Examination of Witnesses (Questions 60
- 79)
MONDAY 7 NOVEMBER 2005
BBC
Q60 Mr Bacon: Are you saying that
it was just as a land bank strategy to make sure your future needs
were taken care of?
Mr Thompson: No.
Q61 Mr Bacon: Was it not the case
that there was a series of projects which effectively fell through
during these years?
Mr Thompson: The BBC started building
on this site almost immediately and the White City 1 building
was opened in the late 1980s.
Mr Smith The White City 1 building
was designed in a previous era of management to move people out
of the West End from the expensive Langham Island site, which
is now the Langham Hotel, to West 12 where land, property and
other costs were cheaper. So the building went up more or less
straight away.
Q62 Mr Bacon: An awful lot of it
was still not used for many, many years and I am just asking whether
that was a good use of public money?
Mr Smith: Again prior to any of
our involvement, various schemes were put forward to develop the
spare land which was there, in addition to the building which
did go up and none of them really offered attractive value for
money at the time.
Q63 Mr Bacon: When you say various
schemes were put forward, by whom were they put forward?
Mr Smith: By the BBC's management
of the day.
Q64 Mr Bacon: So the BBC's management
of the day got hold of this land.
Mr Smith: Yes; built on it.
Q65 Mr Bacon: Then the BBC's management
of the day put forward various schemes, but none of them was felt
to be suitable.
Mr Smith: The BBC's management
of the day built one building.
Q66 Mr Bacon: Is it not the case
that if this had been more commercial, or if you had had more
autonomy perhaps, something would have been done more quickly
rather than sitting on a valuable asset of land for so many years?
Mr Thompson: May I ask you to
turn to page 8 of the Report and look at the two diagrams showing
the property? Frankly, because of the foresight of the BBC in
1985, we now have the opportunity of a much, much simpler, consolidated,
more efficient portfolio with a cluster of buildings. They are
all on one site. They are shown as three dark blue blobs, but
they are all on one site at White City and television centre,
rather than what you see in West London above: Union Threshold
Centre, Woodlands, Maida Vale and so on. The ability to do this,
which will drive efficiency and cost reductions for the BBC over
decades, was made possible because the BBC secured this land when
it did.
Q67 Mr Bacon: While on this subject,
I notice that Bush House has gone from the 2008 map below and
the 2000 map already says that some of Bush House is sub-let.
Is the idea that all of Bush House will disappear from BBC use?
Mr Thompson: That is correct.
Q68 Mr Bacon: So where will the World
Service be instead?
Mr Thompson: The World Service
and the external services will be relocated to the redeveloped
Broadcasting House.
Q69 Mr Bacon: In paragraph 50 it
says that although you " . . . made ad hoc use of
some of the space in the Media Centre" you avoided using
the unoccupied space so that you could claim a rates rebate. To
go back to your first sentence about each stage of this process
saving the public money, it beggars belief that that could be
true, if you have so much extra space that you could not use it,
that you actually roped it off in order to make sure you got a
rates rebate.
Mr Thompson: Firstly, the position
as of today is that vacant space is 6%.
Q70 Mr Bacon: Actually you have triggered
off my next question and I shall move straight onto it. You said
that it had gone from 22% down to 15% down to 6%.
Mr Thompson: Yes.
Q71 Mr Bacon: Once this fact that
one quarter of the space was unoccupied became known, did an edict
go out to get this space occupied very quickly? It seems a rapid
rise after it had been unoccupied for such a long time. How did
it get to 6% so quickly and who is in there?
Mr Peat: May I just assure you
that one of the results of the NAO Report was to draw attention
to the extent of the unoccupied space and the Board of Governors
did request that management make every effort to reduce the unoccupied
space rapidly.
Mr Thompson: I have to say that
I did indeed inherit a plan which absolutely was to get the vacant
space down.
Q72 Mr Bacon: Could you send us a
note on who has been moved in and the composition of the occupation
of the space by function since the building first began to be
occupied until you got to the 6%? Could you do that?
Mr Thompson: Yes; we can do that
and we will also include the plans for the full utilisation of
the space going forward.[1]
Q73 Mr Bacon: Mr Peat, may I ask
you about bond finance? Were you saying that the BBC could not
access the capital markets because of your credit rating—which
is what I thought I understood you to say—or because of
structural or regulatory limitations on your access to the capital
market?
Mr Peat: I was making two points
and I shall ask John Smith to provide more detail because he has
been very closely involved. The first point I was making was that
at the time the original deal was struck we did not have a credit
rating in the BBC; we had not gone down that route before.
Q74 Mr Bacon: Do you mean that the
ratings agencies had not been to visit you?
Mr Peat: We had had none of those
conversations which are required.
Q75 Mr Bacon: The boys have been
round now, have they?
Mr Peat: Yes, the boys in pinstripes
have been round and great efforts were put in.
Q76 Mr Bacon: What is your rating?
Mr Peat: It is AA; it is very
satisfactory from three rating agencies, but it takes time to
get to that stage. That was my first point. My second point was
that the bond market has changed substantially over that period
and we managed to get this refinancing through at a time when
long-term interest rates were at an historic low, so it was an
excellent time to undertake the refinancing.
Q77 Mr Bacon: There were no regulatory
restrictions, it was merely, literally, a matter of physically
not having had a credit rating.
Mr Peat: There was no experience
of this; it was just that, because of all the other work which
was taking place on this project, there was no capability to do
it at that juncture.
Q78 Mr Bacon: Mr Thompson, you referred
to the Manchester project. How much will that cost if it goes
ahead?
Mr Thompson: We are continuing
to work on the figures for that.
Q79 Mr Bacon: You do not know yet.
Mr Thompson: We put an initial
number in the public domain a year ago, which was a range from
£550 million to £600 million. Work since then suggests
that we can achieve everything we want to achieve at Manchester
for substantially less than that.
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