Supplementary written evidence from Peter
Horrocks, Director, BBC World Service
During my recent appearance at the FAC to offer evidence
on behalf of BBC World Service, a member of the Committee asked
me about details of the Spending Review settlement with respect
to a letter that had been received by the Committee from the Foreign
Secretary. I had not seen that letter, and so wish to clarify
my response in the light of this new information.
THE FCO'S
OVERALL SETTLEMENT
In his Spending Review announcement to Parliament,
the Chancellor of the Exchequer made the following announcement
with respect to the FCO:
"Our international influence and commitment
to the world are not determined only by our military capabilities;
our diplomacy and development policy matter too. Savings of 24%
in the Foreign and Commonwealth Office budget will be achieved
over the review period by a sharp reduction in the number of Whitehall-based
diplomats and back-office functions."
The Foreign Secretary's letter to you states that
"Taking account of the transfer of BBC World Service funding
to the BBC in 2014-15, our baseline falls by 24% overall".
His letter also says that there is a 10% real reduction in funding
for the FCO "family" by 2014-15. It is not immediately
clear from these statements and the figures that have been published
what the impact of the transfer of World Service to the licence
fee from 2014-15 will be on the FCO's own budget. However the
Treasury press notices on the Spending Review state that "once
the additional resources from the BBC are taken into account the
rest of the FCO budget will only fall by 10% over the period."
(http://cdn.hm-treasury.gov.uk/sr2010_pressnotices.pdf)
BBC WORLD SERVICE'S
OWN SETTLEMENT
World Service has been allocated a 16% real terms
reduction in its funding in the Spending Review settlement. However,
as I explained in my evidence, World Service faces a number of
unavoidable, identified cost pressures which will have a significantly
greater impact than this headline reduction suggests.
Sir John Stanley asked me in my evidence whether
or not these costs, and specifically the extra costs associated
with the BBC's pensions deficit, were provided for in the settlement.
As I said, the settlement does acknowledge the impact of the BBC-wide
pensions deficit on World Service. However our increased pensions
contributions, and any other cost increases, must be funded within
the published budget, which is scheduled to fall by 16% over four
years. There is no additional funding for any costs outside that
settlement. When unavoidable cost increases are taken into account
the like-for-like savings which need to be made in our existing
and ongoing services is more than 25% by 2014-15. We should also
remember that these percentage reductions are calculated on a
baseline which is £7.6 million lower than World Service's
budgeted spend for 2010-11, because of the post-election cuts
to our budget requested by the new government. It is on this basis
that I said we cannot continue to do everything, and why there
will be reductions in services and substantial job losses.
Because of the high proportion of staff costs in
our cost base, achieving these savings will have significant restructuring
and redundancy costs. These must also be met within the settlement.
In the new BBC Licence Fee agreement, struck at the
same time as the Comprehensive Spending Review announcements,
the DCMS-BBC Trust exchange of letters states that "The Government
will continue to fund the World Service at CSR agreed levels for
2011-12, 2012-13 and 2013-14. The BBC will be allowed to fund
any World Service restructuring costs, at its discretion, during
this period. The World Service will become part of the Licence
Fee funded BBC from 2014-15".
I hope this clarifies the issues for the Committee.
CONCLUSION
The respective impacts on the various parts of the
FCO family are important considerations in assessing the ability
of the various organisations to sustain Britain's global presence.
The BBC welcomes the Committee's investigations and deliberation
in this matter.
If you require any further explanation or clarification,
please do not hesitate to ask.
22 November 2010
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