Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 60 - 79)

WEDNESDAY 3 FEBRUARY 1999

SIR JOHN KERR, KCMG, MR E CLAY, CMG, MR M ARTHUR, CMG, MR M BYFORD, MR A HIND and MR J SMITH

  60.  May I stop you there and ask you, if you had the choice, would it have been preferable to the Foreign Office not to go in the direction which has been taken by the BBC?
  (Sir John Kerr)  I was ambassador in Washington at the time.

  61.  As the Chairman said earlier: that is no excuse.
  (Sir John Kerr)  The experts tell me that great efficiencies arise from having a proper value on assets used elsewhere in the organisation or provided elsewhere in the organisation. I believe that must be true but Mr Byford is the greater expert.

  62.  I notice from the report that the World Service now have the right to commission programmes outside the BBC. Under the new commissioning culture which now exists in broadcasting, would it not have been preferable to you and the World Service to become more independent rather than less independent?
  (Mr Byford)  No. I am certain myself that the restructuring is for the benefit of the World Service. Why? It enables our English news supply to come from the world's largest news gatherer, BBC News. In our general programming we also have a supply from the largest production base in Europe within the BBC. Yet, as you say as well, we do have the ability to get programming from other suppliers too, from independent programme makers for our general programming. We can commission too and the freedom for commissioning the programmes lies with the commissioner and that is the BBC World Service. The commissioners have the goal of serving audiences in the most effective manner with programming supplied from their preferred suppliers. In news it is true to say that our preferred supplier is BBC News, but all the evidence we have tracked over time since that restructuring has been that the quality of the programming has benefited and our efficiency programmes are on track.

  63.  Have you commissioned outside the BBC so far?
  (Mr Byford)  Yes; in our general programming, yes. We have within our own organisation a commitment to an informal target for independent programme making and we do.

  64.  I understand the need for full answers but I would ask you to be as brief as you can because we have to get through quite a lot. These are very complex arrangements. We not only have the financial memorandum and the broadcasting agreement which we had previously, but now we have protocols with all the directorates. The report states quite clearly that the trading agreements are very long and very complex. Can you reassure this Committee that accountability still exists under this complex arrangement?
  (Sir John Kerr)  Yes. And I say so subject to two caveats, but I say so with fair confidence because it is the view of the NAO as well, that the arrangements which have been devised should work and provide that assurance. Caveat one: we shall need to monitor them as they work over time. Caveat two: we should like to see the NAO also monitoring them over time and I am very glad that the NAO seems willing to do so.

  65.  In the recent past we have had a combination of both efficiency savings—two different types—and restructuring within the World Service. Can you reassure us that both cost and quality of programming has been kept up to the standards we would expect?
  (Mr Byford)  Yes. Both streams of the efficiency savings programme are on track and quality thresholds are being protected. Within restructuring we recognise—and it is emphasised in the NAO report—that there are some restructuring charges obviously but they are more than outweighed by the efficiency savings benefits coming from it.

  66.  May I press you a little on that? If you look at the efficiency savings which are reported, it was partly improved efficiency—whatever that means, and I would ask you in your answer to give us a description of what that entails—but it was also partly about reduced activity. You made a five per cent further saving in 1997-98 with further savings in the current financial year yet in that year of 1997-98 you did have some difficulty meeting those requirements. That raised a question in my mind. If you had difficulty in the first year of those savings will there be increased difficulties even though the savings required are reducing over time. If you are having difficulties will that have an effect on quality and output of the World Service?
  (Mr Byford)  I have assured the Committee this afternoon that we shall track that over time as well. I am confident that it will not. As highlighted in the NAO report, some shortfall was predicted within production and resources and in Production the savings target was actually delivered. We are on track with the efficiency savings programme. With the restructuring you earlier asked about, the end expectation is of a £5 million cost, more than matched by a £20 million restructuring dividend over the five years.

  67.  Let me come on to that. In 1997-98 you did meet your restructuring costs from the savings which you achieve. In the years from 1998 onwards you still have £3.1 million to achieve. You talk about £20 million overall savings but can you reassure us that you will be able to fund those restructuring costs over the five-year period?
  (Mr Byford)  Yes. The first call on those savings is obviously to be able to fund the restructuring programme which we have endured and predict. We are also confident that by tracking the efficiency savings we will be meeting the dividend which we have declared.

  68.  It says in the report an estimate of £200,000 in management time was spent in the first year on the restructuring. Can you tell us what it was in the second year? Can you reassure us that the time taken up by management on restructuring did not impact on the other duties they are supposed to undertake on behalf of the World Service?
  (Mr Byford)  My understanding is, as it says in the report, that the arrangements were in place from the following year and therefore there was no additional expense in management time.

  69.  Did the £200,000 not adversely impact on the service provided in that year?
  (Mr Byford)  No. Obviously there was a great deal of work which needed to be carried out to get ourselves in a position to be able to have the trading protocols in place, the structures in place, for it to be effective. That was the management time reflected there. Once in place, no further burden.

  70.  May I turn to newscasting because this seems to be one of the most complex areas and it is certainly one of the largest areas of expenditure? The report describes what happened in the first year. We are now told that automation will take over. It does seem to me in reading the report, and I am not at all an expert in this area, I have no experience, but these areas are so complex that even the introduction of automation is not automatically going to make it transparent and above board. I just wondered how you can reassure us that in this very complex area there will be no further disputes, no lack of transparency and no continuing difficulties and frictions between the BBC and the World Service.
  (Mr Byford)  I am absolutely certain that I can commit to the fact that we will be able to explain how the savings have been realised. We will want to reap the benefits of new technology. That is one of the reasons why the restructuring is in place, because over the whole of BBC News activities, including the World Service, we can ensure that we are using the best technology in order to deliver the best programming. That is what we shall do.

  71.  May I take you on to the question which I suspect is on everyone's lips? You have told us that you are able to make the savings without impact on the quality of the service. You have told us that you have been able to carry out the restructuring. Can you then confirm to us that the need for any cuts in the direct services of the World Service is not under consideration within the department?
  (Mr Byford)  I can confirm to you that the overall strategy for the BBC World Service is to strengthen it over the long term, to use the investment from the comprehensive spending review settlement with those efficiency savings but the World Service is in a dynamic situation. The marketplace around it is changing rapidly, new technology opportunities are facing us rapidly and the World Service is not an organisation which must stand still so there will be change.

  72.  Would I interpret that answer as suggesting that the new technology aspects of the World Service are likely to take a larger and larger proportion of your funding and that therefore you will have to look carefully at those services which you currently fund within the World Service?
  (Mr Byford)  We always look carefully at the services we provide to ensure that they are effective and providing value for money. At the same time we also have to be looking at the new opportunities, which the new technologies you emphasise offer us. Our delivery mechanisms will still be a dominant short wave but complemented increasingly by FM and the Internet over time. That is our goal.
  (Sir John Kerr)  From the point of view of the Foreign Office, it is very important that vernacular services should continue. There are 43 now and there were 37 ten years ago. We are anxious that more should open. With our encouragement in the last five years the BBC now have a service to Kazakhstan and Kyrgyzstan in these two languages, Khazak and Kyrgyz. They have a service in Macedonian, starting in 1995. They have a service in Albanian starting in 1996. They are now broadcasting, at our request, more hours a week in Serbian. We have started to talk to them about whether they should be operating in Bosnian. For us this is actually really important. There always was a Croat service. On the other hand I do not think that we can pile languages up. I went to Finland in September. The Finnish service had closed at the end of 1997. I talked to people from the President downwards and it was quite difficult to find people who had noticed that the Finnish service had closed. There was clearly a big audience in Finland for the BBC, but it had not actually been listening to the BBC in Finnish, it had been listening to the BBC in English. As far as we are concerned, we will want to go on pressing Mr Byford to produce more vernacular services aimed at particular hotspots like the Balkans now, or opportunity spots like the Caspian and the republics of the former Soviet Union, down in central Asia. We will not want to be saying to him that he need always keep open all the services he has, particularly in sophisticated markets where opinion formers, the people we really want to hit, are actually listening less to the vernacular than to the English service or would do if he had lots of FM frequencies and lots of Internet.

Mr Davies

  73.  Are you satisfied that there is a set of measurable objectives which the World Service is working to, against which the Foreign Office can assess your performance?
  (Sir John Kerr)  Yes, there are. But I am not satisfied that they will be good enough in future, with resource accounting and budgeting coming in. May I ask Mr Arthur to explain the key performance indicators exercise and how we intend to refine what we have?

  74.  Before he does, may I ask whether for instance in opening up in Albania, Macedonia, Kazhakhstan in central Asia, etcetera and closing down your Finnish and French service and all this, you have key targets for coverage and penetration in the marketplace? Do you have qualitative ideas of whether people think what they are hearing is useful? Do you have these sort of measures?
  (Mr Arthur)  Across the board we are trying to have a much more contractual relationship with the BBC as part of the way they use the grant-in-aid. As part of that, in the context of resource accounting and budgeting, we need to have much tighter setting of targets for what it is we want them to achieve with the money we are supplying. This last few months part of the process of dialogue with the BBC, which has been a very intensive one, has been to establish a precise series of performance targets and indicators which we can jointly measure to see whether they are achieving what it is we want them to achieve.

  75.  As basic indicators you would presumably include coverage and frequency and penetration, number of listeners and whether they think it is worth listening to.
  (Mr Arthur)  Absolutely: hours of coverage, volume of coverage, elite targeting, the type of people we want to get through to, all those are part of the tasking which is now being put in place with the BBC.

  76.  You are moving forward to measurable targets. In terms of actual objectives, you mention in passing that there is movement from the Finnish and French service to focus on Albania and the Balkans. Obviously historically the World Service has provided objective neutral news to areas in strife. Is that essentially what you see your role as doing? What in essence is the point in your view of the World Service. What is driving it?
  (Sir John Kerr)  That is one of its crucial roles. It is clearly very, very important that it should be seen as authoritative, as objective, as independent. For us, getting something which is not seen as propaganda into areas like the Balkans at the moment is very important because in such areas the local media will not tell the majority of people, in other places a minority of the people, what is going on.

  77.  So I have this right: the objective really is to penetrate into areas which are in political turmoil in many instances, where people do not trust their local media to provide objective news. It is not for instance to get a good brand share of the United States.
  (Sir John Kerr)  That is a particular Foreign Office objective. It is not the only Foreign Office objective. For example, in western Europe it is very important to us to influence the debate in countries like Italy, France, Germany, about the direction and development of European policy. We should like them to have an objective statement of British views, an objective British reporting of European Union meetings, carried by the BBC World Service. I singled out the Balkans and Caspian, not because they are the only examples.

  78.  Would you agree with me that there is enormous value for the British brand in the world in terms of the authority and independence of the voice of the World Service? However, you have said we also have a function for it in promoting the policies of Britain, which is slightly different, is it not?
  (Sir John Kerr)  I did not quite say that. It would not be right for him to promote the policies of the Government but it would be right for him to report what people in Britain say about the policies of the Government, the policies of the opposition and what the British are saying in the debate.
  (Mr Byford)  May I say as well that it was emphasised at the start and it has always been emphasised about the World Service and must continue, that editorial independence of the World Service is critical. We have clear aims for the World Service, which is to be the best known and most respected broadcaster in the world. That means being able to provide an authoritative, trusted, high quality information service across the world. We also want it to be a reference point. That is what the branding says and that means a global hub of communication, the ability for the world to communicate with itself. Clearly it is also a vehicle to promote the English language, learning, the best of British culture, the best of British talent, in a sense therefore in cultural diplomacy terms to be able to be leader for Britain. That is our goal. We are a world broadcaster but we recognise the world is a world of differences.

  79.  Would you say then that the value of the World Service in terms of ensuring the word of Britain is trusted, etcetera, etcetera, is that there is a big rub off on our export trade and people trusting British products and this sort of thing? Is that something which the Foreign Office bears in mind?
  (Mr Byford)  There is obviously a political, cultural and economic benefit. I would hope the political benefit is that the democratic values which we all support and enjoy in British society are there in the World Service as well of openness and fairness.


 
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