The Implications of Cuts to the BBC World Service - Foreign Affairs Committee Contents

Examination of Witnesses (Question Numbers 34-93)

Peter Horrocks, Jim Egan and Richard Thomas

9 March 2011

  Q34 Chair: We now turn to the management of the BBC World Service. I give a warm welcome to Peter Horrocks, who is the Director, to Richard Thomas, who is the Chief Operating Officer at BBC Global News, and to Jim Egan, who is the Controller of Strategy and Distribution at BBC Global News.

  Peter, you have been here once before and spoken to us. Is there anything you would like to say just to bring us up to date, before we get into the questioning?

  Peter Horrocks: Thank you very much, Chairman. Briefly, by way of introduction, I was here in November and at that stage it was only possible to speculate about the nature of the changes that the World Service would need to announce. Clearly, we have announced our specific changes since then.

  More importantly, I want to draw the Committee's attention to developments in the world—after all the World Service is about responding to the world—and in particular what has been happening in the Middle East and North Africa. I am sure that members of the Committee will have seen the intrepid reporting by people such as John Simpson and Jeremy Bowen, but I want to briefly mention the work of the BBC Arabic service.

  In recent weeks, we have seen the crowds gathering in Tahrir Square. They set up a makeshift projection system to be able to watch the BBC Arabic television service. Again, in the protests in Bahrain a similar thing was set up. Recently, on the border between Libya and Tunisia, again people were watching BBC Arabic. That's because of the trust that BBC Arabic has with the audience in the Arabic world, through the history of Arabic radio and the developments that there have been in television and in online recently that have built that trust. It is that relationship which is so precious to us.

  You can see through the Arabic service, through both the traditional delivery through radio—we are retaining and sustaining the shortwave for radio—as well as the investment in television and online, whose figures have doubled in recent weeks, the importance of and the need for what the World Service does. The struggle that we have had in recent months is to strike the right balance between the traditional delivery and what was being discussed with the previous panel—delivery through radio, which remains vitally important—and our ability to invest in the future. That is what we have been working through with the Foreign Office.

  I have no doubt that the Foreign Secretary personally is hugely supportive of the World Service. He has said that repeatedly. Our dilemma has been that with the resources that are available in the current economic and financial circumstances, we are suffering damage to our existing services and, of equal importance to me, we are not able sufficiently to invest in new services for the future that can maintain the strength, quality and reputation that are important to our audiences, but also reflect so well on Britain.

  We very much welcome the Committee's investigation of this issue, to assess whether the level of resource is correct, whether all the right sources of funding have been explored and whether the right choices have been made in these very difficult circumstances.

  Q35 Chair: Thank you very much indeed. That is very helpful. You were originally asked to look at a 25% cut, and you eventually ended up at 16%. When was that decision made? When was agreement reached, as it were? And do you think it is fair, in the light of the fact that the Foreign Office is having a 9% cut in real terms?

  Peter Horrocks: We were asked to do a scenario of 25%. It wasn't a question of 16% being agreed; it was clearly a decision that was ultimately made by Ministers, and we were informed about it some weeks before the announcement of the comprehensive spending review on 20 October.

  When I originally spoke to the Committee, we were in the position of having the information that was provided by the Chancellor to the House, which described an overall Foreign Office settlement of a reduction of approximately of 24%. Certainly at that point, the comparison was between the World Service's 16% and that broader figure. However, through the investigations of the Committee and your report, it has become clearer. The figure that I recall from the evidence is that there is a 6% real terms reduction for the FCO budget, so the strict comparison is between 6% and 16% for the World Service. Clearly the difference in that number speaks for itself. The Foreign Office has explained the rationale for that, but there clearly is a discrepancy, and the reference to the FCO family is the fact that different members of the family have clearly been treated in different ways.

  Q36 Chair: Did the Foreign Secretary personally intervene in the discussions leading up to the final decision?

  Peter Horrocks: I do not know. There was a meeting that the Director-General, the Chairman and I had with the Foreign Secretary immediately before the announcement of the settlement, but otherwise my dealings were primarily with officials and the Permanent Secretary.

  Q37 Andrew Rosindell: The service closures to the BBC World Service that are being proposed are quite devastating, particularly in areas of the world such as the Caribbean, where we still have a huge amount of interest in countries and territories that still look to Britain. How did you reach the conclusion that the Caribbean and other parts of the world should be targeted for the cuts?

  Peter Horrocks: I should say that none of the services that the BBC proposed for closure were any that we regarded as involving a simple or light decision. They were all significant losses for each of the audiences in those areas. However, given the extreme financial pressure we were under, we needed to make choices. The consequence of retaining all of our services would have been a degradation and thinning out of the quality of our whole operation, which we judged would in the end lower the BBC's reputation and be a reflection on Britain. We therefore had to look primarily at the need as well as the cost-effectiveness in each part of the world we serve. As an illustration, you are absolutely right that there is a strong connection between the UK and the Caribbean. However, economically the Caribbean is developing reasonably well and there are free media generally. And interestingly, since the BBC announced the closure of the Caribbean regional service, we are still serving our global English to Caribbean audiences.

  A number of islands, broadcasters and media organisations have got together and said that maybe the Caribbean should itself be providing a regional service, rather than its needing to come from Britain. That is a signal that those economies and societies are in a position to provide such a service. But more generally, it was a question of the need for the World Service in the context of the tight financial framework that we were working within.   

  Q38 Andrew Rosindell: Which area of the service that is being cut do you regret cutting most? Is there any particular area that you feel should, on reflection, perhaps be reviewed, or is what you are going to do set in stone?

  Peter Horrocks: It is not entirely set in stone. In terms of our distribution to the Arabic region, we have adapted our radio changes and are sustaining our shortwave and mediumwave more than we originally intended. The Committee might be aware that the other area where we have made an adjustment is in our Hindi service. We have not been able to reprieve the shortwave service entirely, but we have had a number of approaches from commercial partners in India, and in order to give ourselves the time to explore that—it is by no means certain—we have said that we would sustain an hour per day of our Hindi shortwave service for a year to be able to establish those alternatives. Those are two examples where we have been flexible and responsive. However, I should make it clear that those have been absolutely about squeezing budgets that might otherwise have been used for other things, and there is not significant further room for flexibility within the resources we have available.

  Q39 Andrew Rosindell: How about Tamil language in Sri Lanka, bearing in mind the fact that they have just gone through a horrible war? Are the potential cuts there being reviewed?

  Peter Horrocks: We are sustaining the Tamil and Sinhala services in Sri Lanka, and there are small changes there, as there are for all of our services. All of our services are having change of one kind or another. However, I do not believe that the overall effectiveness of the two services to Sri Lanka will be seriously compromised. Of course, we keep all our services under review. As I made clear in my introductory statement, responding to events is the name of the game for the World Service. It is not about having a completely fixed pattern; if political circumstances change, we respond to them.

  Q40 Andrew Rosindell: I know you have to look at cuts, but overall do you not believe that reducing essential services to parts of the world will reduce the very good and reliable reputation of the BBC World Service to parts of the world which we have traditionally shown enormous interest in and valued? Do you not think that will undermine our reputation, not only as a country but your service?

  Peter Horrocks: It clearly will, and there will be damage. I do not believe that this is about the death of the World Service. Some of our critics, and some people expressing concern as supporters, have used that language, but I do not think that is what this is about. However, the World Service will be damaged. We are less able to carry out our mission for our audiences and for Britain than we were previously. It is my job to make the best of the funding available and to continue the argument—I hope we will come on to this—about whether there may be potential ways of mitigating, or being able to invest further for the future. I absolutely do not want us and the team within the World Service to talk ourselves into thinking that the World Service will no longer be strong. It will be strong. It will still have a strong reputation and it will still be the most significant, most reputable international news organisation in the world. It will just be less effective than it has been, and it is being damaged.

  Q41 Rory Stewart: To what extent did you really get the kind of support you should have got from the management, the Trust and the Foreign Office? It seems to me that you were in a pretty bounced and exposed position. You've just told us that you didn't quite know until quite late in the day what the scale of the cuts was and how you compared. Were you getting the support that you needed?

  Peter Horrocks: I think I need to divide that up into the two different aspects of your question in terms of governance and the various aspects of the BBC. We made our case to the Foreign Office as strongly as we possibly could. Clearly, under the financial circumstances in which the whole of Government are operating, there were some difficult decisions to be taken. I think that the Foreign Office is in a business that's different from the BBC. It's different from broadcasting. That understanding of the nature of the choices that we needed to make is not something that the Foreign Office is that well set up to be able to deal with. Referring to the questions that were asked of a previous witness—we may come on to this—I think that being funded by and strategically directed by the BBC is the right thing to do, because it is about broadcasting activity rather than about the representation of the UK.

  In terms of practical support from within the BBC—I have explained to the Committee previously that the idea of licence fee funding was something that I personally supported, and I believe that we can have an integrated approach to our news operations while still delivering for our international audiences—I will draw the Committee's attention to the funding that the BBC has provided for the costs of restructuring. One of the things that we faced in the various scenarios that we looked at was the possibility of cutting 20 or more services, and that was in the face of the non-availability of funding for restructuring from HMG. The BBC, although it is not required to under the terms of the recent licence fee settlement, has provided £20 million to pay for the restructuring costs. The Foreign Office has offered, but has not yet approved or agreed, £3 million of restructuring support, which the Foreign Secretary referred to in his statement on 26 January. That has not yet been agreed.

  In terms of practical ways of helping the World Service through this period, the BBC has certainly come to our assistance, and we have heard reference to the statement that the Director-General has made about his intention to improve the funding from 2014 onwards.

  Q42 Rory Stewart: Is there any lesson for the Foreign Office? Is there anything that the Foreign Office could do better if it was in this situation again?

  Peter Horrocks: It probably isn't going to be in quite the same situation again, but clearly there is three years' further funding, and perhaps we will come on to that if I have questions about the potential for development funding. It's an example of thinking about Britain's assets across Government as a whole. I absolutely understand why the Foreign Office wanted to support the budgets for its embassies. There has been erosion there, and there was clearly a strong need to support the activities of the Foreign Office. On the thinking between the Foreign Office and DFID, and the ability to consider UK assets across the piece, which is something that the Government have said that they want to do, it would be helpful if that was easier to be able to achieve, and perhaps we can address that if we talk about the issue of development funding.

  Q43 Mike Gapes: Can I take you back to your remarks about the Hindi service? As I understand it, the announcement on 7 March was simply for a one-hour evening broadcast for a year while you explore other options. Is that correct?

  Peter Horrocks: That is correct, yes.

  Q44 Mike Gapes: Given that you had 10.9 million listeners to the shortwave service in Hindi and the broadcasts via the internet audio service, why was a decision taken to close the Hindi shortwave service?

  Peter Horrocks: It was largely taken because of the very rapid falls that have been happening in shortwave listening in India—very steep declines in recent years. However, it was made earlier. It was a change that was required because of the financial circumstances, but was ahead of what we would ideally have wanted to do. We would like to be able to be broadcasting on FM in India. We are not allowed to because of regulatory conditions. We would like to be in a position to be able to provide low-cost television programming, and we wanted to get those new things in place before cutting. However, financial circumstances have meant that we need to make significant savings, which was the primary reason for losing the Hindi service.

  Q45 Mike Gapes: On the figures you have given us, you are basically saving £680,000 and losing an audience of nearly 11 million. There seems to be an incredible loss of audience. You have 180 million globally?

  Peter Horrocks: Yes.

  Q46 Mike Gapes: And you are losing 11 million of them. It seems unbelievable that this decision was taken. Now, clearly, there is a public outcry and you have moved a little way back. I just do not understand. You cannot broadcast through FM because of the restrictions to which you referred. Russia and China are apparently increasing their broadcasts in Hindi. India is a major Commonwealth country. It is a major partner. It is a priority for our Government in business and trade connections. It is a potential member of the Security Council. This just seems a perverse decision.

  Peter Horrocks: The audience has been falling by more than the 10 million figure organically because of the change in listening habits. As I said, the decision was required because of the scale of change and reduction we needed to make, but it was earlier than was ideal. Jim Egan's team look at all our distribution issues and they were very involved in the analysis that led to the decision. You might want to add something, Jim.  

  Jim Egan: We have a very active strategy in India, which is in Hindi, the English language and some other vernacular languages. As Peter said, the shortwave audience has been dropping significantly; it dropped by 5 million last year.

  Q47 Mike Gapes: Can you give us some figures? Will you go back four or five years and tell us what the audience was, and how many you are losing each year? We then might be able to get the sense of it.

  Jim Egan: In 2007, the audience was 19 million. Last year, it dropped by 5 million from just under 16 million to just under 11 million. The shortwave audience has clearly been going down, as people have other choices about how they access news and information in India. We have had a very active strategy working with mobile companies, with emerging internet companies in India and so on, together with a FM radio strategy whereby we are available in a large number of cities in India, but we are not able to provide news services. As Peter has indicated, it was a decision that we were probably going to make in the next few years, given what has happened to shortwave audiences, but it was something that was required of us because of the financial circumstances that we are operating in.

  Q48 Mr Watts: I want to be clear. It seems that there has been a dramatic drop in short band, and you have plans to move into different areas to compensate. Is it the case that you are not doing that, and that you are actually losing a big chunk of your previous listeners. You have lost 10 million, but you have already lost 10 million over the last five years. So that is 20 million.

  Jim Egan: Ten million shortwave listeners have been lost in India.

  Q49 Mr Watts: So that is 20 million you will no longer cover in any way.

  Jim Egan: Well, we are not covering them by shortwave. There are still mediumwave broadcasts going into India. There is explosive growth in the availability of mobile phones, which are used not just for reading texts but for listening to radio services. In Bangladesh next door, for example, more than half of our FM radio listening is now via the mobile phone rather than via the transistor radio. Nokia is now the world's largest manufacturer of radios and mobile phones.

  Peter Horrocks: We are adapting the response of our audiences, and also crucially from commercial partners. It is very striking that people have come forward and said that they are prepared to put money into partnerships. Given the scale of change, there was always bound to be a need for some adaptation and we are responding to that. It is partly the response from audiences in the UK and also that commercial response. It was inevitable with so many changes that there would be some things that we would need to adjust. I am happy to acknowledge that.

  Q50 Mr Watts: If you look back, 20 million people were receiving news from the BBC who now will not be receiving news from the BBC.

  Peter Horrocks: There has been a fall in the audience which has happened irrespective of BBC changes. If we had entirely shut shortwave, we would have lost another 10 million. We have now said we will sustain an hour a day to keep that going, in order to explore some alternatives.

  Q51 Mr Watts: For one year?  Peter Horrocks: Yes.

  Q52 Mike Gapes: Mr Horrocks, when you spoke to us in November, you referred to a restructuring plan that would save £46 million by the end of the period before you were transferred to the BBC. Can you give us some idea of the timetable for the implementation of this restructuring plan?  Peter Horrocks: The bulk of the changes have now been announced. As to the changes to our language services in particular, and the bulk of the changes to our English network schedule, we will seek to make further savings once our operations have moved into the new Broadcasting House headquarters. I think approximately two thirds, maybe more, of our savings have already been announced.   Richard Thomas: The announcement was made on 26 January. The savings we put on the table then were worth roughly £30 million, so that is roughly two thirds of the £46 million we need to save over the three years.

  Q53 Mike Gapes: So you are front-loading the changes?  Richard Thomas: We are.

  Q54 Mike Gapes: You also said that essential services will remain unaffected. What do you mean by "essential services"?  Peter Horrocks: Our priority services: the Arabic service and our services to sub-Saharan Africa, Afghanistan and Pakistan, where our largest audiences are. They are not entirely unchanged, but their ability to deliver a quality service is being sustained. As I have acknowledged, it will clearly be eroded in some way, but the overall reputation of those services will be sustained.

  Q55 Mike Gapes: Isn't India, with more than a billion people, and the Hindi language, a priority in terms of languages and of sheer numbers?  Peter Horrocks: India is a very mixed country, isn't it? There is the new India, economically thriving, and we have certainly got a strong offer to them through our World Service English, through BBC World News and through our online, in both English and Hindi. We have already talked about the judgment we made about shortwave and the adaptation we have made in relation to that.

  Q56 Mike Gapes: Can you summarise where we will be after you have implemented these cuts, both the £30 million you have already announced and the rest of them? What services will you be providing in terms of shortwave, FM or internet?  Peter Horrocks: Clearly, the picture is very detailed—

  Q57 Mike Gapes: Have you finalised it yet?  Peter Horrocks: For the first two thirds of those savings. Most of the savings in the final period are more about how we work in the new headquarters, as opposed to editorial delivery changes. However, I can't rule out those. But we can certainly provide for the Committee a clear description of all our remaining services, the countries that we are serving and on which platforms we provide those services. If I can summarise that in more general terms, clearly there are reductions and withdrawals: the five services we are fully closing, and a number of services where we are maybe not providing radio or shortwave. However, the World Service will still be a global service. We still have the ability to generate journalism from all round the world, and we have the ability, through a variety of platforms—especially in English, but also with sustaining 27 languages—to still be a strong global service. We will be strongly competitive. We will still have the largest overall reach across the BBC's global news services of any international news broadcaster, and we believe that we will still have the strongest reputation. But it is hard to sustain that in the context of those £46 million savings.

  Q58 Sir John Stanley: Mr Horrocks, I want to return to the point that I raised with the trade union representatives in the earlier session. Perhaps you could spell out a bit more to the Committee why you feel that the World Service will be better off within the BBC, as opposed to grant-aided by the Foreign Office. I want to provide a specific illustration of the important general point that Sir Menzies Campbell made in the earlier evidence session, which is that, by virtue of the change, you lose what could prove to be a critically important degree of parliamentary protection. If you cast your mind back to the time when the previous Conservative Government imposed significant cuts on the BBC World Service, it was the action of this Committee and all-party Back-Bench MPs, who rode to your rescue, that got a substantial reversal of the then Government's cuts. In your present situation you will not have that protection. Is it not a real fear that within the BBC you could be slowly shrivelled and silently shrunk? Here, we will not be able to ride to your rescue.

  Peter Horrocks: Sir John, if that protection that was offered previously, which my predecessors clearly appreciated, was applied again and there was parliamentary support, which changed what we have been discussing, I have no doubt that I might revise my view. The situation I am in at the moment, however, is that under the current mechanism there has been the significant change that we are discussing. As I explained to Mr Stewart, in terms of the immediate difficulty that we face—the cost of restructuring—the BBC has been supportive when it is not required to be, to the tune of £20 million. The Foreign Office has not yet agreed the £3 million that it has so far offered. That is just a measure of the difference in perspective of our potential funders.

  I appreciate the parliamentary support that we have received, and I hope that in any new dispensation that would continue to be expressed. Clearly the mechanisms would be different. It is important for the BBC—this is primarily the responsibility of the BBC Trust—to put in place protections or guarantees, but, most importantly, it should be able to define what the World Service should be. What need in the world is it responding to and how, in delivering that, does it reflect well on the UK and the UK's long-term national interests, rather than its short-term foreign policy? The BBC Trust is discussing and working on how it would do that. I am sure an element of accountability to Parliament and mechanisms will be an aspect of that.

  I return to the point I made previously. The world that broadcasting is now in is not the straightforward world that it used to be, with the delivery of radio service through one mechanism, through shortwave. It is now a highly complex set of relationships with audiences through online, through social media, through quite difficult changes. The BBC has been, in the UK, world beating in transitioning from the old linear world to the digital world. My colleagues on the BBC executive have enormous experience of dealing with that and the difficult judgments that are involved in those transitions. The Foreign Office, for perfectly understandable reasons, does not contain that expertise and does not have the understanding of the broadcasting business that the BBC has.

  As long as the understanding of the need for the World Service is there, and the BBC Trust puts in place the right mechanisms, and has a way of being able to assess the difficult judgment between the delivery of services to UK audiences and the delivery of services to international audiences—I appreciate that that is difficult to resolve—I believe that we will be in a better position, not least because of the experience of recent months, when it has been difficult to share with the Foreign Office the judgments that I have been outlining through the course of my evidence.

  Q59 Mr Baron: Can I return to the question I asked previously, on the business of protecting the World Service budget from raiding to fund other BBC activities? Mr Horrocks, when you were before us previously, you said that you were looking at the mechanism. Can you update us as to where we are on that?

  Peter Horrocks: This may well be something for you to ask the Director-General about as well. Ultimately, I believe that this is primarily a BBC Trust responsibility. Just to refer to how the BBC Trust manages the balance between different services, it is already used to dealing with asymmetric services, for example, much larger, expensive services such as BBC1 versus local radio services or vernacular UK language services. It defines a licence for each of those services, and the BBC management is then only allowed to adjust within a narrow margin once those service licences have been set. As I understand it, the BBC Trust is considering an overall service licence for the World Service, which will describe the nature of the need and the broad nature of the response that the BBC should make to that need in the world.

  That would sit under the BBC's purposes, which are its ultimate objective. The particular purpose of the World Service is to bring Britain to the world and the world to Britain. That may be redefined or adapted, or the supplementary language in relation to that may be adapted in order to reflect the World Service's particular mission. The BBC Trust is considering, I believe, the right mechanisms in terms of a particular trustee who might take responsibility. Those matters are in discussion at the moment and are not yet determined, but they are the broad range of mechanisms that are being considered.

  Q60 Mr Baron: There has to be flexibility in this, if only because of world events, and so on. But you have said, Mr Horrocks, that that would be subject to revision—or might be in future. It still lays open the possibility that the budget could be raided for other BBC programmes and activities. We have talked before about ring-fencing as a possible option, and percentages of the overall BBC budget, and so on. I know the indications are very early, and we will ask this question to the Director-General, but what would you like to see? How can we best protect the World Service?

  Peter Horrocks: The most important thing is the statement about what we should be delivering and how we respond to the world—the World Service's mission. There should be a mechanism for that within the BBC Trust, which might be an individual who has responsibility and is charged with ensuring that it is carried out. That is the most important thing for me.

  Within the licence agreements the protection will be there. It will not be possible under those mechanisms for the budget to be raided month by month or year by year. Clearly, there is a strategy-setting process—possibly at each charter review—but those mechanisms are in place for ensuring expenditure on specific services. So those are the things that I am most looking for.

  Q61 Mr Ainsworth: You were in the room when my colleague, Frank Roy, was asking the trade union representatives about the pensions issue. Are you now in a position to clarify—you couldn't before—what the effects are of the pension problem dispute on funding of the World Service?

  Peter Horrocks: The provision that we indicated to the FCO of £13 million remains our current best estimate. We will have updates on that within the next few months, but that agreed figure between us and the FCO remains the position. Richard, do you want to amplify?

  Richard Thomas: The negotiations with the pension fund trustees are ongoing and we are not expecting a final announcement on that until June or July. But all the indications are that the £13 million estimate in our budget that we gave to the Foreign Office is still the right number.

  Q62 Mr Ainsworth: Let's clarify the situation, because you, Mr Horrocks, told us that ongoing "like-for-like savings" would mean that a 25% reduction would be needed by 2014-15. The Foreign Secretary told us back in October that the 16% figure included "additional funding for the World Service's element of the BBC pensions deficit." Which of those statements was true?

  Peter Horrocks: It is included within the settlement—Richard, perhaps you want to explain.

  Richard Thomas: The 16% figure is the difference between the income that we are getting at the beginning of the period and at the end. Within that 16% we have to find the money for the pension increase. The other way of looking at it would be, we have a 25% cut and we have put money back in for the pensions and for new investments of about £10 million.

  Q63 Mr Ainsworth: The cut between now and 2014-15 will be 25%.

  Richard Thomas: Yes.

  Q64 Mr Ainsworth: And how much money was included in the agreement that you reached with the FCO?

    Peter Horrocks: £13 million for pensions provision and there was an allowance for £10 million of new investments. However, and we may wish to turn to this, we feel we should not invest up to that level at this stage because otherwise we will be cutting even more deeply. In relation to the pensions, the £13 million does not improve our position in relation to 16%.

  Q65 Mr Ainsworth: The effective reduction between now and 2014/15 is 25%.

  Peter Horrocks: Yes, to our existing services there is a reduction of 25%.

  Q66 Mr Ainsworth: Is it true that you took a partial pensions holiday of £1 billion over 13 years?

  Peter Horrocks: That was not a World Service decision; that was a matter for the BBC as a whole. So I was not involved with that but it may be something you wish to ask the director general.

  Q67 Mr Ainsworth: Is there any requirement on the World Service to cross-subsidise the wider BBC pensions deficit problem?

  Peter Horrocks: No, we are part of the BBC. All of our staff work interchangeably across the BBC. We are part of it and we get our fair share of the ups and downs of that scheme.

  Q68 Mr Ainsworth: So are you protected from those potential wider problems in the BBC?

  Peter Horrocks: There is one way in which we have had further support from the BBC within this three-year transition period, before we come into full licence-fee funding, as well as the restructuring money which I have referred to previously. We are not having to pay the full amount once that £13 million charge becomes due until later on. There is a two-year period when our deficit repayments are significantly reduced by the support of the BBC. So it is another way in which the BBC, prior to this transfer to the full licence-fee funding, is supporting us and allowing us to smooth those pension-deficit repayments over a longer period.

  Q69 Mr Roy: You will remember I asked the Foreign Secretary whether workers here on work permits would be sent home. Were you assured by the answers that he gave me in late January in relation to those 277 people?

    Peter Horrocks: I was and I appreciated that you raised that issue with the Foreign Secretary. We are still in the relatively early stages of the process of losing the staff who unfortunately will need to leave. We have done the analysis of the numbers of people who are on various different visas and permissions to remain and, for reasons that the unions explained, we do not know yet exactly who will be in the frame, but so far the assurances from the Foreign Secretary are very helpful. As we get nearer to identifying individuals, we will be able to assess whether that is working in terms of the response from officials within the Border Agency and Home Office and so on.


  Q70 Mr Roy: In relation to who will be in the frame and who will not be in the frame, what grades will be in the frame as opposed to what individuals? What are the grades of those among the 480 who will be losing their jobs?

  Peter Horrocks: Of the ones who might be on a visa?

  Mr Roy: Total job losses.

  Peter Horrocks: Right across the whole range—

  Mr Roy: Is that equal? Is that 10, 20 and 430 or is it 150, 150 and 150?

  Peter Horrocks: There are smaller numbers of senior staff than junior staff but the changes across the World Service over the course of the last year and looking ahead over this period are spread. Already, senior management has taken a reduction of 25%. in line with the overall BBC target for reductions in senior managers. We carried those changes out in advance of the announcement of the settlement, which is one of the reasons why the union was right to say there are no senior management changes as a result of the settlement because we made those cuts first.

  Q71 Mr Roy: So that has already been done in the past.

  Peter Horrocks: It has been done immediately before.

  Q72 Mr Roy: That is not what we are asking. What I am asking now is in relation to the 480. For example, how will the BBC management numbers be affected?

  Richard Thomas: I had a look at the split by grades and, if you look at grades 9 and above, which is where people start getting management responsibility, 15%. of the post closures were within that category. When you compare that to the spread in the total population it came out at 15.6%. So it is roughly in line with the spread between management and non-management.

  Q73 Mr Roy: So that is an 85/15 spread. Is it the same spread between management and other grades?

    Richard Thomas: Yes, one was 15% and the other was 15.6%, so it was pretty much in line.

  Q74 Mr Roy: Therefore, it is 15% of the 480?

  Richard Thomas: Yes. We can give you a breakdown by grade, if that would help.

  Q75 Mr Roy: Is that junior or senior management?

  Richard Thomas: It is all management. Grade 9 would be quite junior.

  Q76 Mr Roy: How do you split between junior or senior management?

  Richard Thomas: I can give you those figures if you like. I don't have them with me today, just the split between managers and non-managers.

  Q77 Mr Roy: I'd be grateful for that.

  In relation to the turmoil in the Middle East, do you regret announcing the loss of 60 jobs in the Arabic section?

  Peter Horrocks: Of course; I regret all the job losses. It is a huge loss of talent and colleagues across the piece.

  Q78 Mr Roy: Do you regret it more than the rest, based on what has been happening?

  Peter Horrocks: Clearly, when something happens immediately after a decision that you've announced, you are concerned about how effectively you will be able to respond. If these changes had happened six months earlier, we clearly would have had fewer journalists in Egypt; for instance, the radio journalists who have been brilliantly contributing to our coverage. You may have used the BBC live page on News Online, which has this amazing updated rolling information about what's happening in North Africa. A large amount of the information in that is being provided by the BBC Arabic journalists, so, of course, losing that number of journalists would mean that we are less able to cover that story.

  Q79 Mr Roy: Based on those circumstances, is there not a case for a rethink on those numbers?

  Peter Horrocks: This is where it is difficult to take a strategic view as well as being responsive to events. If I were to say we will rescind all those job losses within the Arabic service, I would have to find another 60 posts across the piece and that would be very significant; the Arabic service is one of the largest. We are in constructive discussion with the Foreign Office about an initiative which has been announced, called the Arabic partnership initiative, covering potential interventions across a range of UK activities—educational, cultural, etc.—to respond to the changes that are happening in the Arabic-speaking world.

  The BBC has put forward proposals, both for broadcasting and also to support the change in media organisations. State broadcasting in Egypt, for instance, will be going through huge transformation and we believe the BBC can play a vital role in that, and with our colleagues in the BBC World Service Trust, we are putting forward proposals to be able to respond to that. We hope that if there is some funding available from that, we may be able to alter some of those job losses within the Arabic service to provide the programming that will help the Arabic-speaking world to understand and discuss the changes to its society that it is going through.

  Chair: Mr Horrocks, we have four subjects we still want to discuss with you. I would be grateful if you could keep your answers brief.

  Peter Horrocks: I shall try to tighten up Chairman.

  Q80 Rory Stewart: Most of us around this table are very excited at the idea that you might get some DFID funding that might be able to fill some of the gaps. How far have you got with putting together proposals on welfare, poverty and all the other indications required to qualify for DFID funding?

  Peter Horrocks: Our submissions to the Foreign Office, which were also shared with DIFD, identified clearly our priority proposals, which were Pakistan, Afghanistan, sub-Saharan Africa and Bangladesh. They were all defined in a way that would make them absolutely susceptible to being scored as ODA and we have defined them in those terms. We have also had, through the settlement letter from the Foreign Office in relation to our existing activity, a requirement that £25 million of our existing expenditure should count towards development. However, we did not receive any extra funding for that. Other parts of the FCO family have received transfers of funding, as we understand it, and your fellow Committee, the International Development Committee, looked into this and identified that £60 million had been transferred from DFID to the FCO family, including a substantial amount for the British Council.

  We understand that a determination has been made—it is in the settlement letter—that says that £25 million of expenditure is granted on the basis that it will support economic development, because free and independent media help counter corruption and sustain governance. What we haven't established is whether there is potential for that money to be extra, as opposed to it just being counted something we are already doing. We are pursuing both existing activity and potential new services.


  Q81 Rory Stewart: Can you give us a sense of deadlines—when you could get an answer, what you will bring together and how you will make sure that you do get the extra money? Presumably you are right, that that £25 million isn't extra money at all; you will have to find something else.

  Peter Horrocks: We are making that case in relation to the existing activity and the potential future activity as vigorously as possible. We have been speaking to officials in both the FCO and DFID about it over many months. Clearly, how that is responded to and the time scales are a matter for Government rather than us. Of course, the sooner we know if there is any potential through this route will be very useful in being able to adapt the changes which we have been discussing.

  Q82 Rory Stewart: So no indications as yet.

  Peter Horrocks: No. You have been talking to some officials, haven't you, Mr Egan?

  Jim Egan: It is correct that there are no indications yet. The two questions are, I suppose, whether the activities of the World Service could count towards Britain's international development effort at all and, secondly, whether there is any additional funding available for us.

  On the first question, there was a clause within our settlement letter from the Foreign Office, which stated that funds are provided "to the BBC World Service in order to provide impartial and independent news services as a developmental good to DAC list countries." In the eyes of the Foreign Office, at least, it appears that some of the activities of the World Service qualify.

  As Peter said, in our submission to the spending review 2010 process, we identified new activities of £25 million a year, which we think could contribute. All that has happened so far is that £25 million of our existing activities appears to have been rebadged as ODA-scorable, if I may put it that way. We continue to think that there is an interesting case both for ourselves and for Britain more broadly, but at the moment we are not engaged in an active bi-departmental process, if I may describe it that way, that is likely to lead to a resolution.

  Q83 Sir Menzies Campbell: So far we have not mentioned BBC Monitoring at all. What assessment can you give the Committee of the impact upon the capability of BBC Monitoring as a result of the cuts proposed in its financial arrangements?

  Peter Horrocks: Its cuts are more severe than those of the World Service. As was referred to earlier, it was not provided with any specific funding in relation to the costs of the pension deficit. It is having to withdraw activities. It has already announced a cuts programme.

  I think we can work more effectively with BBC Monitoring in providing editorial information to BBC services. Again, in our coverage of the Arabic story, BBC Monitoring has been playing an enormously important role. I know that the United States has expressed concerns about the changes to BBC Monitoring—

  Q84 Sir Menzies Campbell: The Secretary of State, Mrs Clinton.

  Peter Horrocks: The Secretary of State has also noted the changes to the World Service. The US Administration are admiring of these UK soft power assets and, I think, are surprised by the changes. Undoubtedly, the changes to BBC Monitoring are difficult.

  The last thing, which I have been made aware of very recently, is that there is some suggestion from the Cabinet Office that its financial settlement to BBC Monitoring, which we assumed had been fixed as part of the licence fee settlement, is being adjusted—adjusted downward—which would make the cuts to BBC Monitoring even more difficult.

  Under the terms of the BBC's overall licence fee settlement, there is a commitment by Government not to put any extra financial obligations on to the BBC. We think it is important that that is stuck to. But even that position is a reduction in funding for BBC Monitoring that is certainly very difficult to cope with.

  Q85 Sir Menzies Campbell: As I read that assessment, the capability of BBC Monitoring is liable to be very substantially damaged.

  Peter Horrocks: It will certainly deteriorate, yes.

  Q86 Sir Menzies Campbell: BBC Monitoring of course fulfils certain national responsibilities—without going into detail—using open source monitoring that provides information for institutions whose responsibilities are the defence of the realm.

  Peter Horrocks: It does. It is a BBC editorial service, which operates under BBC editorial guidelines, and, as you say, it is all about open information. In the agreement that the BBC entered into with the Government, mechanisms were to be put in place to ensure that continued flow of information, even though the funding would be coming from the licence fee. Up to now, generally, the interests of Government and the journalistic interest in countries tend to coincide. The places that are hot spots in the world are of interest from an editorial point of view as well as from other perspectives. We believe that it is possible to keep that consonance of interest, but with a different funding mechanism.

  Q87 Sir Menzies Campbell: But the volume of the flow depends on the capability of the organisation, doesn't it?

  Peter Horrocks: Of course it does, and that is changing. That is not part of the licence fee settlement at all, but part of the existing changes that are being made by the Cabinet Office, which, as you are aware, has a stakeholder relationship. It holds the ring for various aspects of the Government and the BBC. That is the funding they have provided, I'm afraid.

  Q88 Sir Menzies Campbell: Does monitoring fall under your responsibility?

  Peter Horrocks: It does.

  Q89 Sir Menzies Campbell: How would you characterise the future prospects of BBC Monitoring?

  Peter Horrocks: Within the licence fee, I am sure that the BBC will be supportive of it, but it will be at a deteriorated, lower level of provision than was the case before the recently announced cuts.

  Q90 Sir John Stanley: China is the most populous country in the world and is now the second largest economy, yet it is a country that has a totally ruthless system in place for suppressing freedom of expression, particularly that of a politically dissenting nature. You could hardly provide a more compelling case for the maximum possible involvement of the World Service. Can you justify to us how the BBC can do away with the Chinese shortwave service, particularly bearing in mind the critical point that access to shortwave in China is risk-free for the user, whereas access to the internet is far from risk-free, when particular sites are concerned?

  Peter Horrocks: Again, it was a change that ideally one would not have wanted to make, but it reflects the level of consumption on shortwave that we are able to detect. Again, Mr Egan's department has researched and looked at that.

  Jim Egan: It is probably fair to describe issues with our Chinese radio service as ones of both supply and demand. There are issues with getting our content in there because shortwave is blockable and jammable. The Chinese Government invest quite actively in that, using both high-power blocking transmitters near cities and skywave jamming within a radius of about 1,500 km. That is an expensive activity, but one that is used quite frequently to block our services. However, it does not work everywhere, and particularly in rural areas, our signal has been available.

  As I say, there are problems with demand as well as supply. In rural areas, we have not been able to identify significant listening to our service, even outwith the jamming. It is worth emphasising that the jammings have generally been on our Mandarin broadcasts; we have never experienced any jamming to our English-language broadcasts, but again, the audiences for those are very small. Those are the problems. It is difficult to get in, and even in the instances where we have been able to do so, in such a highly developed economy as China, where people have a wide range of choices for the way they consume their media, it has not been possible to get the sort of impact for our Mandarin broadcasts that merits the expenditure that we have committed to it.

  Peter Horrocks: We are investing, and will shortly be making announcements about, new circumvention technology that helps users on the internet to get round some of the blocks put in the so-called great firewall of China. We have received funding—interestingly, from the US Government, rather than from the UK Government—in relation to researching that. Our technologists are developing techniques that will at least help those who seek out our content online.

  Q91 Mr Ainsworth: You have an audience for the shortwave Swahili service. How on earth do you justify withdrawing that?

  Peter Horrocks: There is an audience, but there is also a large overlap with the increasing FM audience. When people have both shortwave and FM, they invariably listen to the higher-quality FM. We have very large audiences on FM in Swahili-speaking countries.

  Q92 Mr Ainsworth: In the urban conurbations, yes, but this is a vast region with a long relationship with Great Britain that looks to Britain and the BBC. It also has, I would suggest, poor, unstable and far from savoury Governments from time to time. This is the ideal area where a service should be preserved. People would be forgiven for believing that it is a little bit cynical on your part that you should see this as the one area where you could force DFID to ride like the 7th Cavalry to your rescue.

  Peter Horrocks: I can assure you that that is not our approach. It is a change that I regret, a change that is forced on us by financial circumstances. We are saving more than £10 million through our distribution changes. There have been cases made throughout the course of the afternoon. There is, of course, a strong case for retaining all those services. I am proud of the services that we offer, and I regret the loss to all those audiences. Those 30 million people are 30 million regrets, as far as I am concerned. We are not playing games. We are making choices that we feel we have to make in order to make the books add up. We are looking to where audiences are consuming us in different ways, and those economies are advancing. FM is more widely available, not just in the main cities, but in smaller conurbations. Not everyone who is losing us on shortwave will be able to get us on FM, but a significant number of people will be able to, and that is the reason for the change.

  Q93 Chair: Mr Horrocks, in your answer to Sir John Stanley on China, you mentioned a few technical points. Would you be able to give us a note on that?

  Peter Horrocks: Of course, yes.

  Chair: I thank all of you very much indeed. This has been really helpful, and we very much appreciate your taking the time to come. Thank you.

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