Examination of Witnesses (Questions 40-58)
BBC
11 OCTOBER 2005
Q40 Paul Farrelly: But more generally
on the way you have arrived at the £150?
Mr Grade: There are inevitably
at this stage in a seven-year business plan some variables which
we have identified and no doubt this bid will now be crawled all
over by various consultants employed by DCMS and/or the Treasury,
probably both, and they will flush out anything that we, the Governors,
have not spotted so far. I would be pretty confident in going
on record as saying that no BBC licence fee bid at this stage
has ever been scrutinised to the extent that the Governors have
scrutinised this one. For example, we were very unhappy in the
first pass at the efficiency targets that management presented
in the initial draft and we pushed them quite hard on that and
arrived at a figure of 3.3% per annum of efficiency savings. There
has to be an incentive to efficiency built into a BBC licence
fee.
Q41 Chairman: So it was initially
more than RPI +2.3%?
Mr Grade: It has gone through
various iterations, Chairman. Another area was that we thought
they had rather over-egged the profit targets from commercial
enterprises and we pegged those back because we did not think
they were achievable, which obviously had an effect on the spending
side. If you over-egg the earning side you can relax a bit on
the spending side. No BBC licence fee bid at this stage has ever
been scrutinised like this. It will obviously, in the interests
of the licence fee payers, go on being scrutinised now and a consensus
will be reached.
Mr Peat: It has been of tremendous
value to the Governors to have access to very high quality external
advice that we commissioned from PA Consulting for us to be able
to look in real detail at what management was putting forward—totally
independent, objective and well-informed advice. It is also very
advantageous to have the input from the governance unit, which
is our source of advice as well internally. That combined external
and internal input that we have had has really made the Governors
very well placed to look in detail at the proposals being put
forward, as we did at the value for money savings that Mark Thompson
unveiled earlier in the year. We have really had great benefit
from the advice and, as Michael said, this has been scrutinised
very thoroughly by the Governors before coming to this stage.
Q42 Mr Evans: The whole thing about
the licence fee, and you are asking for 2.3% because you have
got plans for what you want to do, is a bit like somebody looking
at their bank balance statement, being deeply in the red and then
saying, "I am spending at the right level. Clearly I am not
earning enough". It is like it is the only option and clearly
it is not. You have other options and the secretary of state can
easily turn round and say, "No. You have been warned. You
have had 1.5% increases for a period over and above the rate of
inflation. We are now going to keep a lid on it. It is only going
to be inflation rates from now on". What is your answer going
to be if that is the case?
Mr Grade: Then we obviously have
to look at the vision of what we would like to do in the next
charter period, which we laid out in Building Public Value,
a public document on which there has been intensive consultation,
dialogue with licence fee payers, research and so on. That does
not exist in a vacuum. That exists as a vision and a plan for
the BBC services going forward which has been endorsed pretty
much by the licence fee payers as far as one can test that. Through
that process the culmination of that was a green paper which again
was drawn up by the Government following intensive consultations
on our Building Public Value document. The green paper
refined the Building Public Value document and laid on
us a set of objectives and ambitions for the BBC and the green
paper says, "BBC, this is what we, the Government, think
you should be doing in the next charter". We have now put
a cost on that and that is what you see today, the cost of that
vision. This is not just an exercise in BBC expansion. This has
been a very carefully worked out process fully informed by feedback
from the licence fee payers and now the Bill has arrived and so
that will concentrate minds.
Q43 Mr Evans: I am just wondering,
Michael, whether you are not looking at other streams as well
for people to contribute to the BBC services. I use them. Since
I have been here about five minutes ago the BBC Breaking News
has told me that Malcolm Rifkind has withdrawn from the leadership
of the Tory Party. It works for me. I am prepared to pay for that,
but there are millions of others out there who will be looking
at the bill that you are now presenting them with and saying that
this is too much for them because they are not using all these
other services themselves and perhaps in the long term you are
even risking the danger of creating TV licence payer martyrs.
We have seen it with the council tax bill where people say, "Enough
is enough", and this could happen with the licence fee too.
Mr Grade: You are absolutely right
and that is the purpose of the whole charter review process. That
is why we took the decision to go public with the licence fee
bid, so that we could test the licence fee payers' response to
this basket of goodies that has been presented. It is all part
of the process. It is not a rushed process. This is an orderly
process to try and reach a consensus on what is the role for the
BBC going forward—is it affordable, what is the least price
we can get it for? I am actually rather pleased that this has
gone public so that we can get a sense from today of what licence
fee payers think about it.
Q44 Mr Sanders: I want to bring in
the issue of sports coverage and what you are doing to meet the
challenge proposed by a failure to acquire key sports rights,
particularly as you refer to this in the annual report when you
talk about the need to prioritise spending at the same time as
looking at the loss of some sports rights and some gains as well.
Mr Thompson: First, sports remains
a very important part of the BBC service to many of our licence
fee payers. We know very clearly that licence fee payers do expect
to get a really broad diet of sport on TV, radio and on the web
from the BBC. Overall our portfolio of sports rights is in pretty
good shape, I think. We have probably the best basket of football
rights we have had in our history, at UK level certainly. We have
strong positions in many other sports. This summer there has been
some controversy about test match cricket. First, we are able
and very pleased to be able to cover test match cricket on radio.
Secondly, it was the ECB which decided to part company with the
BBC after many years in the late nineties. We certainly explored
the possibility of bidding this summer for test match cricket.
It is quite complex for us. One of the things that the green paper
asks us to think very carefully about is competing with other
public service broadcasters for rights. Channel Four had the rights
and we did not know but it seemed pretty clear that Channel Four
was quite keen to hang on to the rights. Given our other priorities
we decided at that point not to bid for the rights though we did
not expect at that point that the rights would go to a subscription
broadcaster and would be lost to free-to-air. When test match
cricket rights come up in the future we will certainly look at
them as we look at all major rights as they come up. The broader
point is that, despite the various changes in technology, despite
the arrival of Sky with, particularly in football, its innovative
and very popular product in terms of live premiership action to
subscription, despite greater competition, Channel Five and so
forth, we remain committed to having a strong portfolio of sports
rights and I have to say that currently where we stand, although
I am sure there will be some losses and some gains, I do not see
any reason why we cannot go on offering a lot of high quality
sports for the public.
Q45 Mr Sanders: From a licence fee
payer's point of view do they not look to the BBC in particular
to cover a national team when it is doing well? Whether that is
rugby, soccer, curling in the Olympics, Wimbledon or whatever,
they look to the BBC for the big sporting events and in particular
they expect the BBC to be showing them when a national team is
doing well.
Mr Grade: If I may just offer
a correction there, I am not sure about British nationals doing
that well at Wimbledon. It is just a small point of factual accuracy!
Mr Thompson: Yes, they do, and
I think as far as we can we should try and meet that need but
the economics of sports rights mean that it is not always possible.
We have secured rights to the Olympic Games through to 2012 and
indeed the Winter Olympics in 2014, we have access to the World
Cup until 2014 and we have, as I have said, a very big basket
of rights, including currently, for example, England home internationals
as part of our relationship with the FA. As far as we can we try
and make sure that these great national sporting moments are ones
that licence payers get free to air, but the reality of the economics
of sports rights means that you could in theory pay pretty much
all of the licence fee just on sports rights and do nothing else
and that would not be right either.
Mr Grade: In regard to the test
matches we are seeing the impact of removing the test matches
from the listed events list. Whether that is a good thing or a
bad thing is a matter of public policy. It is not for us to say.
That is the result of removing test matches which always used
to be on the listed events list.
Q46 Mr Evans: Were you consulted
about the removal of it from the listed events list?
Mr Grade: Not me personally, I
have to say.
Q47 Mr Evans: Were the BBC at all
consulted about removing cricket?
Mr Grade: I will have to give
you an answer separately to that. I have no knowledge of it.
Mr Thompson: I was not involved
at the time. I was not at the BBC. We can come back to you on
that.[4]
Q48 Paul Farrelly: I am sure we will
come to sports rights again in the future. I want to ask a couple
of questions on what I will call mentionables and unmentionables
in your report and the Governors' objectives. First, there is
express concern in there about MPs' declining perceptions of the
independence of the BBC. What on earth are you worried about MPs
for?
Mr Grade: We are very sensitive
souls at the BBC. Our research shows that there is a real disconnect
between, if I can use the word, the esteem in which the BBC is
held by its licence fee payers as a generality and MPs in particular.
I think it is the right thing for us to try and understand why
that should be and what the concerns of Parliament as the representatives
of the licence fee are and what lies behind those concerns and
that disaffection and that disconnect in your perception—not
you individually but as a group. I think it is incumbent on us
to understand what lies behind that.
Q49 Paul Farrelly: I am sure you
are doing a good job but, if I can repeat this, I can remember
that years ago the BBC refused to show The Monocled Mutineer
again because of the outcry in the country. Should the BBC not
just to stick to its guns?
Mr Grade: It was transmitted.
I was the Controller for BBC 1 at the time who had commissioned
and transmitted it. Whether it was repeated or not I do not know.
I had left by then. I had got on the escape committee.
Mr Thompson: I think it is fair
to say that this is one aspect of the BBC listening to various
stakeholders. Behind your question the views of the general public,
the licence fee payers, are the most important measure of how
the BBC is succeeding, but we are interested. We do not take impartiality
for granted and we try very hard to work on the objectivity and
accuracy and impartiality of our journalism. We are interested
in perspectives from wherever they come. We are absolutely interested
in perspectives from representatives of political parties both
inside and outside Parliament. I am not saying that we are going
in some way to distort or change what we do because of that but
we want to understand why those concerns are there.
Mr Peat: From the viewpoint of
the Governors we need to know more about why there are these differences
before we know whether we should be worrying about them unduly.
Q50 Paul Farrelly: Before anybody
mentions John Humphrys can I move on to a question about something
that is not really mentioned in this report, nor in the Governors'
objectives, historic or future, nor in your mission, which is
the role of the BBC in promoting a creative Britain. I looked
through the report and it is only in the grudging section called
"Compliance" that I find any reference to the BBC's responsibilities
and relationships with the independent creative sector and it
shows in fine print that you exceeded your target of 25% of quota,
30.3% this time. I wondered why you were not singing from high
heaven about it and then I get right to the end of the report
and on page 146, table 21, it shows that you spent £329 million
on independent production, which is nowhere near 30%; it is not
quite 15% of your total income. Why is not the BBC talking more
about its role in promoting creative Britain and what do you think,
with your Channel Four experience, you can do to bring back the
spending of the BBC in the independent sector more in line with
the percentage target which you just measure in terms of hours?
Mr Grade: From the Governors'
perspective and from our position we want to be sure that we are
compliant with the quota, obviously, and the quota for independent
production exists quite correctly to ensure that the conflict
between BBC in-house production and independent production is
underpinned by some guarantees. There is a development further
on which I am sure the Director-General would be happy to talk
about. What the Governors wish to see is that there is a clear
process and a clear ambition which is implemented, which is to
get the best programmes for the licence fee payers from whatever
source. We have taken a real deep interest in the proposed arrangements
with the independent sector which the Director-General can outline.
We have taken a very deep interest not just in what is proposed
but how it is going to be implemented. A number of Governors have
spent quite a bit of time off line outside of Governors' meetings
getting to understand the commissioning processes inside the BBC
and have actually been doing workshops on the editorial side of
the house, understanding exactly how the commissioning process
works so that they can ask the right questions and make sure that
the implementation of the new arrangements with the independent
producers are having the desired output.
Mr Thompson: I feel totally committed
to the BBC's big role as an investor in and partner with the whole
of creative Britain. That goes from the orchestras we support
to all the other ways in which we interact with the creative industries
and I have talked about some of our plans around the UK. The 30.3%
figure is the narrow definition of eligible hours of television
independent commissions. It excludes some areas, and BBC News
would be a good example, where we have and I think we are right
to have an in-house solution to the provision of news. In addition
to that spend we have a voluntary quota for independents on radio
production. We are going to extend that to radio nations. We are
also opting for a 25% voluntary quota in new media, so we are
very keen to open up the BBC to the independent sector. A year
ago we announced the idea of a Window of Creative Competition
whereby we hold in-house capacity at a lower level than the headline
quota would suggest so that there is space for both in-house and
commissioned work. Over the course of the last year we have got
to a position in dialogue with PACT, the organisation which represents
independents in this country, on whether they are supporting the
idea of the WOCC[5]
and supporting our proposals. The mood music between the BBC and
the independent sector has been transformed over the last 18 months
and they want to see how the plans work out but at this stage
they have expressed confidence in the plans we have suggested.
Going forward, one of the most important values the BBC represents
beyond the core delivery of that to the licence fee payers is
the way it can help work, in Tessa Jowell's phrase, as a venture
capitalist or catalyst for the wider creative industries.
Q51 Paul Farrelly: Is there not for the
Governors a serious issue here, both in terms of that wider role
and talking about it and making it central to the mission in terms
of the transparency of the accounts? There are lots of tables
here but it is very difficult to find out how the independent/in-house
split is made up across the programming, and also in terms of
the value because it is barely 15%. Anyone who takes an interest
in this is always irritated, I must say, when, at the end of a
radio or TV programme it says, "This is a Smith, Jones or
Bloggs production for the BBC" and Smith, Jones or Bloggs
either have long-standing BBC connections or are still employed
by the BBC, and, secondly, when you see well-known formats created
by the BBC which are simply transferred out to independent production
companies without any element of creativity and that is how you
meet the quota. There is an issue here for the Governors, is there
not?
Mr Peat: As a governor I would
say we do take this very seriously. The commissioning process
is hugely important. I am one of those who have been and had a
workshop on exactly how this works. It is not just a matter of
making sure that the independents and the BBC in-house people
have the same access to commissioners on an even-handed basis.
It relates to the nations and regions point as well. Getting a
commissioner for comedy based in Glasgow is a huge step forward
which will help both the independent sector and BBC Scotland.
This is something that is close to our hearts. If you say that
the tables in the report do not provide an adequate reflection
on this I am very happy that we look at this again for the next
report and see whether it can be more carefully set out so that
your point is answered.
Mr Grade: On the credit side I
think it is important—and I defer to the Director-General
here and I assume that it is still BBC policy because I have not
seen any change on air, radio or television—that due credit
is given to the producing entity, whether it is in-house or whether
it is Hat Trick Productions or XYZ Productions Ltd for Manchester
or whatever. It is very important for the independent producers
that they get that credit. There has been no change in that policy
as far as I can see.
Mr Thompson: No.
Mr Grade: They do get due credit.
Q52 Adam Price: Can I just say that
John Kavanagh's recent piece in The New Statesman aroused
a lot of interest but also his core argument that the journalism
that the BBC has been less robust or more risk averse since Hutton
has a degree of resonance among some observers. The BBC has accused
the Political Editor of The New Statesman of lying and,
bearing in mind the last time the BBC accused anyone of lying
the Chairman of the Governors and the Director-General resigned,
do you stand by that position, that there was no truth either
in the specific allegation in relation to John Humphrys or in
the general point about the journalism of the BBC?
Mr Grade: There are two aspects
to the Editor of The New Statesman's piece. One was the
"factual" basis for his story. Then there was a lot
of opinion about how the BBC was behaving in the post-Hutton era.
I would like to go on record now as saying absolutely categorically
that on the factual side it made good reading, it made for good
conspiracy theory, but there is no truth in it whatsoever. When
the story appeared, in my role as the Chairman of the Governors,
where the responsibility for the independence and impartiality
of the BBC ultimately resides, it was clear that newspapers were
making allegations that called into question the BBC's impartiality.
It was therefore quite proper that I made a single telephone call
to the Director-General and said, "I think you ought to look
into this. Would you let me know what this is all about? If any
of this is true what are the facts behind this?". That was
the extent of the conversation. There were never other conversations
with other members of staff. It is not my job to do that. I was
concerned that we get to the bottom of it and that we say publicly
that since the BBC's impartiality had been impugned by these stories
the Governors were on top of this.
Q53 Adam Price: So nothing you said
privately could possibly have been misconstrued as suggesting
that you believed John Humphrys had been treated leniently?
Mr Grade: No, I am absolutely
certain.
Mr Thompson: Can I just say for
my part that I thought the story was utterly untrue in most of
the statements which it made on this particular story, none of
which by the way was checked. There was no attempt to check the
factual accuracy with us. If they had checked the piece would
not have appeared because it simply was not true. More generally,
some of the suggestions in it are preposterous. The piece claims
that we have issued instructions to, presumably, all editorial
staff that "people should go soft on ministers and soft on
the Government". I would love to see such instructions. I
would love to imagine a world where you could issue such instructions.
I would never want to issue such instructions in a million years,
but the idea you could do such a thing without it instantly becoming
public knowledge—we have an absolute code of honour about
this. What has been interesting in the days since this, quite
apart from the fact that I have managed to calm down enough to
write an email to staff about it, is that several of our editors—Kevin
Marsh, Editor of the Today programme, and others—have
quite independently volunteered to come forward to say what utter
nonsense this is. Of course there is a debate to be had about
various aspects of impartiality; there always will be, but it
is a long way from that kind of broad debate to say that the management
of the BBC or the Governors of the BBC are issuing instructions
that the BBC should go soft on the Government. It may be that
you find a resonance in this story. I really do not. A few weeks
ago the Prime Minister was letting it be known that he was profoundly
unhappy with some aspects of our coverage of Katrina. I made it
clear immediately that I thought our coverage had been outstanding.
If anyone saw Panorama on Sunday, the idea that this is
an organisation which is afraid to properly, rigorously, accurately,
objectively examine Government policy—I cannot see any diminution
in that in the last 18 months. If you ask the public about the
trustworthiness of the BBC, that rating has gone up since Hutton,
not down. The public absolutely want us to hold public figures
to account. There is no sense I get from the public that their
confidence in the BBC has diminished at all.
Q54 Adam Price: Could I ask a quick
supplementary related to the independence of the BBC's journalism?
I understand that the Metropolitan Police have asked for some
footage of Muslim clerics following the Panorama programme
and the court has ordered footage related to the G8 demonstration
to be delivered as well. Is there a danger, in the light of the
Incitement to Religious Hatred Bill, the proposals on the glorification
of terrorism, that the BBC's cameras effectively could end up
becoming the eyes and ears of the state if there is continuous
demand for video footage?
Mr Grade: I think this is a matter
for the editor-in-chief.
Mr Thompson: This is a live issue.
We have not handed over any material at the moment. We await further
developments, including potential legal developments, on this
story. Of course, it is for the BBC to abide by all laws. At the
same time it is very important that we maintain our independence
as an organisation and so we look at each of these cases on their
merits, but if I may say so we are right in the middle of that
case at the moment.
Q55 Mr Evans: Mark, can I just one
question? On page 89 of the report it says that 13 Governors got
paid bonuses of £546,000. You refused to take a bonus because
you thought it was wrong with all the redundancies that were being
made within the BBC. Do you feel somewhat let down by your other
Governors that they did not follow your line?
Mr Grade: It is the Executive
Directors, not the Governors.
Q56 Mr Evans: Sorry; do forgive me.
Mr Thompson: I will hand over
absolutely to Michael as Chairman of the Governors. The remuneration
of senior executives is a matter for the Board of Governors of
the BBC. I can make recommendations about other directors, obviously
not about myself. I felt I was in a particular position. I had
come into the organisation and been the architect of a very big
change programme and I did not personally feel it was right that
I should be considered for a bonus. I waived my right to be considered
for a bonus. I felt about all of the other employees of the BBC
though that we should have paid them in the normal way. We are
paying all other members of staff in the normal way. These were
other directors who had been set their objectives for the year
before I arrived. Their contracts included a provision for a bonus
and I thought that I should recommend the bonusing of these colleagues
in the normal way and indeed encouraged the rest of the executive
board to be considered for bonuses in the normal way. However,
it is also true that, quite independently, both Michael and I
had come into the BBC and thought that the recent history of contracts
for senior managers with quite large bonuses, up to 30%, did not
feel right for the public service culture of the BBC, so I was
very pleased when the Remuneration Committee of the Board of Governors
decided to make a change. Michael, do you want to pick up the
story?
Mr Grade: I would just say in
answer to your original question that I sit on the Remuneration
Committee, I do not chair it, but the Remuneration Committee,
and I think I speak for all of them, respected Mark's decision
to waive his bonus and respected his colleagues' decisions not
to waive their bonuses. It seemed to us perfectly proper. We did
not query that at all. Irrespective of the bonus scheme one of
the first things I did when I arrived was declare that I was unhappy
with the level of the bonus. I was also unhappy with the performance
criteria which are required to be met. There was nothing in there
about efficiency, productivity and so on and we embarked on quite
a lengthy process, obviously informed by the usual outside pay
consultants and so on, and we formulated a new bonus scheme which
reduces the potential from 30% to 10% of salary. I think a limited
bonus scheme is justified inside the BBC at executive director
level. It is a way of signalling to senior people inside the BBC
about their performance of the previous year.
Q57 Mr Evans: So you are thinking
of extending it, are you, throughout the entire BBC?
Mr Grade: That is a matter for
the Director-General.
Mr Thompson: Some members of the
BBC are bonused, some are not, but the idea of a common ceiling
across the BBC of 10% as a maximum is a good idea, and as far
as possible I think the idea of beginning to bonus people working
in teams together across the organisation is a good idea, but
we are looking at that.
Mr Grade: I think we should exempt
from that 10% the commercial activities of the BBC where different
incentives may well apply.
Mr Thompson: Yes.
Q58 Chairman: Unless any of my colleagues
have burning issues to raise, can I thank you very much for giving
up your time? It has been a very helpful session and we shall
look forward to continuing our dialogue over the months to come.
Mr Grade: Thank you, Chairman.
Mr Thompson: Chairman, we are
very happy to invite the new committee to come and visit the BBC
and see some of the things we are up to, some of the new services
we are up to in particular, at a time of your convenience if that
is useful to you.
Chairman: I am sure it will be.
4 See supplementary memorandum on Ev 18 Back
5
Footnote by witness: WOCC is Window of Creative Competition. Back
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