they require to take on the might of powerful companies.
“Regulators must also step up and clearly demonstrate how their work is making a positive difference and stopping people from getting ripped off.”