House of Commons - BBC Annual Report 2008-09 - Culture, Media and Sport Committee

BBC Annual Report 2008-09 - Culture, Media and Sport Committee Contents

Written evidence submitted by the BBC

BBC ANNUAL REPORT 2008-09: FOLLOW-UP QUESTIONS

The questions below are a combination of commitments made by the BBC in the oral evidence session on 16 July 2009 to supply further information, and additional questions arising from the session and the BBC's Annual Report. The Committee would be grateful for responses from the BBC Executive and/or BBC Trust.

The responses to the Committee's questions (in italics) below are from both the BBC Trust and BBC Executive, and in one case from BBC Worldwide. Who is responding is marked on each question.

BBC ANNUAL REPORT 2007-08

On 28 January 2009, the day of publication of the Committee's report on the BBC's Annual Report and Accounts 2007-08, the BBC Trust released a statement in response. The statement said that "the Trust will submit a full response to the select committee in due course and at that time respond to all of its conclusions and recommendations". This response has not been received, but Sir Michael Lyons gave an undertaking in this year's session to "fill that gap as a matter of urgency".

1. The BBC Trust made a public statement in which it committed to respond to our report on the BBC's Annual Report and Accounts 2007-08. We would be grateful if this response could be supplied.

The conclusions and recommendations of the Committee's report on the BBC's Annual Report 2007-08 are set out below with responses from the BBC Trust.

We believe it is a significant failing of the BBC Executive to have sidestepped the question of reach targets, and for the BBC Trust not to have commented on, let alone rectified, this deficiency. (Paragraph 13)

In line with our role setting the strategic direction for the BBC, the BBC Trust has set an overall target for all BBC services to reach 90% of the population. The Trust does not itself set reach targets for individual services, as we believe the BBC Executive are best placed to judge how to achieve the overall reach target across the portfolio of BBC services. The BBC Executive does however produce some reach targets for its own internal use. Copies of these for 2008-09 are included elsewhere in this submission and the Executive would be able to supply earlier sets of data if required.

Whilst it is a matter for BBC management to ensure that the overall target is met, and to establish the relative contribution each service should make, the Trust maintains an ongoing interest in the performance of all BBC services (including reach) and their contribution towards the delivery of the BBC's public purposes.

As well as commissioning our own research on the delivery of the BBC's public purposes, the Trust also carries out regular in-depth service reviews and other work including a quarterly performance dashboard in order to measure the performance of individual services, and track trends in usage.

We find it difficult to reconcile the BBC Trust's claim to have given only limited authorisation for the Executive to "talk to other players in the industry" with information on the subsequent development of Kangaroo and statements in the provisional findings of the Competition Commission. It is apparent that the Trust reviewed proposals for the joint venture at a number of stages, including a detailed review on 19 June 2008, in advance of our oral evidence session. The statements by the BBC Trust Chairman to the Committee therefore appear, at best, incomplete and, as a result, potentially misleading. (Paragraph 18)

We believe that it would have been more appropriate, in the first instance, for the BBC Trust to have given further consideration to the Kangaroo proposal and a preliminary indication of its approval or rejection of fundamental aspects in principle—subject to amendment and compliance with competition law as appropriate—before the launch of a full scale investigation by the competition authorities. (Paragraph 19).

The Trust stated in its press release of 28 January 2009 that:

The Trust first considered the Kangaroo proposition in June 2007. It agreed with the Executive that the proposition should be developed further, including work on fair trading compliance and consideration against the commercial criteria, and that formal approval would be required.

As would be expected for a project of this nature, the BBC Executive updated the Trust on progress (in June and October 2008). At these meetings, the Trust made clear to the BBC Executive that this proposition would still need to go through the Trust's formal regulatory processes.

The Trust considered that, in the light of the Competition Commission's review, it was right to postpone the Trust's own regulatory processes, as the Commission's review might significantly alter the proposition that the Trust would be asked to consider. The Trust also assisted the Competition Commission in their enquiries. The Trust considered that this was the most cost-efficient outcome for licence fee payers.

The Trust subsequently offered further evidence on its decision making process in front of the CMS Committee at its 18 November 2008 hearing.

This remains an accurate account of the Trust's consideration of the project Kangaroo proposals.To fulfil its regulatory process the Trust would have had to assess a more fully developed proposition using its commercial service approval procedures. In June 2007 when the Trust first considered the proposal in principle it did give the BBC Executive permission to consult other bodies in the industry and to develop the proposal so that the Trust could fully consider it at a future date.

The Trust's consideration of the proposals in principle pre-dated entry by the BBC Executive into a short-form agreement on a non-binding basis.Its intention at a future stage would have been to review both the final long-form agreements with partners and conduct an assessment both for consistency with the BBC's overall strategy and against the four commercial criteria set out in the BBC Agreement.

The BBC Executive did not submit either a fully formed proposal or a final four criteria assessment to the Trust, and once the OFT had referred the matter to the Competition Commission in June 2008 the Trust explicitly postponed its consideration to until the Competition Commission investigation had been completed. It is the Trust's view that consideration at this later date would not only have allowed the Trust a better understanding of the proposal in regard to competition issues but would also have allowed for any possible alterations to the proposal that the Competition Commission's findings might have led to.

The subsequent updates from the BBC Executive to the Trust during 2008 were reports on progress with the Competition Commission investigation and on discussions with potential partners.

The Trust did not set any specific limits on development costs.As is the case with any BBC proposal subject to approval from the Trust, there was a clear understanding with BBC Executive that there were regulatory risks, as well as no guarantee that either the Trust or other relevant regulatory authorities would clear the proposals.The BBC Executive therefore undertakes any development expenditure with this in mind, and remains accountable to the Trust for delivering value for money.

The Trust remains of the view to consider the proposal in full before the Competition Commission had completed its investigation would have been counter-productive, led to additional expenditure for licence fee payers and may well have led to further consideration being required if the Competition Commission's conclusions had significantly altered the nature of the proposal.

We welcome the efforts made by the BBC to increase transparency through the publication of the numbers of senior management in various different salary bands. However, we continue to believe that the same requirement should be applied to BBC "talent", whether they are employed directly or under contract. We welcome the undertaking by the Chairman of the Trust to give this further consideration. (Paragraph 23)

The BBC Executive has stated that they are committed to reducing the amount spent on top talent over the next few years.They have given an undertaking that in future the BBC will disclose the total amount spent on talent as a whole and work on a plan to make spend on talent more transparent while protecting commercial confidentiality.

The BBC Trust has been pushing for further disclosure of salaries and expenses as part of a drive for greater openness and transparency across the BBC, and the Trust is in discussion with the Executive about how best to do this.

The Trust recognises that this is an issue of concern to licence fee payers and in June 2008 published an independent report on the BBC's role in the on-screen and on-air talent markets.The Trust undertook to carry out a follow up review after 12 months of the BBC's progress against the review's conclusions. This was published alongside the 2008-09 Annual Report and Accounts.

The Trust's follow-up review concluded that although the BBC Executive has taken positive steps to strengthen its approach to talent negotiations and the processes it uses to control talent costs, the recent economic downturn presents an opportunity for the BBC to do more to reduce its spend in this area. The Trust believes thatit is right for the BBC Executive to go further than it already has in meeting the Trust's earlier recommendations and that it should look to reduce its overall talent spend on a like for like basis during the current licence fee period, with a particular focus on reducing its spend on talent at the top end.

The Trust intends to publish a short statement on the BBC's future progress in the Trust's annual report each year, focusing on value for money and the BBC's approach to developing and nurturing new talent. The Trust will report sooner on any significant developments should they arise.

The BBC Executive have also given an undertaking that in future Annual Reports the BBC will disclose the total amount spent on talent as a whole and work on a plan to make spend on talent more transparent while protecting commercial confidentiality.

The BBC Trust has been pushing for further disclosure of salaries and expenses as part of a drive for greater openness and transparency across the BBC, and is in discussion with the Executive about how best to do this. The Trust remains of the position that the interests of licence fee payers are not best served by publication of details of individual talent contracts however will keep this issue under review.

We are pleased that the BBC Trust has acknowledged this error but remain concerned that a material figure in the Annual Report and Accounts was misrepresented, despite proof reading by both the BBC Trust and its external auditors. Nor is it clear that this error was identified until the Committee brought it to the BBC's attention. (Paragraph 25)

The Trust acknowledged this error and is grateful to the Committee for bringing it to its attention. The Trust has improved its processes to avoid any repetition of a similar error in the future.

The deficiencies outlined in this report should not detract from the overall improvement in the BBC's response compared to its approach in the previous year. While there remains room for further improvement, we are generally satisfied with the quality and detail of the responses received this year. We hope that in future years the BBC will continue to strive to provide accurate and thorough responses to our scrutiny. (Paragraph 26)

Recommendation noted.

The broadcast of The Russell Brand Show on 18 October was a serious editorial lapse which exposed major failings in the BBC's system of editorial control. These failings must be addressed and such a lapse must not be repeated. The broadcast of the show was bad enough, but the BBC's failure to respond quickly exacerbated the situation. It seems extraordinary that BBC senior management were not aware of the broadcast until some eight days after it went on air. We find it inexplicable that an apology was not issued until 27 October. Even then, the BBC failed to check the wording of its apology with the main victim of the broadcast, Andrew Sachs. (Paragraph 31)

The decision by the BBC to announce on Radio 2 that Jonathan Ross would be back on air immediately after his three month suspension, despite the fact that the Trust had yet to approve the BBC's action, was premature and wholly inappropriate. It suggests to us an arrogance on the part of the BBC in apparently assuming that the Trust would not seek to alter the BBC's ruling. As the Chairman of the Trust himself accepted, the announcement should not have been made until after the Trust had approved the action. We also find it bizarre that the Trust should then issue its own statement suggesting that Jonathan Ross would face no further sanction ahead of its own meeting to consider the matter. This was the last in a series of major errors of judgement from the BBC relating to this matter, which started with the broadcast itself and was compounded by the unacceptable delay in acknowledging its inappropriateness and issuing apologies. We trust that all concerned will learn the appropriate lessons and that the Trust Chairman's declared intention to make sure that there is no recurrence is fulfilled. (Paragraph 33)

The BBC Trust considers that the BBC Executive acted promptly to apologise for the breaches of the editorial guidelines through a public statement on 27 October 2008, as soon as they became aware of the programme's broadcast. An on-air apology was broadcast on 8 November, the first date after this that the programme would have aired.

Following the Trust's decision to uphold the breaches of the BBC's editorial guidelines caused by the broadcast of these programmes, the BBC Executive announced a range of measures to ensure that lessons could be learnt and future failings avoided, in particular in the Audio and Music division, where this particular breach occurred.

Beyond this action the Audio and Music division have reported to the Trust regularly since the breach occurred on the actions being taken to ensure that failings are addressed. The BBC Executive also announced earlier this year new guidance for talent-owned independent production companies.

In September 2009, the Trust launched an independent review of the compliance measures that have been put in place in Audio and Music. This will be carried out by Tim Suter, former Partner for Content and Standards at Ofcom, and Tony Stoller, former Chief Executive of the Radio Authority. It will report back in early 2010.

Separately, the BBC Executive has commissioned a major piece of research into the public's views on taste and decency which has helped to inform the BBC's new draft Editorial Guidelines that are currently out for consultation.

AUDIENCE REACH AND SHARE

2. What was the audience share of each of the BBC's television and radio channels in 2008-09? (If possible, the definition of share should be consistent with that used in 2006-07 and 2007-08, to permit comparison.)

BBC Executive responds:

Ave weekly share BBC and competitors

	All Homes
	2008-09	2007-08	2006-07
	%	%	%
BBC Television
BBC One	21.7	21.9	22.7
BBC Two	7.8	8.3	8.6
BBC Three	1.1	1.0	0.8
BBC Four	0.4	0.4	0.3
CBBC Channel	0.5	0.5	0.4
CBeebies	1.2	1.1	1.0
BBC News Channel	0.8	0.7	0.5
BBC Parliament	0.0	0.0	0.0
BBC i	0.1	0.1	0.1
BBC HD	0.0	-	-
BBC Alba	-	-
Total BBC Television Share	33.4	33.8	34.3
Other Television
All ITV	23.2	23.3	22.7
All C4	11.8	11.5	12.2
All five	6.0	6.0	5.9
All Sky	6.2	6.2	6.8
Total other channels	39.3	37.2	34.1
BBC Radio
Radio 1	10.0	10.5	10.1
Radio 2	15.9	15.9	15.8
Radio 3	1.2	1.1	1.2
Radio 4	12.1	11.6	11.4
Radio 5 Live	4.7	4.4	4.3
Five Live Sports Extra	0.2	0.2	0.2
1Xtra	0.3	0.3	0.2
6 Music	0.4	0.3	0.2
BBC7	0.5	0.4	0.4
Asian Network	0.3	0.3	0.3
BBC Local & Nations Radio	9.3	9.8	10.2
World Service (UK only)	0.7	0.7	0.7
Total BBC Radio Share	55.5	55.2	54.9
Total BBC Television & Radio Share	42.3	42.7	43.1
BBC Radio
Local Radio in England TSA	8.7	9.3	9.8
Radio Scotland/nG in TSA	8.3	8.3	8.4
Radio Wales in TSA	9.4	9.6	9.1
Radio Cymru in TSA	3.8	3.6	4.6
Radio Ulster/Foyle in TSA	22.7	23.3	24.9
Commercial radio
Virgin AM/FM	1.3	1.5	1.5
Classic FM	3.9	4.1	4.2
Talksport	1.8	1.9	1.9
All Local Commercial Radio	31.6	31.4	32.3
All Commercial Radio	42.4	42.6	43.1
Notes: TV Base Individuals age 4+ BBC Alba is not currently BARB measured Total BBC = BBC One, BBC Two, BBC Three, BBC Four, BBC HD, BBC Parliament, BBC News, CBBC, Cbeebies All ITV = ITV1, ITV2, ITV2 +1, ITV3, ITV3 +1, ITV4, ITV4 +1, CITV, Men & Motors All C4 = CH4, CH4+1, S4C, S4C2, E4, E4+1, Film4, Film4+1, More4, More4+1, 4Music (from 17 August 2008). All Five = Five, Fiver, Fiver +1, Five USA, Five USA +1 Total Other = BARB definition BBCi= DSAT Streams only 6870, 6871, 6880, 6881, 6882, 6883, 6884, 6885, 6886
Radio Base Adults age 15+ RAJAR data are an average of Q208-Q408 Total BBC TV & Radio Share calculated using combination of BARB and RAJAR data.

3. What reach targets were set for each individual channel in 2008/09 and what targets have been set for this year?

BBC Executive responds:

The following table shows the service licence reach targets for individual services together with the actual reach for 2007-08 and 2008-09:

Television Service licence reach target (15 minute weekly reach, age 4+, unless otherwise stated). Source: BARB 07/08
Reach 08/09
Reach

BBC One

(all homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 78.2% 77.6%

BBC Two

(all homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 57.6% 57.4%

BBC Three

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach, particularly amongst younger adult viewers. 20.2%
(16-34:
24.8%) 20.5%
(16-34:
26.6%)

BBC Four

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach. 8.4% 8.7%

BBC HD

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to grow its own weekly reach. n/a 0.7%

CBBC

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach, particularly amongst its stated target audience. 6.6%
(6-12
28.7%) 5.8%
(6-12:
26.5%)

CBeebies

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach, particularly amongst its stated target audience. 8.9%
(0-6:
43.6%) 8.7%
(0-6:
42.1%)

BBC News Channel

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 16.3%
(3 min weekly,
adults 16+) 16.5%
(3 min weekly,
adults 16+)

BBC Parliament

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 1.0%
(3 min weekly,
adults 16+) 1.0%
(3 min weekly,
adults 16+)

BBC Red Button

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach. 11.0m
(wkly users) 9.7m
(wkly users)

BBC Alba

(digital homes) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach to around 250,000 people each week. n/a n/a

Online
Service licence reach target (weekly reach, age 16+) 07/08
Reach 08/09
Reach

BBC Online

(BBC ARA p68) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach. 16.5m
(wkly users1) 22.2m
(wkly users1)

1BBC Online UK Weekly PC browsers. Source: Sage Metrics, UK Only

Radio Service licence reach target (15 minute weekly reach, age 15+, unless otherwise stated). Source: RAJAR 07/08
Reach 08/09
Reach

BBC Radio 1 Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach, particularly amongst its stated target audience. 21.5%
(15-29:
42.9%) 21.3%
(15-29:
42.4%)

BBC Radio 2 Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach, particularly among its stated target audience. 26.2%
(35+:
31.6%) 26.1%
(35+:
31.4%)

BBC Radio 3 Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 3.7% 3.9%

BBC Radio 4 Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 18.7% 19.1%

BBC Radio 5 Live Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 11.7% 11.9%

BBC Radio 5 Live SE Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach. 1.5% 1.4%

BBC 1Xtra Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach, particularly amongst its stated target audience. 1.0%
(15-24:
3.6%) 1.1%
(15-24:
4.3%)

BBC 6 Music Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach. 1.0% 1.2%

BBC Radio 7 Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach. 1.6% 1.7%

BBC Asian Network Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to increase its own weekly reach, particularly amongst its stated target audience. 1.0%
(Asian
15-34:
18.5%) 0.8%
(Asian
15-34:
15.4%)

BBC Local Radio in England Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach, particularly amongst its stated target audience. 18.7%
(50+:
28.8%) 17.4%
(50+:
27.0%)

BBC Radio Scotland (including Radio nan Gaidheal) Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 21.5% 21.6%

BBC Radio Wales Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 17.9% 17.8%

BBC Radio Cymru Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 6.2% 6.4%

BBC Radio Ulster/Foyle Contribute towards the maintenance of combined BBC weekly reach at over 90% by aiming to maintain its own weekly reach. 38.6% 35.6%

4. What was the reach of individual BBC television services in 2008-09 using 30-minute and 1-hour weekly reach measures?

BBC Executive responds: Information redacted due to confidentiality issues.

DIVERSION OF FUNDING FROM SERVICES TO DIGITAL SWITCHOVER

5. The Director General stated, in reply to Q25, that funds for BBC services were being diverted to pay for analogue to digital switchover. How much is being diverted for this purpose, and what proportion of it represents funds otherwise earmarked for programme content?

BBC Executive responds:

The annual cost of distribution prior to the start of the digital switchover was 5% of the licence fee (£165 million per the 2007 annual report and accounts). Following the digital build at the end of the switchover period, the annual cost of distribution will rise to just under 6% of the licence fee including the impact of inflation and the cost of both the DTT and DAB networks. This increase was predicted and budgeted for in the licence fee settlement of 2007.

In addition, to ensure that there is no service disruption over the six-year switchover period, the BBC is running its analogue and digital transmitters concurrently, with digital spend increasing at a higher rate than analogue reduces.There are also a number of one-off set-up costs to switch to digital such as centralising our coding and multiplexing and one-off charges to facilitate digital distribution.

As above this expenditure was budgeted at the time of the 2007 licence fee settlement.However, as that settlement ring-fenced monies only for the DSHS and DUK, the BBC's current six-year efficiency programme was implemented so as to make sure the BBC could self-fund its digital build commitments, as well as continue to invest in new technology and enhance the quality of its programming. The programme will make efficiencies across all areas of the BBC, both in programming and non-programming areas. Its critical success factor is ensuring that there is no impact on the quality of BBC content and programming.

Since its implementation in 2008, it has delivered £237 million of gross savings, and has a target of £1.9 billion to 2012-13.

WILLINGNESS TO PAY/VALUE FOR MONEY

6. In response to Q26, the Chairman of the Trust referred to work relating to the public's view about the appropriateness of the licence fee as a funding mechanism. The Committee would be grateful for information on this and any other research commissioned by the BBC on the public's willingness to pay and value for money perceptions.

BBC Trust responds:

Research has shown that the public is, on average, willing to pay at least the current level of the licence fee for BBC content and services:

Ofcom's research also found that 81% of people are willing to pay for the BBC from a personal point of view and 82% are willing to pay for the BBC from a citizen point of view.

Attached at Appendix 1[4] to this response is the Purpose Remit Tracking Study 2009—UK findings prepared for the Trust in July 2009. This found that the value audiences place on the BBC is rising—85% said they would miss the BBC if it wasn't there, compared with 70% two years ago. In more detail, pages 13 to 15 of the report look at value for money perceptions while appendix C[5] looks in detail at licence fee payers' relationship with the BBC, including overall perceptions, value for money and whether people would miss the BBC if it did not exist.

The Ipsos MORI research referred to was commissioned by the Guardian (full report attached at Appendix 2).[6] Pages 94 to 99 look at whether people believe the licence fee is an appropriate way to fund the BBC. Pages 100 to 107 look at whether people believe the licence fee represents value for money.[7]

BBC THREE

7. What are the 15-minute and 30-minute weekly reach figures for BBC Three among (i) 16 to 34 year olds and (ii) its overall audience, when acquired programmes and programmes transferred from BBC One and Two are excluded?

BBC Executive responds:

15-minute weekly reach for 08/09:

(i)1.9m/14.2% for 16-34s

(ii)5.4m/10.5% for individuals

30-minute weekly reach for 08/09:

(i)0.9m/6.6% for 16-34s

(ii)2.6m/5% for individuals

8. Does the cost per user hour figure for BBC Three include the hours viewed of acquired programming and transfers from BBC One and Two? If so, what is the cost per user hour excluding this content?

BBC Executive responds:

The cost per user hour figure of 10.6p does include both the costs and hours viewed of acquired content and transfers from BBC One and Two.

Cost per user hour is calculated using the £87.3 million content costs for BBC Three. Content costs include the direct costs of programming (ie commissioned and acquired programmes—first run and repeats), presentation costs as well as some other production related costs including, for example, copyright costs. Content costs represent the annual expenditure on the channel as defined in the Service Licence budget.

The cost per user hour figures requested are as follows:

BBC Three—as stated in annual report 10.6p

Adjusted to remove costs and viewer hours of acquisitions and transfers from other channels 19.1p

Adjusted to include costs and viewer hours of BBC Three transfers to other channels 17.0p

We are not able to provide accurate 08/09 audience figures for BBC Three content viewed via the BBC's iPlayer—which would of course reduce the above figure of 17.0p.

We schedule programmes across the portfolio of channels to both benefit audiences and increase value for money from content. Such programmes on BBC Three are those titles which particularly appeal to younger audiences such as Doctor Who, Dragons Den and Top Gear.

We know the audience value high quality acquisitions as part of the whole mix of quality programming across our channels.Acquired programmes not only provide variety for the audience but also represent very good value for money—which in turn allows us to protect higher level of investment in other parts of the schedule and in individual original productions.

YOUNGER AUDIENCES

9. What has been the 15-minute reach of the BBC's television services (in aggregate) among 16 to 34 year olds in each of the last five years?

BBC Trust responds using data gathered for its younger audiences service review:

The 15-minute weekly reach of the BBC's television services among 16 to 34 year olds for the last five years are:

16-34s 2003 2004 2005 2006 2007 2008

BBC One 77.3 74.5 71.9 69.6 67.8 68.3

BBC Two 56.8 49.0 45.4 43.2 45.5 45.0

BBC Three 9.5 11.4 14.3 15.9 20.2 26.3

BBC Four 1.2 1.8 2.3 3.2 4.0 4.8

BBC Portfolio 82.6 79.8 78.1 76.5 76.1 75.4

Source: BARB/TRP, 15 min % weekly reach in all homes (NB BBC Three and Four reach in digital homes only)

10. According to the service review for younger audiences, the average amount of BBC Television viewing for teenagers was 24 minutes a day in 2008, compared with 75 minutes for all individuals. What are the comparative figures for the previous five years?

BBC Trust respond using data gathered for its younger audiences service review:

The comparative figures for the last five years are:

2003 2004 2005 2006 2007 2008

Individuals 86 83 77 74 74 75

Teens (13-19) 39 33 29 26 26 24

Source: BARB, Minutes of viewing BBC Television per day

PROJECT KANGAROO

In response to Q121, Sir Michael Lyons said "we have not finished our discussions about that sum of money [the £9.1 million loss to the BBC from Project Kangaroo]. I am very happy to come back to you when we have finished those discussions".

11. Can the BBC Trust give an indication of when it expects to be able to supply its response on Project Kangaroo?

BBC Trust responds:

The Trust has now had an explanation from the Executive as to the composition of the £9.1 million figure published in the annual report. BBC Worldwide's share of the loss resulting from the closure of the UKVOD venture was £5.3 million. This loss will be mitigated to some extent by the subsequent sale of the technology assets owned by the venture to Arqiva. In addition, BBC Worldwide has written off in accounting terms its investment in capitalised assets (mainly investments in developing the technology) related to the Kangaroo proposition. This additional write-off accounts for the difference between the £5.3 million loss on the UKVOD venture and the figure published in the 2008-09 Annual Report.The additional write-off does not mean that no value can be secured by the business from these investments. BBC Worldwide expects to be able to use the technology it has invested in future activity in the TV download arena.

In the meantime, the Committee hopes that the BBC is able to respond to the following specific queries. Channel 4 told us that its write-off on Project Kangaroo, as an equal one-third partner with the BBC and ITV, was £6.4 million.[8] This contrasts with the BBC's disclosures in the 2008-09 Annual Report of £9.1 million (Part Two, pages 81 and 108).

12. Why did the BBC write-off £9.1 million due to Project Kangaroo, whilst Channel 4—an equal one-third shareholder—only lost £6.4 million?

BBC Worldwide responds:

As John Smith, Chief Executive of BBC Worldwide set out in a letter to the Committee Chairman on 6 August, although a direct comparison for write offs between BBC Worldwide, ITV, and Channel 4 is difficult to achieve due to different accounting periods and different types and levels of internal spend, BBC Worldwide spend was generally in line with the other broadcasters.

ITV quotes a figure of £8 million. The £6.4 million investment stated in C4's accounts relates only to the investment in the UKVOD joint venture, which mirrors the level of investment made by BBC Worldwide. However, BBC Worldwide also incurred internal costs in the work carried out to create systems and digitise content for Kangaroo. Worldwide has chosen to write these costs off too, but it is an investment that will be useful in future ventures in the TV download arena. Since these figures were published the technology assets for Project Kangaroo have been acquired by Arqiva, and this deal will go some way towards recouping the development costs incurred.

13. Channel 4 told us at its 2008 Annual Report oral evidence session on 12 May that its "very clear understanding" from the BBC Executive was that "they had a series of sessions with the BBC Trust along the way and it was very clearly understood that if the Competition Commission gave it [Project Kangaroo] the green light, it was also expected the Trust would give it the green light". What is the BBC's response to this claim?

BBC Trust responds:

The Trust did not at any stage seek to pre-judge the outcome of its consideration of project Kangaroo and did not advise either BBC Worldwide or any of the proposed partners that it was minded to approve the proposals subject to Competition Commission approval. The short form agreement entered into by BBC Worldwide and its proposed partners on a non-binding basis made clear that the proposals would be subject to Trust approval.The Trust's intention had been to review both the final long-form agreements with partners and a final four criteria assessment before reaching a decision. The Trust was never in a position to conduct this assessment.The BBC Executive did not submit either a fully formed proposal or a final four criteria assessment to the Trust, and once the OFT had referred the matter to the Competition Commission in June 2008 the Trust concluded that it should not make a decision until the Commission's own investigation was complete.

PROJECT CANVAS

14. Has the BBC Trust or the Executive Board set expenditure limits and controls on the development of Project Canvas while the Trust is still considering the venture? If so, what controls and limits have been set?

BBC Trust and BBC Executive responds:

The Trust has not set any specific limits on development costs. As is the case with any BBC proposal subject to approval from the Trust, there is a clear understanding with BBC Executive that there are regulatory risks and no guarantee that the Trust will clear the proposals.The BBC Executive therefore undertakes any development expenditure with this risk in mind, and remains accountable to the Trust for delivering value for money.

Consent for any expenditure on Project Canvas (as with any significant project) has to be given by the BBC Executive's Finance Committee via a funding application, supported by legal and fair trading advice. Through this process the Finance Committee has effectively controlled development expenditure on the project. In recent months it has been setting a monthly limit on expenditure.Limits have been set at the minimum level necessary to keep the project sustainable. Project expenditure has stayed within these limits.

BBC COMMERCIAL ACTIVITIES

15. The BBC has on some occasions suggested that successive Charter or Agreement settlements have required it to undertake or increase revenue from commercial activities. The Committee would appreciate clarification on where this requirement appears.

BBC Trust and BBC Executive responds:

Governments in successive Charter and Agreement settlements have encouraged the BBC to maximise commercial revenues. Licence fee payers have also supported this position. Below is a summary of how this has informed the BBC's commercial strategy over successive Charter and Agreement settlements.

History of requirement in BBC's strategy to maximise commercial revenue

The BBC has engaged in commercial activity since the launch of Radio Times in 1923 and the Government's support for that activity also has a long history. BBCW's predecessor, BBC Enterprises, was set up in March 1979 with the support of the then Labour Government. Support for commercial activity continued under successive governments; support typified by the Rt Hon Virginia Bottomley MP when, in 1996, she wrote to the Chairman of the BBC that "The BBC must take full advantage of the new commercial opportunities which are now available." In 1998 the Culture, Media and Sport Committee stated that:

For the previous Charter (eighth Charter: 1 January 1997-31 December 2006):

"Gavyn Davies—later to become BBC Chair—was commissioned to examine options for additional funding for the BBC, assuming the licence fee remained the principal source of revenue until Charter Renewal in 2006. The Davies report stated that the BBC was essential to take coverage for digital above 50-60% of the population. The report emphasised the need for additional funds to enable the BBC to maintain and enhance its role in the digital age, and recommended that these come from a new digital supplement to the TV licence fee and from efficiency measures and increased commercial revenues.

In 1999 the Culture, Media and Sport Committee stated that:

The Government responded to the Select Committee's report as follows:

In 2000, the Rt Hon Chris Smith MP wrote to the Chairman of the BBC in 2000 arguing that "...faster gains in efficiency and commercial activities will be needed [...] it should be possible for the BBC to [...] increase commercial revenues."

BBCW's core business is the commercial exploitation and export of the BBC brand and BBC content. Yet BBCW's scale and capabilities as a global media business also give rise to opportunities to distribute non-BBC content and thereby earn additional revenues for the licence payer. The most recent BBC Charter Review encouraged BBCW to develop these opportunities:

The White Paper for the current Charter ("A public service for all: the BBC in the digital age", DCMS, 2006) stated that "[t]he Green Paper set out a clear policy, backed up by strong findings from consultation and research, that the BBC should continue to relieve pressure on the licence fee by generating commercial income. It should seek to maximise commercial revenue, in appropriate areas, to reinvest in programming and talent to the benefit of licence fee payers."[14] Support for BBC commercial activities continues, with DCMS Minister, Gerry Sutcliffe MP, stating in 2008 that "The BBC should seek to maximise commercial revenue in appropriate areas and reinvest it in programming and talent to the benefit of licence fee payers."[15]

Licence fee payers have also expressed their support. Government research to inform the latest BBC Charter Review gave an overwhelming endorsement for the BBC to use "all responsible methods" to offset the licence fee. In findings subsequently confirmed by the Government's Green Paper consultation, 90% of those surveyed agreed that the BBC should raise as much money as it can from selling its programmes and other products.[16] Clear support for the BBC continuing to undertake commercial activities beyond just TV sales was also confirmed by other responses. 92% of participants thought that the BBC should continue to sell programmes, and 93% said it should continue to sell other products like books, DVDs and magazines.

In July 2008 the BBC Trust launched a review of BBC Worldwide's mandate, strategy and governance arrangements.This review was driven by two concerns. The first was to ensure that BBC Worldwide's strategy was properly aligned with the BBC's public service interest and so had a positive impact on the BBC's brand and reputation. The second was to ensure that in its strategy and operations BBC Worldwide was duly sensitive to the concerns of other commercial players in the market.

Although the Trust put back any final decisions in order to take proper account of the broader public policy debate about the role BBC Worldwide might play in sustaining a second public service broadcasting entity, it did issue an interim statement in March, ahead of publication of the Culture, Media and Sport Select Committee's own report in April 2009, summarising its emerging thinking.Whilst recognising the value of the BBC's commercial activity for licence fee payers it concluded that the Trust should bring greater clarity to the direction, parameters and strategic priorities of BBC Worldwide's commercial activities in the UK and overseas, to ensure that they aligned properly with delivery of the BBC's public purposes.

The Trust announced that it had agreed a revised governance framework within which the BBC must operate its commercial activities in September 2009. These changes are designed to strengthen the oversight of the BBC's commercial operation and ensure even greater clarity and confidence in the separation of the BBC's public service and commercial activities.

The Trust is now close to finalising its review and to issuing a further statement on its intentions.

BBC EXECUTIVE BOARD

Brief biographies of the BBC Executive Board members are supplied on pages 86-87 of Part Two of the Annual Report. It states that Dr Mike Lynch OBE is the founder and CEO of Autonomy plc, and Robert Webb QC is the Chairman of Autonomy plc.

16. Why does the BBC Executive Board contain two members with interests at a very senior level (Chairman and CEO) at the same company, Autonomy plc?

BBC Executive responds:

Rob Webb (non-executive director of the BBC Executive Board) was appointed Chairman of Autonomy in May 2009. Mike Lynch (also a non-executive director of the BBC Executive Board) is CEO and founder of Autonomy.

It should be noted that Rob Webb's appointment as a non-executive director of the BBC Executive Board and his subsequent renewal in this post were approved prior to his appointment as Chairman of Autonomy, and consideration of this matter was not therefore part of the appointment and renewal process.

However, both the Director-General (Chairman of the Executive Board) and the Senior Independent Director of the Executive Board (who chairs the Nominations Committee for non-executive appointments), having both considered the issue, did not deem it to present an issue in terms of the suitability of both individuals to remain on the BBC Executive Board. The Senior Independent Director cited in particular the strong independence of each and their strong sense of personal integrity.

BBC ONLINE

In response to Q125 from Tom Watson MP about whether the BBC is considering "new and inventive ways of doing creative content using the web alone", Mark Thompson undertook to: "come back with some forward looking strategy about areas like knowledge building, science, history, culture, where we are trying to embrace pure web content in a way which perhaps we have not done in the past". In a follow-up question (Q127), Mark Thompson then made a commitment to provide statistics on the frequency with which users of the BBC website click on external links.

17. The Committee would be grateful if the BBC could follow-up on both these undertakings.

BBC Executive responds:

A key challenge for the BBC in these areas has been around combining the best of our radio and television programmes with the content we make specifically for the web. Radio and TV programmes are now available on demand, but usually only for a limited period. One expectation of the web, of course, is long term availability and this creates a natural tension. Text and graphic content is more permanent but does not always bring a subject to life and rarely showcases the best the BBC has to offer at a particular time. There is also the question of how the BBC should position itself in relation to third party providers of high quality information in different subject areas.

Over recent months two key building blocks have come into place which will form the basis for much of our web centred activity in the knowledge areas:

— a page for every programme, providing a permanent record of each episode as well as a place to go for clips, descriptions, links and other material related to an episode; and

— a growing understanding of how to model knowledge "domains" so that all of the BBC's assets in a subject area are labelled consistently and the relationships between them mapped out. This allows content to be accessed in multiple contexts, and encourages different types of exploration.

Perhaps the best way to understand these ideas is to look at the recently launched Wildlife Finder: http://www.bbc.co.uk/wildlifefinder/

Here, the best of the Natural History Unit's archive audio and video programmes about animals have been segmented, classified and described alongside information about habitats, behaviours, global distribution and so on. A user interested in viewing footage of a lion may note that one of its habitats is desert and click through to a page describing that habitat and showing all the animals living in the desert. For each animal on the desert page there is also "homepage" allowing the user to watch it in action, hear its sound or follow up on other characteristics such as behaviours.

BBC content in Wildlife finder is supplemented by information sourced from content partners including Animal Diversity Web, the World Wildlife Fund and Wikipedia, which is particularly strong in this area. Users are also linked to a wealth of other sites.

The essence of the product is to exploit the unique capabilities of the web in order to enrich users' understanding and appreciation of the natural world. Users who simply want to hear or watch animals or birds can do so. But they can also explore a wealth of in depth information around ecology, distribution, behaviour, taxonomy and conservation. By creating a web product, it becomes possible to link together information, entertainment and education seamlessly.

A key point, too, is that the product will be continually supplemented by new material from our natural history programmes. It is integrated with our broadcast output but is also independent of it. For example, each animal or habitat page is permanent and will be updated as new data or pictures become available.

Another project worth noting in this context is Your Paintings, announced by the Director General in January. Here, the BBC is working with a range of partners in the UK art world to make all the paintings in public ownership in the UK available online. While the details have yet to be worked through, we would expect users to be able to explore this huge 200,000 image gallery in the ways that appeal to them—by period, artist, subject, style, colour and so on. We hope to launch this product some time in 2010.

The key elements of this approach an online database and a rich archive—could be applied in a number of areas. The priorities in the knowledge building areas for the next period are Science (as 2010 is the Year of Science) and History. However, we are keen to explore how some of this thinking might be used more widely to enhance our services in comedy, drama and entertainment.

In the context of "new and inventive ways of doing creative content using the web alone", two other recent developments are worth mentioning.

Our Digital Revolution project—www.bbc.co.uk/digitalrevolution—is an attempt to develop a new approach to programme making, using the resources and features of the web. It will be a documentary, made in collaboration with our users, which explores the changes to our lives brought about by 20 years of the internet. The website will allow us to open up the production process as far as possible, sharing plans, potential new ideas and the latest rushes, stage by stage, to the thoughts, contributions and stories of our users. Digital Revolution is due for transmission next year.

The renowned documentary film maker, Adam Curtis, is also experimenting with new ways of engaging with the audience in his blog: www.bbc.co.uk/blogs/adamcurtis Adam describes it as "a website expressing my personal views through a selection of opinionated observations and arguments. I'll be including stories I like, ideas I find fascinating, work in progress and a selection of material from the BBC archives".

Blogs, of course, are now extremely popular as a supplement to normal broadcast and journalistic activity but it will be interesting to discover how far a blog such as this can open up new avenues of creativity and enhance traditional programme making processes.

In a follow-up question (Q127), Mark Thompson then made a commitment to provide statistics on the frequency with which users of the BBC website click on external links. Over the past six months, we've seen an average of 10.8 million clicks per month on links on BBC Online leading to external sites (UK only).

SALFORD RELOCATION

In response to Q29 from Janet Anderson MP, Zarin Patel said that the relocation of staff to Salford would be roughly a third cheaper than making them redundant. In Q34, Janet Anderson requested the average cost of the incentives per employee as compared with the cost of redundancy, to which Zarin Patel replied that she would be able to supply that information.

18. What is the average cost of the relocation incentives per employee, compared with the average cost of redundancy?

BBC Executive responds:

On average the cost of the relocation assistance is around £39,000 per person whereas the average cost to the BBC of a redundancy is around £53,000 (depending on length of service). This equates to an average cost of relocation being approximately one quarter cheaper per employee than redundancy and not a third as incorrectly stated in the hearing.

There is obviously a need to relocate some staff in order to maintain business continuity and quality of output; however it is also recognised that providing a relocation package to staff enables specialist skills and knowledge to be transferred and improves the overall transition process of complex business areas.

The move of approximately 1,500 roles from London to the North of England, including an assessment that the costs and benefits of the move represented value for money for the licence fee payer, was approved by the BBC Board of Governors in 2006.

As part of the move, a Guaranteed House Purchase Scheme, based on 95% house valuation was proposed.The aim of the scheme was to help staff with moving, to facilitate the process of relocation and to ensure that staff were provided with a level of help consistent with other schemes of this nature. The scheme was benchmarked against HMRC standards and other private and public sector relocation packages to ensure that it was in line with the market.

Following the fall in property prices over 2008, the BBC made the decision to adjust the relocation scheme. It was recognised that a change to policy was required so as to:

— Reduce the level of financial risk associated with the GHPS scheme in an adverse housing market.

— Introduce greater choice and flexibility into the relocation support, safeguarding the quality and continuity of output by enabling the transfer of specialist talent as required to the new location.

There are three options for the new relocation scheme for homeowners. Each option has clear limits around the structure so the costs are not open ended and all reimbursements need to be backed up with receipts.The options are:

— a Guaranteed House Purchase Scheme, based on an initial advance of 85% of the market value of the property to be sold. The scheme is handled by Cartus, a relocation agency, with the BBC bearing the cost of funding the advance and other transaction costs.The market value is determined by three independent valuers and priced to achieve sale.

— an Assisted Relocation Scheme, reimbursing the major items of spend associated with relocation (such as buying and selling costs, physical removal) but leaving the property sale as the responsibility of the staff member; or

— a Remote Location Scheme, funding a second property for employees in the North West for two years, limited to a maximum of £1,900 per month.

The reduction in the advance to 85% from 95% reduces the cost risk to the BBC. The scheme compares favourably from a value perspective to other organisations, which continue to offer 95% or 100% of house value (e.g. The Ministry of Defence).

PENSIONS AND BENEFITS

There has been significant recent press coverage relating to the BBC Pension Scheme:

The

The Times reported that the BBC had warned its pension scheme members that in April last year the fund was £470 million in the red. According to the Times, industry experts said that the plunging stock markets around the world since then would have increased the deficit by a further £1.6 billion. Jeremy Peat, the Chairman of the Trustees, had admitted that the corporation had set aside "additional funds" from its £3.6 billion licence fee income to reduce the liability.

The Guardian reported the BBC's denial that it would have to cut into its programming budget to meet its growing pension deficit.

The Financial Statements report, on page F06, shows a deficit in the pension scheme of £139 million as at 31 March 2009, compared to a surplus of £528 million last year. This is described as reflecting "market turbulence". Page F37 discloses the fact that employer contributions by the BBC have been increased to 19.35% to address the deficit, but these are expected to drop back again to 17.85% by 2011. Page F30 (note 4b) shows that the pension costs relating to the main BBC Pension Scheme actually dropped during the year, from £173.2 million in 2007-08 to £158.9 million in 2008-09.

19. How does the BBC plan to tackle the deficit in its pension scheme?

BBC Executive responds:

The deficit figure is based on an annual update of the BBC Pension Scheme's ("the Scheme") funding position as at 1 April 2008.It is not based on a full actuarial valuation. The next full valuation is due on 1 April 2010. At that time should the Scheme have a deficit, the Scheme trustees and the BBC will consider and agree a recovery plan.The valuation, discussions and agreement will take some time, possibly running into 2011. The BBC is considering a range of options to deal with a deficit should it arise.These options include looking to employees to increase their contributions or to extend their working life. The BBC is also able to review its overall pension provision—as it has done in the past when it closed the final salary scheme to new members and introduced career average benefits, a scheme which costs less to the BBC as it reduces the overall benefits package. The BBC is also able to make further efficiencies to fund an increase to deficit contributions.It could also provide the pension scheme with added security of income by providing security over assets.

If there is a need for deficit contributions, these will need to be taken into account in the BBC's financial planning once the outcome of the 2010 valuation and the scale of the contribution requirement is known, and as part of the wider process of reviewing the BBC's financial plans. It is premature to have fixed plans in place at this stage.

We are also mindful of the fact that the current deficit reflects short term market turbulence whilst the scheme's liabilities will fall due over a much longer period (more than 50 years). The scheme continues to be cash positive now and in the long term. It is appropriate to continually review the design of the scheme to ensure it remains affordable to licence payers and to recognise that people are living longer and pensions may cost more; however it is equally important to recognise that we are making decisions for the long-term, which may then be irreversible. These decisions should not be made solely in response to short term market volatility.

20. Is the BBC redirecting funds from programming budgets into the pension scheme?

BBC Executive responds:

The BBC is not redirecting funds from programming budgets into the Scheme.

The BBC Pension Scheme, like many other schemes, has not been immune from the turbulence that has affected markets around the world; however as noted above, its investments, like all pension funds, are long-term in nature.

The BBC continually reviews long term financial plans in the light of changing strategic priorities and cost pressures—pension costs will continue to be an important (and, in the short term, potentially more material) element of this equation.

However as noted above, the BBC has a number of options available to ensure the long-term sustainability of the scheme. A few years ago for instance the BBC used money derived from efficiencies to increase the contributions it makes into the scheme. From this year, employees also are paying more into the scheme.There are many further steps the BBC could take, before even considering any impact on services to the public.

21. In 2006 the BBC changed the pension scheme from final salary, to career average salary for new members.What was the basis of this decision?

BBC Executive responds:

We took the step of introducing a career average section in the interests of the financial health of the Scheme. The Scheme, like other UK schemes, is not immune to the increasing costs of pension provision—people are living for longer, and the expected return on investments is lower than it has been in the past. We also have responsibilities to our licence payers. That is why we needed to make changes to ensure that we can maintain a healthy pension scheme over the long term, whilst also offering reasonable pension provision for all those who work for us.

22. Why hasn't the BBC moved to a defined contribution pension scheme?

BBC Executive responds:

The BBC considered in depth a defined contribution pension arrangement for all staff in 2006 as part of the review leading up to the introduction of career average benefits. In making its decision, the BBC considered the relative costs of defined contribution and career average benefits as well as the fact that the pension scheme continues to be one of the important reward levers available to the BBC to attract and retain staff within the organisation. The Career Average Benefits scheme offered a savings for pensions which remained attractive at a relatively modest cost, so was considered an appropriate way forward. It was also noted that employers can find that the introduction of a defined contributions scheme can, over time, inflate the cost of reward in compensation for a limited contribution to pension schemes. The BBC does have a defined contribution arrangement in place for its fixed term contract staff (the BBC Group Personal Pension Scheme).

In order to curtail the cost of the career average benefits section, the level of pension provided by the career average benefits section is modest compared with other similar schemes. For example the rate of build up of pension is lower (the BBC scheme has a 1.67% accrual rate, compared with 2.3% in the Civil Service scheme). In addition, the BBC has sought to limit its risk exposure.The pension for active and deferred members is revalued annually on a discretionary basis, rather than on a guaranteed basis.

23. Does the accrued pension disclosed for Mark Thompson in the Annual Report include amounts accrued during his prior service at the BBC? If it does not include this, please could you outline the reasons why.

BBC Executive responds:

Mark Thompson does have a deferred pension in the BBC Pension Scheme from an earlier period of service with the BBC.This is not disclosed within the Annual Report. As noted on page 89 of Part Two of the Annual Report and Accounts 2008-09 the BBC prepares its Executive Board Remuneration Report in line with Directors' Remuneration Report Regulations 2002 to the extent that they are applicable.In relation to pensions the Regulations require the disclosure of pension benefits a director has become entitled to as a result of his/her service as a director.

Therefore because the value of a deferred pension from an earlier period of service is not affected by earnings in any subsequent period of service the deferred pension is not part of the remuneration receivable as a result of the service as a director.In contrast, for a director who has unbroken membership of the BBC Pension Scheme, all of the pension obligation will be based on current (ie directors) pensionable pay and will therefore be disclosed.

Page 64 of Part One of the Annual Report and Accounts 2008-09 discloses that Sir Michael Lyons receives private medical insurance cover as a benefit "at the same level as BBC senior managers". Table 23 on page 98 of Part Two of the Annual Report shows that there were 751 individuals classified as 'senior managers' during 2008-09, but it is not specified whether all of these individuals receive private medical insurance. Page 91 of Part Two of the Annual Report confirms that all Executive Directors receive this benefit.

24. How many staff are receiving private medical insurance, paid for by the BBC?

BBC Executive responds:

536 BBC Employees receive private medical insurance paid for by the BBC.

25. Does the BBC pay the tax due on private medical insurance cover for its staff?

BBC Executive responds:

No, employees are responsible for paying the benefit in kind tax due and as such the benefit is declared on the employee's P11D. The BBC obviously pays the Insurance Premium Tax (IPT) due on the premium of 5%.

26. How much does the provision of medical insurance cost the BBC, both in paying for the benefit itself and paying the tax bill [if applicable]?

BBC Executive responds:

Total cost for the BBC is £714,147 including IPT @ 5%. The BBC does not fund the benefit in kind tax due on the benefit.

27. Does the BBC feel it is achieving the best value for money for licence fee payers by offering staff private medical insurance cover?

BBC Executive responds:

PMI is offered to senior managers for two main reasons. Firstly to ensure that time lost due to illness or medical treatment is minimised by offering access to prompt and convenient treatment. Providing PMI enables senior managers to get back to work after illness or injury as quickly as possible and therefore minimise periods of paid sick leave.

Secondly this is offered as it is a prevalent and expected employee benefit for senior managers in the external market.